As far as interest bearing savings and checking accounts go, returns are paltry. According to Bankrate.com, the national average is still only about .57%, which is pretty pathetic. One could take more risk and invest in a bond or stock, of course, but that involves other complications such as research, investment strategy, etc. Or, one could try something else.
Another option is peer-to-peer lending, essentially lending without banking institutions involved. Enter Prosper.com which allows one to lend money for as little as $25 for a “Note” and reap rates of 10% or more. Prosper and other similar platforms, provide a platform for both lenders and borrowers who are seeking to fill a gap: lenders want better returns than a bank or even stock or bond consistently provide, and borrowers need cash that might not otherwise be available. Such examples include: starting a business, paying off loans such as credit cards, or making home improvements.
I have been lending money for over a year now on Prosper and am doing quite well. Well is relative, of course, but I will take the 16% annual returns with moderate risk any day of the week . That’s just my experience, of course, but it is not atypical. Not only are Notes available with varying levels of risk (debt quality essentially), terms, and expected rates of return, diversification is not difficult to achieve. According to Prosper.com, “For Notes purchased since July 2009, every Prosper investor with 100 or more Notes has experienced positive returns.” Since the minimum investment is $25, achieving optimal diversification is possible with $2500.
When you get a chance, take a look at Prosper and see if it is right for you. And remember, the greatest risk is not taking any. Your idle cash is at risk if is not being aggressively utilized.