I was at a conference for work this past week and heard an alarming statistic, the average person is only earning 0.09% per year interest on their savings account.
Do you know how much interest you’re earning on your savings account? If you *were* like me and had your savings account at Chase, their annual interest rate is even lower than the average 0.09%. According to the presentation, Chase customers are only getting 0.03% per year. That’s the $0.05 transaction you and your friends joke about over brunch.
I wish I could say that I came to this realization years ago. Sadly, I had all my savings with Chase up until last fall. It wasn’t until I started reading the Broke Millennial, that I realized the banking universe expanded beyond the Chase Bank across the street. Once I started doing my own research I realized just how much higher the interest rates are with online banks. In some cases, I could instantly earn another 2% in interest per year just by transferring my savings balance to one of these online banks. So that’s just what I did!
Online Banks & Savings Accounts
They’re called online banks is because they are online (obviously) and are without a brick and mortar presence. By keeping their overhead costs low, these online banks are able to pass their operational cost savings along to their customers in the form of higher interest rates. Here are a few of the top online banks and their current interest rate offerings.
So much better than 0.03%. So what does this mean in terms of dollars and cents to the saver? The example below demonstrates the monthly and annual interest earned with a savings account balance of $50,000.
What would you do with an extra $1,000 each year? Personally, my husband and I are using the extra interest to put towards purchasing our first home. Online savings accounts are a great place to build your emergency fund or begin saving for your short term goals (think vacations, car purchases, home down payments, etc. )
Brick & Mortar Banks
I am not totally disregarding traditional brick and mortar banks. In my opinion, there is still a need to have a relationship with a national bank for convenience and the ability to walk into a branch if needed. I’ve been thankful to have a Chase Bank across the street when we were depositing checks from our wedding, merging bank accounts and when we needed a quick turn around for cashier’s checks for our last safety deposit.
Hope you find this post enlightening and that it moves you to research some of the online savings accounts and give yourself an interest promotion!