This Banking Mistake Cost Me Over $2,000
KEY POINTS
- For 12 years, I was earning a way lower interest rate than I should have.
- When I switched to a high-yield savings account, I instantly started earning over 300 times more interest.
- Check out your savings account's APY -- and if you're not earning a high yield, switch immediately.
For 12 years, I thought I was being responsible by putting spare cash in a savings account at my local credit union. I never touched the money except to pay for an emergency, like a car repair. That's what you're supposed to do, right?
Yet I was costing myself thousands without realizing it.
When I learned about high-yield savings accounts, I decided to check out my own account's APY to see how it compared. I was earning just 0.01% (that's not a typo). My money earned almost nothing in interest for more than a decade.
Turns out, I could have earned over $2,000 in that time.
How much more could you be earning?
Today, some of the best high-yield savings accounts (HYSAs) offer 3.60% APY or more -- that's at least 9x the national average. They're also federally insured and just as safe as a traditional savings account.
Let's say you have $10,000 in savings. Here's how much interest you'd earn over the next 12 years depending on your APY:
| APY | Interest Earned | Balance |
|---|---|---|
| 0.41% (national average) | $503 | $10,503 |
| 4.00% | $6,010 | $16,010 |
Wouldn't you like to be thousands of dollars richer for basically no work at all?
Keep in mind that rates weren't always this high, and they may drop before long. Until a few years ago, APYs above 1.00% were hard to come by. (I feel slightly better knowing I didn't miss out on a 4.00% APY for 12 whole years.)
That's all the more reason to open an HYSA and take advantage of today's high rates now.
Switching bank accounts is easier than you think
I used to think switching banks would be a hassle. I pictured paperwork and never-ending hold music.
In reality, I opened a new account and transferred my savings in under 10 minutes. I even opened a checking account at the same bank while I was at it.
Opening a high-yield savings account today takes just a few minutes on your phone or computer. Making transfers is quick and easy, too (though it may take a few days for your money to reach your new account).
And don't worry -- your money is still safe. Most HYSAs (including all the accounts we recommend) are offered by FDIC-insured banks, meaning your deposits are protected up to $250,000.
Don't wait to start earning more interest
You can lose money without making a risky investment. I lost money by leaving it in a savings account that paid almost no interest, while the price of everything went up and up.
Don't make my mistake. Take a few minutes to open an HYSA today.
If you need a recommendation, one of our favorites is the CIT Platinum Savings account, which pays 4.00% APY for balances of $5,000 or more. Click here to open a CIT Platinum Savings account and start earning 10X the average APY today.
Our Research Expert
Managing editor for Motley Fool Money. James has worked full-time for The Motley Fool since 2012. A longtime editor and former reporter, James oversees the production and quality of Motley Fool Money's editorial content.