68% of Middle-Income Americans Are Missing Out on This Important Financial Opportunity

The past few years have been challenging for many middle-income households. Not only has rampant inflation persisted, but the Federal Reserve's numerous interest rate hikes have driven the cost of borrowing way up.

These days, consumers are paying more money to carry a credit card balance or sign a personal loan. And a lot of middle earners are now in a position where they need to spend carefully to account for their overall costs.

But a recent Santander US survey found that 68% of middle-income Americans may be missing out on a huge opportunity to better their finances at a time like this. And given that it's a risk-free opportunity, it's one worth jumping on.

You might as well earn more interest on your money

The downside of the Fed's recent rate hikes is that borrowing has gotten more expensive. The upside is that it's resulted in generous interest rates on savings accounts.

Our Picks for the Best High-Yield Savings Accounts of 2024

Capital One 360 Performance Savings APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
CIT Platinum Savings APY 4.85% APY for balances of $5,000 or more Rate info 4.85% APY for balances of $5,000 or more; otherwise, 0.25% APY Min. to earn $100 to open account, $5,000 for max APY Open Account for CIT Platinum Savings On CIT's Secure Website. Member FDIC.	APY 4.85% APY for balances of $5,000 or more Rate info 4.85% APY for balances of $5,000 or more; otherwise, 0.25% APY	Min. to earn $100 to open account, $5,000 for max APY
American Express® High Yield Savings APY 4.25% Rate info 4.25% annual percentage yield as of September 16, 2024 Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	APY 4.25% Rate info 4.25% annual percentage yield as of September 16, 2024	Min. to earn $0

Since March 2023, 32% of middle-income Americans have moved money into a high-yield savings account to take advantage of higher interest rates, as per the aforementioned survey. But that means 68% of middle earners have not gone this route even though it's easy and pretty much risk-free.

The reality is that despite a minor meltdown in the banking industry earlier this year, putting money in the bank is still a very safe option, provided your bank is FDIC-insured. If so, it means you're protected for up to $250,000 in deposits, per depositor, per bank. If your bank fails and you have $50,000 in savings, you're guaranteed not to lose a dime if that institution is FDIC-insured.

Meanwhile, a higher interest rate on your savings could do a lot of good for your finances. Let's say you have $20,000 in savings and are earning a 2% APY on your money right now. That's $400 a year.

If you find a high-yield savings account paying 4.5% interest instead, which is very doable these days, you're looking at scoring $900 a year on your money instead. That extra $500 could go a long way toward paying bills or just padding your cash reserves so you have extra funds on hand for a rainy day.

It pays to consider switching to a high-yield savings account

When you're used to banking at the same institution, it can be difficult to make a change. But if you're earning a minimal amount of interest on your money, then it pays to find a bank that's going to pay far more generously.

Remember, too, that you don't necessarily have to cut ties with your current bank. Rather, you can simply move most of your money out of savings for now if the rate you're getting isn't up to par.

But if you're going to chase a higher interest rate on your savings, move quickly. Today's higher savings account rates aren't guaranteed to last. If the Fed starts to cut rates in the coming year as inflation cools, banks are likely to start paying less. So the time to act to score a higher interest rate is now.