A standard savings account at a big bank pays as little as 0.01%, while inflation shrinks what the money buys. Move your cash to a high-yield savings account at an FDIC-insured bank, which carries the same federal protection as a big bank’s account and pays many times that rate.
Chase’s standard savings account pays 0.01% interest, the same rate on every balance. Leave $10,000 there for a year and you earn $1.
That account is losing you money even when the balance never drops. The Federal Reserve aims to keep inflation at 2% a year over the long run. At that pace, cash earning next to nothing loses about 2% of its buying power every year, and more when prices run hotter.
Fees can shrink the balance itself. Bank of America’s Advantage Savings charges $8 a month unless you keep at least $500 in it every day or qualify another way. That’s $96 a year if you miss the waivers.
High-yield savings accounts, most of them at online banks, pay many times what a standard big-bank account does. Every percentage point of interest is worth about $100 a year on $10,000, so the gap between 0.01% and a competitive rate is real money, and it compounds.
Look for an account with no monthly fee and no minimum balance at a bank insured by the FDIC or a credit union insured by the NCUA. If the institution fails, the FDIC and the NCUA each cover up to $250,000 per owner, and more if you also hold joint or retirement accounts there. If you sign up through an app, find out which bank holds your money, because deposit insurance doesn’t cover the failure of a nonbank app company.
Link the new account to your checking, move the balance over, and set a recurring transfer from each paycheck. Money moved back to checking can take a business day or two to arrive, so keep enough in checking to cover bills in the meantime. Savings rates change, so compare yours once a year and move again if it falls well behind.
If the interest on your last statement came to a few cents, move the money this week.
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