Buzz
Banks no longer offer the same high interest rates as before, so it's easy to get excited when we find rates above 0.25%. Some banks and credit unions offer rates as high as 1%, which is great, but it shouldn’t be the main reason to pick an account.
Forbes highlights the hidden terms that come with savings accounts offering 1% interest. One example they provide is:
For example, the enticing 1% interest rate only applies to accounts with a minimum balance of $2,500. Smaller balances earn just 0.25%. When the Summit launch was announced, the fact that smaller accounts earn 75% less interest was buried in a footnote and not included in the list of fees and interest rates I had requested the day before. While most checking accounts may be larger, we live in a world where low balances are penalized, leaving 30% of American households either underbanked or unbanked.
Additionally, even if you have enough in your account, the 1% APY won’t generate significant returns unless you have tens of thousands of dollars in your account, and you probably don’t need that much cash readily available.
This doesn’t mean you shouldn’t benefit from a higher interest rate. Even if it’s just $50 a year, that’s still an improvement over nothing. However, there are other factors you should consider when choosing a new savings account, such as monthly fees, ATM access, and transaction limits.
Photo by GotCredit.
