Banks offer a wide range of interest rates on savings accounts, from .10% all the way up to 1.05%. Our savings accounts are currently with Capital One where we enjoy a .75% interest rate. According to Nerd Wallet , we could up our rate by a whopping .30% if we simply move our accounts over to one of those higher paying banks. This sounds good on the surface. After all, it’s free money, right? But, is the higher rate really worth changing banks?
Change is Hard
Think for a moment about what steps you would need to take to move your money to a different bank.
1. Fill out the paperwork
It’s not as bad as the paperwork at the doctor’s office, but it’s still pretty painful. The new bank might need 4-5 pages worth of information from you.
2. Transfer the money
Once you’ve created the account, this part is easy. The problem is, you usually have to wait several days for the funds to actually show up in the new account.
3. Move your automation
If you have any automatic withdrawals or deposits scheduled with your old accounts, be sure you remember to move those over.
4. Close the old account
Not usually a big deal if you forget this step. Just make sure your old bank doesn’t charge you for leaving a zero balance behind.
My Time is Worth Something
So, let’s say I’m thinking of moving an account that has $10,000 in it. If my new interest rate is 1.05%, I’ll go from taking in $75 a year to $105 a year. That’s a $30 increase. For some this might be worth the move. For me, it’s just not worth the time and effort of changing banks.
It’s Called a “Savings” Account for a Reason
Savings accounts are not in the business of making you money. If you have $10,000 in an account that pays you 1% interest, you’re talking about $100 per year. Now, don’t get me wrong, money is money. But, you’re not going to retire a millionaire making $100 a year. Interest is a nice side benefit, but the primary purpose of a savings account is to act as a Tupperware dish for your leftover money. You want a safe, low risk place to stash your cash so that it’s there when you need it. Whether it’s for an emergency or for that vacation you plan to take next year. If you plan to spend the money in less than five years, park it in a savings account and forget about it.
So, while there may be banks out there that offer higher interest rates, don’t go chasing waterfalls. Just stick to the one that your used to and you’ll be just fine.