What the Fed Rate Increase Means for Savings Accounts

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Federal Reserve officials raised the federal funds rate on Sept. 21 for the fifth time this year[0]. The rate increased once again by three-quarters of a percentage point. That matches its target bumps for the previous two months.

This increase, like previous increases, is likely to have an effect. Higher interest rates can raise costs for borrowers, but they can also mean higher yields for savers[0]. After all, when you have a savings account at a bank, you’re effectively letting the bank borrow your money, and the institution pays you interest in return.

A Fed rate increase doesn’t instantly change the rates your bank offers, but it can lead to an increase for some accounts. In a higher-rate environment, banks may start raising rates…

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This article was written by Margarette Burnette and originally published on www.nerdwallet.com