Interest rates on savings accounts fluctuate often, which hunting for the best return on your savings stash a game of cat and mouse. If your account’s yield drops, is it worth switching to another account with a better rate? After all, the yield on the new account could also drop at any time.
Doing some math can help you make the call. Suppose you have $ 10,000 in a savings account with a rate that recently dropped to 0.4%. Over the next year or so, you will earn around $ 40 in interest if the rate remains stable. If you transfer the money to an account that pays 0.7% – one of the highest rates available recently – you will earn about $ 70 in interest over a year, or $ 30 more, if the return stays on. same (but it’s a big if).
If you maintain a larger balance, the change becomes more compelling. “The more you have in the savings account, the bigger the difference, and it may even be worth a small rate advantage,” says Ken Tumin of DepositAccounts.com. Using the example above but with a balance of $ 50,000, you would earn about $ 150 more in interest by transferring your money to the higher yielding account. With a balance of $ 100,000, the difference is about $ 300. You can run the numbers by visiting Investor.gov, hovering over the “Financial Tools & Calculators” tab, and selecting “Compound Interest Calculator”.
Look for consistency. Accounts that have reliably offered high returns in the past are more likely to continue to offer above-average rates than those that occasionally show chart-topping returns to attract clients. To see a list of the most profitable accounts in your area, visit Deposit Accounts. For each account, you can click on “Details” to see its rate history. Tumin notes that in an index of 10 well-established online savings accounts that DepositAccounts tracks, the no-fee accounts of Live Oak Bank (yield 0.6%), SFGI Direct (yield 0.56%) and Synchrony (0.55% yield) recently offered above-average index rates of 0.49%, and they’ve had above-average rates for the past three and a half years as well.