This Mistake Can Drain 454 Percent From Your Savings Account

cash in
Photo by Dean Drobot / Shutterstock.com

With eight Federal Reserve rate hikes in the past couple of years, banks are finally raising interest rates on savings accounts. You might not have noticed this trend if you still use a traditional bank, though.

In fact, refusing to consider moving your savings to an online bank can cost you a lot of money.

While interest rates have risen at both brick-and-mortar and online institutions, they’re a whopping 454 percent higher at online banks than at traditional banks, according to Ken Tumin, founder of DepositAccounts.com.

He reports on CBS MoneyWatch that over the past two years, the following increases in the average annual percentage yield (APY) have been seen:

  • At banks and credit unions (the vast majority of which are brick-and-mortar institutions), from 0.18 percent to 0.24 percent
  • At internet banks, from 0.72 percent to 1.33 percent

If you do a little research, you can gain even more. One shortcut to finding the best interest rate for your money is to use a free online resource like Money Talks News’ savings account comparison tool.

Tumin notes that some online banks offer APYs of as much as 2 percent.

“Suffice to say, consumers are losing out if they stick with their longtime brick-and-mortar banks and don’t switch to an internet bank,” he says.

Why online banks can offer more

Online banks, also known as internet banks, don’t operate branches, which is key to the financial advantages they tend to offer customers.

As we note in “10 Tips for Finding a Bank With More Bang for Your Buck”:

“They don’t need to maintain a network of brick-and-mortar branches, so their expenses are lower, which can mean they pay higher interest rates and charge lower fees.”

Still, a lot of people are unaware that switching to an online bank is an easy way to dramatically boost their returns.

A recent WalletHub survey found that 62 percent of people do not know that online-only banks offer higher interest rates and lower fees than their brick-and-mortar counterparts.

If you’re worried that internet banks are not as safe as traditional banks, fear not. Money Talks News founder Stacy Johnson explains why in “2-Minute Money Manager: Are Online, Internet-Only Banks Safe?“:

“I get this type of question a lot: ‘Are online banks safe?’ Short answer: Yes, online-only banks are safe, providing they have FDIC insurance. The Federal Deposit Insurance Corp. is what insures bank accounts. Taxpayer dollars support the FDIC. So, if a bank has FDIC insurance, your accounts are insured up to $250,000.”

To find out whether a banking institution is FDIC-insured, search for the bank using the FDIC’s free BankFind tool. It will tell you whether the institution is actively insured and related details.

The bottom line: Don’t overlook switching to an online bank. And if you have an online account now, think twice before moving those savings into a traditional bank account. You could risk sending 454 percent in future returns down the drain.

For more tips, check out:

Have you ever used an online bank? Tell us about your experience below or on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
7 Ways to Save Even More at Dollar Stores
7 Ways to Save Even More at Dollar Stores

Yes, it’s possible to pay less than a buck for items from a dollar store. Here’s how.

Top 5 Activities That People Dream of Doing in Retirement
Top 5 Activities That People Dream of Doing in Retirement

No. 1 isn’t visiting grandkids, and No. 4 might surprise you.

This Cellphone Carrier Has the Worst Network Quality, Customers Say
This Cellphone Carrier Has the Worst Network Quality, Customers Say

One major wireless provider stands out for the least reliable call, messaging and data services.

How to Get Rid of 6 Hard-to-Sell Things
How to Get Rid of 6 Hard-to-Sell Things

Find out where to sell, donate or recycle items — and feel good about it.

3 Cable TV Companies Hiking Prices for 2020
3 Cable TV Companies Hiking Prices for 2020

Still married to your cable company? Hold on to your wallet!

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

9 Deep Discounts Available on Amazon This Friday
9 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

14 Things That Are ‘Free’ With Medicare
14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

Do This in the Car If You Want to Avoid COVID-19
Do This in the Car If You Want to Avoid COVID-19

It takes just seconds to take this simple preventive measure.

15 Products You Need — Even If You Didn’t Know It
15 Products You Need — Even If You Didn’t Know It

Discover some must-have products on Amazon that you didn’t even know you were missing.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.