If your last 401(k) statement scared you out of the stock market, you don’t have to resort to hiding your cash under your mattress. Whether it’s the Dow’s wild swings or the specter of unemployment, more and more people are deciding to keep their savings in a bank. Saving money is always a great idea, but unless you shop around you may be missing out on hundreds or even thousands of dollars in risk-free income.
The average savings account only yields about 0.5% interest, and many banks don’t even give you that much. For instance, Bank of America pays 0.2% APY.
Meanwhile, a growing number of online banks offer much higher returns, and deposits are FDIC-insured. Current interest rates reach as high as 3.5%, seven times the national average.
If you have a few months of expenses in your emergency fund, that extra interest can really add up. On a $15,000 balance, a typical savings account will pay you $75/year. Switching to a high-yield online account will give you $525, a gain of $450! Not bad for a few minutes work.
One Comment
Wow. I use Bank of America. That never even crossed my mind. How do they even defend such a low rate? Awful!
One Trackback
[...] Get a better interest rate on savings. If your savings account pays peanuts on your money, consider moving it to an online bank. Switching banks over a 1 percent difference in APY may seem like more trouble than it’s worth, but on a $10,000 balance, that ends up being $100 more in your pocket at the end of a year. [...]