It’s not fair that savers are losing money by trying to keep their money safe. With inflation running at 7% and the average money market deposit account paying only 0.5% savers are losing out to inflation in a big way.

At only 3% inflation, the buying power of your money is cut in half in about 25 years!

Rising rates in the trading markets are making headlines — even ahead of the Fed’s promise to raise rates several times this coming year. Fears of inflation make bond buyers demand a higher yield to offset the impact of inflation.

But if you’re sitting around waiting for savings rates to rise, it’s likely to be a longer wait. Banks have little incentive to attract more deposits by raising rates for savers. There is still plenty of money (liquidity) around in the financial marketplace. And the banks like the idea of making mortgage loans at 3.75%, while paying depositors just pennies on the dollar. That leads to bank profits.

So, if you have some “chicken money” (money you can’t afford to lose), is this the time to throw caution to the winds and seek higher yields outside insured deposits? As always, the answer depends on your tolerance for risk. Ask yourself whether the pain of losses, is worth slightly higher yields you might get by taking more risk.

But if you’re watching pennies, there are ways to earn a bit more or pay a bit less.

Avoiding Fees
A new survey by MagnifyMoney.com says that banks collected $114 billion more in fees than they paid out in interest on checking accounts and money market deposit accounts over the past decade! (That doesn’t include interest on CDs.)

But these days bank fees are coming down, under pressure from government regulators and competition from online insured deposit accounts. Capitol One and Ally Bank recently said they will eliminate overdraft fees. JPMorgan now gives customers 24 hours to repair overdrafts and avoid fees.

Bricks-and-mortar behemoth Bank of America announced it would no longer charge for bounced checks and is reducing overdraft fees from $35 to $10. (NSF or non-sufficient funds overdrafts typically come when automated payments for rent or utilities are taken out before a paycheck is deposited.) B of A said its move would cut its overdraft fee income by 97% from a decade ago.

It’s time to check your own account and see what fees you are paying – and how you might switch to save on fees.
But beware. There are tradeoffs. You need to compare the following, frequently hidden, traps:

• ATM fees. If the bank doesn’t have its own ATMs in your area, will they reimburse all fees if you use another bank’s ATM?
• Monthly service charges or annual account fees.
• Minimum balance requirements.
• Overdraft or NSF fees.
• Expensive charges for printing paper checks if you still use them.
• Wire transfer fees – some charge fees on incoming wired deposits, even if it is your paycheck!

The “best” checking account for you will depend on how you use it. At DepositAccounts.com you can use their “checking finder” to input your own typical usage data and search results for online banks or banks in your area that could save you money.

Earning More on Insured Accounts
The other side of the coin is searching for a bank that will let you earn money on your account balances. At www.MaxMyInterest.com they will automatically search for lower-cost online banks that pay significantly more interest – especially if you typically hold a larger balance. Max gets a tiny fee for directing those deposits, but you still earn much more.

Or, do it yourself. It’s easy to search online for the highest paying online savings and checking accounts. Go to MagnifyMoney.com or Bankrate.com for instant results on highest paying FDCI accounts.

There are some banks and credit unions aggressively seeking deposits. A sharp-eyed reader brought to my attention an offer by one credit union that offers rates as high as 4%. BUT there are caveats — such as a requirement to have money directly deposited every month and use your debit card regularly. And their high rates apply only to deposits up to $10,000. It’s explained on the Magnify Money “best accounts” page.

If you have larger sums to invest in CDs, check out www.MaxMyInterest.com, where they route your savings directly to the highest-yielding CDs and money accounts. A complete description of their service can be found in my earlier column.

One warning: Avoid the CD “brokers” advertising much higher rates on your savings. There is always a catch if it sounds too good to be true.
Competition is bringing bank fees down. Eventually, competition will bring higher interest rates to patient depositors. And that’s the Savage Truth.