Americans See Money in Bank Accounts Increase

As the Federal Reserve opted against cutting interest rates and kept them consistent at 5.25 percent to 5.5 percent, Americans' saving accounts are growing at unprecedented levels.

The Fed has levied one of the highest interest rates in more than a decade as inflation remains stubborn. But one side effect of the rates is that Americans' bank account money is soaring in savings interest.

Read more: Compare the Best High-Yield Savings Accounts to Grow Your Savings

Savers last year made $315.4 billion in interest in their deposit accounts, which was a whopping four times the $78.7 billion Americans made in 2022, LendingTree found.

"It's the best time to be a saver in over 20 years," Alex Beene, financial literacy instructor at the University of Tennessee at Martin, told Newsweek. "If you haven't been taking advantage of these higher interest rates for certain accounts, do so immediately. Every month you fail to do so could amount to many extra dollars not coming into your account."

The savings gains happened as the average interest rate on regular bank savings accounts is 0.5 percent. In some cases, at larger banks, it's as low as 0.01 percent.

But savers using high-yield savings accounts saw interest rates above 4 percent, with some reaching 5 percent to 5.5 percent. That could lead to an additional $500 on a savings account balance of $10,000 over the span of one year.

Read more: Average Savings Account Rates

"I can't stress enough what a renaissance this has been for savers," Michael Ryan, finance expert and founder of michaelryanmoney.com, told Newsweek. "We're finally getting a chance to grow our cash reserves at a meaningful clip without taking undue risk."

But there are, of course, several negatives with the high interest rates.

After today's Fed announcement, Bankrate Chief Financial Analyst Greg McBride said Americans are no closer to knowing when interest rates will come down again, meaning credit card payments, mortgages and car payments could continue to remain out of reach for many.

"The timing of when the Federal Reserve begins to cut interest rates is up in the air and in an indefinite holding pattern," McBride said in a statement. "Until we see renewed evidence that inflation is consistently easing, we're no closer to the Fed cutting rates."

While the high interest rates are promising news to savers, those in debt need to prioritize paying off their loans now or risk seeing their payment amounts skyrocket far beyond what they initially owed.

"The mantra of 'higher for longer' interest rates is music to the ears of savers who will continue to enjoy inflation-beating returns on safe-haven savings accounts, money markets, and CDs for the foreseeable future," McBride said. "For borrowers however, it dashes the hopes that interest rates will come down in a meaningful way any time soon."

Read more: Average Money Market Account Rates

Kevin Thompson, finance expert and 9i Capital Group founder and CEO, said many Americans will continue to keep cash on the sidelines as yield rates stay healthy for money markets and other savings accounts. And, echoing McBride's sentiment, it's unclear how long this could last, due to what the Fed has consistently called "sticky" inflation.

In March, inflation had reached 3.5 percent compared to a year ago, which remains far above the 2 percent rate the Fed continues to want for the economy.

"The Fed will keep rates higher for longer and the expectation is that we "may" see one rate cut this year, if any," Thompson told Newsweek. "So, do not expect rates to come down in the near term."