It isn’t hard to earn 5% on savings today. There are tons of online banks with savings and money market offers at or over that level. You can also find local banks and credit unions that are equally competitive.

Compare online savings rates here.

After a half-generation where savings rates were not near 5%, it is awfully exciting to earn a real return on your cash. Or, at least it should be. Many, however, are seeking more purpose or gratification in their savings and CDs than just a number and the nice yield that comes with it.

Here are our ideas:

1. Open an account that will incentivize you to get in shape

Fitness Bank, a division of Atlanta-based Affinity Bank, offers an account that incentivizes users who record 12,500 average steps per month (10,000 if over 65) with its highest rates. The online savings account, first unveiled in 2019, is now offering 4.75% if you meet step requirements, but customers who also maintain $5,000 in a checking account may be boosted to 5.25% on their savings.

2. Earn Something Other than Savings, Like American Airlines miles

Bask Bank, like many online banks, will give you 5% in their interest savings account. Alternatively, you can earn 2.50 American miles per year per dollar on deposit in Bask’s mileage savings account. Bask has also begun offering extra mileage-earning incentives, including a 2023 summer promotion offering customers an additional 20,000 AA miles if they maintain over $50,000 on deposit for six months. Some customers opt for this frequent flier mile-accruing savings account as Bask produces a 1099-INT that values the miles at only $0.42, but, even so, they should really only do it if they can reliably extract well over 1.50 cents in value from their American Airlines miles. Another bit of good news is that Bask enables customers to easily move cash between accounts, enabling those needing small amounts of miles to get what they may need for their next redemption and go back to earning 5%.

3. Deposit Your Money with A Bank Focused on Reducing Carbon Output

Climate change is undeniable. It is also clear that mankind has the ability to take action today that will avoid the worst impact through substantial investment in wind, solar and water. That ability, as I discussed here, is being significantly impaired by a financial system dominated by very few large banks that are yet unwilling to invest in projects that will quickly render obsolete their carbon emitting long-term project financing. Why not deposit your money in a smaller bank that is committed to renewable energy and energy efficiencies projects? Forbright Bank is one such bank and they are offering a highly competitive one-year CD rate well over 5%.

Compare all CD offers here.

Editor’s Note: Banks that are listed here have advertised in the past on BestCashCow and/or are currently advertising and they are discussed here consistent with our advertising disclosure.

The Federal Reserve has raised the Fed Funds target rate to 5.25% to 5.50% after a much anticipated quarter point raise. This is the highest Fed target rate in 22 years.

The Federal Reserve had paused following its June meeting, but had telegraphed clearly that it was not finished with its moves to fight inflation.

The committee continues to see inflationary pressure ahead, and a long road to get it down to its long-term target of 2%. Policy needs to remain restrictive enough for long enough to be certain that inflation is under control.

The Fed’s statement says that it will continue to monitor the extent of additional policy firming that may be appropriate. Since the Fed is still focused on the extent of additional firming need – not whether any additional firming is needed – some analysts are inferring that there will be least an additional quarter point move coming in September or November.

In his press conference, Powell said that it is possible that he and the Fed will raise rates again in the September meeting, based on the eight weeks of data that will be coming between now and then. It is also possible that the data will indicate that such a move is not necessary.

Chair Jerome Powell and the Fed members remains concerned that additional firming will cause stress for financial institutions that become overexposed to interest rate risk, and exert downward pressure of economic activity.

Those risk, however, are overshadowed by the reality that continued erosion of purchasing power with inflation undermines confidence in the economy with its burdens falling disproportionately on the working and middle classes.

In this Bloomberg piece, published today, Bill Dudley makes a compelling case against raising the FDIC insurance limit from the current $250,000 per account (learn more about FDIC coverage here).

First, Dudley recognizes the importance of protecting depositors who, he says, have “just two modes, complete inattention or total panic.” He also recognizes that bank runs can now happen with unprecedented speed due to social media, as we witnessed with Silicon Valley Bank and Signature Bank.

However, he points out that raising the FDIC limit would cause certain banking institutions to take on even greater risk and, through the process whereby all banks fund the FDIC, create a mechanism through which conservatively run institutions subsidize more risky banks.

Dudley therefore proposes an alternative where the Fed’s lender of last resort functions that were used in the 2008 financial crisis are expanded and made permanent. A bank would need to pledge sufficient collateral to the Fed to cover its uninsured deposits and, after assigning values to that collateral, the Fed would promise to make that bank's depositors whole.

Dudley says that the depositors will not run on the bank because they will know that each bank has provided the Federal Reserve with the collateral enabling it to always have cash that will meet its deposit requests.

But, I am not so sure that Dudley’s solution would deter anxious depositors from bank runs.

Well-capitalized banks will have no problems meeting the Fed’s collateral requirements and other banks would, as Dudley says, “face powerful incentives to change how they operate.” But is that really what we want? Our economy needs banks that operate aggressively and unconventionally.Especially in this day and age where we are moving across a climate tipping point, we need some subset of banks to take on risk that Chase, Wells or Bank of America will not take on. And, I do not think we want our entire financial system to be entirely concentrated in US Treasuries which, under Dudley's proposal is the security that each bank will basically wind up needing to provide as collateral to the FDIC (US Treasuries will have the highest collateral value).

In short, I think Bill Dudley makes some good points, but the biggest problem with the current environment is that uninsured deposits are being pushed into US Treasuries and the largest banks. We need solutions to the FDIC limits that are designed to backstop depositors at midsized and smaller banks, and to create a vibrant non-concentrated banking market in the US again.