Often, consumers will worry about rising interest rates, but are higher rates actually better for your savings account?
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GOBankingRates asked ChatGPT what the effect of rising interest rates has on the money you put into your savings, and here’s what it said.
Also see how to calculate interest in a savings account.
According to ChatGPT, if your money is in high-yield savings accounts, certificates of deposit (CDs) or money market accounts, your savings will increase.
As the federal interest rate rises, banks raise their interest rates they pay customers to deposit cash. You will earn more money on top of your money in savings without having to do anything. Right now, a high-yield savings account can earn you over 4% interest, which is a good return and could even increase as federal rates rise. At 4%, if you save $10,000 in a year, you’ll earn an extra $400.
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If you carry credit card debt, you might see interest rates or required minimum payments go up. That’s why it’s important to prioritize paying off this debt as fast as you can, so you’re not stuck paying an ever increasing amount.
It may be good to pay off the credit card with the highest interest rate first and then go in descending order from there.
The good thing about having money in savings is that it’s a sure thing. If you don’t spend what’s in the account, it will still be there in a few months. With interest, you’ll probably even have a little more than you started with. On the flip side, there is more risk investing money in stocks.
While investing is still a good bet over the long term, when interest rates are higher, things like high-yield savings accounts can be another attractive option.
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This article originally appeared on GOBankingRates.com: I Asked ChatGPT How Rising Interest Rates Affect My Savings
