Last Updated on 8/19/23
Interest Yielding Products
Below is the list of the most commonly used interest yielding products and how they rank in terms of yield. Ranks are based on the best potential rates for that product. Keep in mind this ranking only focuses on yield and does not factor in liquidity. Some products are more liquid than others and that might be a big factor for considering which product to use.
|Estimated Rate Snapshot
|Government-backed debt securities that pay fixed interest and return principal upon maturity.
|Certificate of Deposit (CD)
|Time deposits with fixed interest rates for a specific term, subject to withdrawal penalties.
|Money Market/High Yield Savings
|4.3% - 5%
|Savings accounts with better interest rates than standard savings, offering increased returns while maintaining liquidity.
|Savings/Checking with Interest
|0.01% - 0.53%
|Basic deposit accounts with limited interest (savings) or minimal interest (checking), suited for daily transactions and easy access.
Below is the list of the most commonly used borrowing products and how they rank in terms of borrowing rate. Ranks are based on the lowest borrowing rates achievable for the product.
|Estimated Borrowing Rate Snapshot
|6.375% - 7%
|Loan for purchasing real estate, with the property as collateral.
|6.83% - 14.25%
|Borrowed funds from a brokerage, using your securities as collateral.
|9.25% - 10.25%
|Borrowing from your 401(k) retirement account.
|9.25% - 10.25%
|Borrowing from your credit card's credit limit.
|Home Equity Loan
|9.25% - 10.25%
|Loan using your home's equity as collateral.
|Wide range but typically higher than Rank 3 products but not as bad as credit cards
|Unsecured loans provided by banks, credit unions, or online lenders.
|0%* or 20%+
|A revolving line of credit that lets you make purchases up to a credit limit. This can have a competitive rate if you utilize 0% APR periods.
What is the Federal Funds Rate?
The federal funds rate is the interest rate at which depository institutions (mainly banks) lend reserve balances to other depository institutions overnight on an uncollateralized basis. It is a tool used by the Federal Reserve to implement monetary policy and influence the broader economy. The Federal Open Market Committee (FOMC) of the Federal Reserve sets a target range for the federal funds rate.
Does Federal Funds Rate Affect US Treasury Rates?
Yes, the Federal Funds Rate can influence U.S. Treasury rates, but the relationship is not one-to-one and there are additional factors at play, such as supply and demand dynamics, economic conditions, and global factors.
Does Federal Funds Rate Affect Borrowing Rates?
Yes. When the Federal Reserve raises the Federal Funds Rate, it becomes more expensive for banks to borrow money, and they may pass on these increased costs to consumers and businesses through higher short-term borrowing rates. The prime rate, which is the rate at which banks lend to their most creditworthy customers, is often influenced by changes in the Federal Funds Rate. Banks tend to adjust their prime rates in response to changes in the Federal Funds Rate. As the prime rate changes, it affects various consumer and commercial borrowing rates, such as adjustable-rate mortgages, home equity lines of credit, and business loans.