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 4.10% 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.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Motley Fool Money does not cover all offers on the market. Motley Fool Money is 100% owned and operated by The Motley Fool. Our knowledgeable team of personal finance editors and analysts are employed by The Motley Fool and held to the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands. Terms may apply to offers listed on this page. APYs are subject to change at any time without notice.