Interest rates on savings accounts often fluctuate, making the hunt for the highest yield on your savings stash a cat-and-mouse game.
If your account’s yield falls, is it worth switching to a different account offering a better rate? After all, the new account’s yield could drop at any time, too.
Doing some math can help you make the call. Say you have $10,000 in a savings account with a rate that recently dropped to 0.4%. Over the next year, you’ll earn about $40 in interest if the rate remains steady. If you move the money to an account yielding 0.7% — one of the top rates available recently — you’ll earn about $70 in interest over a year, or $30 more, if the yield stays the same (but that’s a big if).
If you hold a bigger balance, switching becomes more compelling.
“The more you have in the savings account, the larger the difference, and that can make even a small rate advantage worthwhile,” said Ken Tumin, founder of DepositAccounts.com.
Using the example above but with a $50,000 balance, you’d earn about $150 more in interest by moving your money to the higher-yielding account. With a $100,000 balance, the difference is about $300.
You can run the numbers by visiting Investor.gov, hovering over the “Financial Tools & Calculators” tab and selecting “Compound Interest Calculator.”
Look for consistency. Accounts that have reliably offered strong yields in the past are more likely to continue providing above-average rates than those that occasionally dangle chart-topping yields to attract customers.
To see a list of the highest-yielding accounts in your area, visit www.depositaccounts.com/savings. For each account, you can click on “Details” to see its rate history.
Tumin notes that in an index of 10 well-established online savings accounts that Deposit-Accounts tracks, the no-fee accounts from Live Oak Bank (www.liveoak bank.com; 0.6% yield), SFGI Direct (www.sfgidirect.com; 0.56% yield) and Synchrony (www.synchronybank.com; 0.55% yield) recently offered rates higher than the index average of 0.49%, and they’ve had above-average rates for the past 31/2 years, too.