Buzz
Bank savings rates are infamously low these days, but some banks may advertise a 'high interest' rate, which often tops out at just one percent. From personal experience with a high-interest savings account, let me tell you: it’s not a game changer. Here’s why.
Sometimes, switching banks makes sense, especially if you're facing high fees or poor customer service. However, it can also be a hassle, so you likely shouldn’t move just because a bank offers a 1% interest rate.
For starters, that interest rate is typically only available to those with a certain minimum balance. Plus, as Refinery29 mentions, you shouldn’t be holding that much money in a savings account anyway:
You can still earn interest and lose money. Here’s the catch: With inflation averaging 3% annually, even at the best online banks offering 1% interest, you're still losing 2% each year. To minimize this loss, it’s best to keep only your emergency fund and short-term savings in a savings account...
To give you a clearer idea, if you maintain a daily balance of $6,000 in an account with 1% interest, you’ll earn approximately $60 over the course of the year. That comes out to about $5 a month. This is in line with the idea of focusing on small savings rather than large expenses. Sure, the little things add up, but it’s far wiser to store your savings in a more profitable place. For more, check out their full article linked below.
Photo by Andrew Watson
