After a stretch of unusually high deposit yields, rates have been on the decline. And experts believe rates will keep going down this year.<\/p>\n
If you\u2019ve been moving your money around to lock in the best rates, you might be wondering whether it\u2019s worth the hassle \u2014 especially as banks gradually trim rates and the gap between top accounts narrows.<\/p>\n
While \u201crate chasing\u201d may seem like a good strategy to get the most bang for your buck, it has some disadvantages you should be aware of. Read more to find out when it\u2019s worth switching banks to earn more on your savings.<\/p>\n
Savings interest rates vary by bank and can change at any time, often in response to the federal funds rate. Rate chasing involves constantly searching for the best savings account rates, opening a new account when you find a better rate, and transferring your savings to your new account.<\/p>\n
Often, this pattern of opening and closing bank accounts to eke out a slightly higher rate isn\u2019t worth it. While there\u2019s a chance it\u2019ll help you earn a few extra bucks, it takes a lot of time and effort that may be better spent elsewhere. However, there are certain situations where switching banks to chase a higher rate may be worth it.<\/p>\n
Read more: <\/em>How do banks set their savings account interest rates?<\/em><\/p>\n Switching banks to earn a much higher interest rate \u2014 for example, switching from a large brick-and-mortar bank to an online bank offering a high-yield savings account \u2014 is often worth the effort.<\/p>\n Large national banks tend to offer rock-bottom savings account interest rates. Think: around 0.01% APY. Meanwhile, it\u2019s possible to find high-yield savings accounts with rates around 3% to 4% APY.<\/p>\n If you aren\u2019t currently using a high-yield bank account, making the switch from a national bank to a financial institution with more competitive rates can make a major difference in terms of your interest earnings.<\/p>\n The following table illustrates how much interest you\u2019d earn with a $10,000 balance in a savings account earning 0.01% APY, 3.8% APY, and 4% APY (with interest compounding daily).<\/p>\n In this case, switching banks to earn 4% APY would amount to a difference of more than $400 over the course of a year. But as you can see, jumping from a rate of 3.8% APY to 4% APY would only result in an extra $20.<\/p>\n In other words, if you\u2019re already using a high-yield savings account that generally offers a competitive rate, it\u2019s likely not worth switching banks to find a marginally better interest rate.<\/p>\n Plus, savings account interest rates are variable, which means they can change at any time. A bank that has historically offered a competitive rate will likely continue to do so in the future, even if it doesn\u2019t currently offer the best rate on the market.<\/p>\n Finally, the administrative hassle of moving your money from bank to bank may have financial costs too. Some banks charge account closure fees of up to $50 for closing a bank account within a certain period of time, such as three or six months of account opening. Such a fee could easily eat up any gains in interest earnings.<\/p>\n Read more: <\/em>Does closing a bank account hurt your credit score?<\/em><\/p>\n Ultimately, it\u2019s up to you to decide whether or not it\u2019s worth switching bank accounts, but the following tips can help.<\/p>\n Do the math:<\/strong> Calculate how much money you\u2019d earn with a new account compared to your current account. If it\u2019s a minor difference, you may decide the administrative effort isn\u2019t worth it.<\/p>\n<\/li>\n Consider any sign-up bonuses: <\/strong>Sometimes, banks offer cash sign-up bonuses when you open a new account. While not necessarily a reason to open a new account, a sign-up bonus can sweeten the deal if you decide to switch for other reasons. (See a list of the best new bank account sign-up bonuses here.)<\/p>\n<\/li>\n Consider fees: <\/strong>Some savings accounts have monthly maintenance fees and some charge early account closure fees. Consider whether an account switch would mean paying these fees, and if so, calculate how much they\u2019d take away from earned interest. On the other hand, switching from an account with a monthly fee to a fee-free account can further boost your earnings.<\/p>\n<\/li>\n Weigh account features: <\/strong>Sometimes, it\u2019s worth switching accounts to get the benefits you want and need. For example, if the ability to split up savings between multiple goals is important to you, switching to an account with this perk may be worth it, even if the difference in interest rate is negligible.<\/p>\n<\/li>\n<\/ul>\n Read more: <\/em>How to switch banks: An easy step-by-step guide<\/em><\/p>\n\n
<\/div>\n<\/div>\n<\/figure>\n