Do You Have a Bank of America Savings Account? Here's Why You Should Switch

With 69 million customers, Bank of America is the second-biggest bank in the United States. But just because a bank is popular doesn't mean it's a good place to store your money. Because like many big banks, Bank of America offers rock-bottom interest rates.

How bad is it? The Bank of America Advantage Savings account is currently offering a 0.01% standard APY. Or, if you qualify for the bank's Preferred Rewards program, you can get an interest rate boost -- to a whole 0.02% to 0.04%, depending on what tier of the program you're in.

That's a terrible return on your money compared to what you could be getting. Many of the top high-yield savings accounts offer rates of 4%, 5%, or more. For example, you could open a Capital One 360 Performance Savings and earn a 4.25% APY, with no fees or minimum balance requirements. If you have a balance of at least $5,000, a CIT Platinum Savings account will pay a 5.00% APY.

It's a massive difference, and it becomes even clearer when you see how much less you'll earn with a Bank of America savings account.

Here's how much interest you're giving up with a Bank of America savings account

Americans have a median balance of $8,000 in transaction accounts, according to the 2022 Survey of Consumer Finances. Transaction accounts refer to bank accounts, including checking accounts, savings accounts, and money market accounts.

In the table below, you can see how much interest it's possible to earn on an $8,000 balance after one year, five years, and 10 years. The only difference is where you keep it. The first option is a Bank of America Advantage Savings with a 0.01% APY. The second is a CIT Platinum Savings with a 5.00% APY for balances of $5,000 or more. Here's how much interest you'd earn with each one.

Even after a year, you'll have less than $1 in earnings with Bank of America, compared to $404 with CIT. Over 10 years, sticking with Bank of America costs you over $5,000.

Now, this is only an example, and it's worth mentioning that interest rates on savings accounts fluctuate. CIT won't offer a 5.00% APY for 10 years straight. That rate will go up and down depending on the federal funds rate. But it's a safe bet that high-yield savings accounts like this one will consistently offer much more than Bank of America.

Are there any downsides or risks with high-yield savings accounts?

You might be wondering what the catch is with high-yield savings accounts. After all, there must be a reason why they offer so much more than big banks.

The savings accounts that pay the most are typically offered by online banks. These are much smaller than big banks. Online banks can afford to pay more interest because they don't have the overhead costs that come with operating bank branches throughout the country. They also need to offer higher interest rates to attract clients, whereas big banks with established customer bases don't.

Banking is different with online banks, but it's just as safe. If you haven't used an online bank before, here's what you should know about it:

• Online banks can be FDIC insured just like big banks. FDIC insurance covers up to $250,000 per depositor, per account in the event of a bank failure. Quality online banks have this, and you can confirm if a bank is FDIC insured by checking its website or looking it up using the FDIC's BankFind Suite tool.
• You won't have access to physical bank branches. Brick-and-mortar banks can be more convenient, because you can visit in person to make deposits and withdrawals. With online banks, you do almost everything from your bank's web platform or mobile app.
• You can get cash at ATMs in your bank's network. Most online banks have ATM networks that their clients can use for fee-free withdrawals. Some have larger networks than others, so it's worth checking what different online banks have available in your area.
• Online banks have fewer fees and other requirements. You can find online banks with no monthly fees or minimum balance requirements, including online banks with high APYs. Many brick-and-mortar banks charge a monthly maintenance fee that they waive if you complete certain requirements, such as maintaining a minimum balance.

If you're not sure about doing all your banking online, you can always have accounts at both a traditional bank and an online bank. You'll still be able to bank in person this way at a brick-and-mortar bank. But for your savings, an online bank is a much better option.