My Savings Account Interest Dropped After the Fed Rate Cut. Here’s What This Means for My Savings Plans

If you’re even a casual follower of financial news, you’ve no doubt heard that the Federal Reserve cut the federal funds rate by half a percentage point on September 18. While this decline is hardly a surprise, the resulting drop in rates for savings accounts and certificates of deposit (CD) has left many Americans uncertain and questioning their savings plans. Including me.

Less than 24 hours after the Fed announced its tapering, my UFB Portfolio Savings Account (APY) began to decline. My account APY dropped from 5.15% to 4.83%, a decrease of 0.32%.

What impact did this decrease in APY have on my personal savings plan? In short: it didn’t have much of an impact for a few key reasons.

1. UFB still offers a highly competitive APY

Only a small fraction of the high-yield savings accounts we cover at The Ascent still have APYs above 5.00% (and they’re by no means guaranteed to last). So my new APY of 4.83% still ranks with the best.

An APY of 5.00% would earn $500 on a $10,000 savings balance in one year, while my APY of 4.83% would earn $483 on the same balance that year. Since my UFB account has other benefits that I enjoy and there are no hassles to overcome, I’m willing to ignore the $17 loss to continue with my current account.

2. No minimums or monthly fees

The minimum amount required to earn maximum APY in the UFB Portfolio Savings Account is $0. That’s right, you can open and start funding your account with any amount—even the $7 you planned to spend on ordering lunch at the office before opting for PB&J—and still make the best (and only) money of your account. APY.

Moreover, the account has no monthly fee. Although you’ll pay for special services like wire transfers and stop payments, it won’t cost you a dime to keep the account open and store your savings there.

3. No ATM access and withdrawal limits

This is something you don’t see often with online savings accounts. UFB will provide account holders with a free ATM card to access the cash in their accounts. The downside of some online savings accounts is that you often need to transfer money to another account to withdraw cash.

To make this point even better, UFB does not impose any limits on the number of withdrawals you can make from your account. Many banks still limit you to only six free withdrawals per statement cycle (a holdover from the old Regulation D rules, which are now suspended).

4. Excellent mobile app and customer service

UFB has a clean and easy-to-use mobile app. I can log in with facial recognition and see all of my connected accounts (not just the ones with UFB) in the account overview screen. The app also offers the ability to move money, view account alerts, view mobile deposit checks, and chat with Evo customer service, among other things.

The app gets 4.8 out of 5 stars on the iOS app store, while it gets a similar 4.7 out of 5 stars on the Google Play store. The fewer problems we have when it comes to managing our money, the better, and it seems that users are quite happy with the UFB app experience.

I would also like to give brief information to UFB’s customer services. Shortly after opening the account, I asked a question via the Evo chat service. The response I received was prompt, friendly and comprehensive. I was very pleased with the experience.

My savings plans haven’t changed, but now is the time to check your own account

For all the above reasons, I continue to use my UFB Portfolio Savings Account despite the recent drop in APY.

But as for you, now is the perfect time to review your own savings accounts if:

• Your money is still in a regular bank that pays you a few cents a year in interest. You have a good chance of benefiting by moving your funds to an online high-yield savings account (like the UFB Portfolio Savings Account) instead.
• You’re already earning high interest returns in an online savings account. Review your balance. Have you saved the recommended three to six months of expenses for your emergency fund? If so, great! If not, try making automatic deposits into your savings account to increase your balance or look into side hustle opportunities to generate more income.
• You are one of the lucky ones who has accumulated so much savings money that you don’t know what to do with it. Consider putting the excess into a brokerage account or funding your retirement savings. While savings account rates remain good for now, they don’t reach the 10% average annual return that the S&P 500 has historically averaged.

If you have more savings than you need for your emergency fund, you’re doing yourself a disservice by not striving for higher returns. And if you’re still working to reach your initial savings goal, take heart and know that although savings rates will continue to gradually decline, they won’t reach the bottom overnight, so your current balance (and anything you add to it) will continue. It can grow if you keep it in the right account.