What Happens When Interest Rates Rise

We're all aware that banks are paying almost nothing on savings accounts. Interest rates are low, and the Fed wants to keep it that way for a while.

But what happens when rates start to rise -- how will that affect your savings? Ideally, your savings account rate will rise, and you'll be able to get CDs with higher rates. However, some challenges could come along with those higher rates.

Banks and credit unions may have to deal with some consequences when interest rates go up, and you'll notice some delay before you can fully benefit from higher rates. Don't expect to see an instant improvement in savings account rates -- in the beginning those rates will only rise enough to remain competitive.

Ken from Deposit Accounts points out that banks and credit unions may also refuse to cash out CDs before maturity if rates rise quickly. Many institutions allow you to cash out (with a penalty), but some have policies allowing them to keep your cash until maturity if they feel that they need to. Find out how your bank or credit union works so that you're not surprised.