For savers looking to maximize returns on their money, high-yield savings accounts can be an attractive option, Mint reports.
But with rates fluctuating and the hassle of switching banks, many are questioning whether chasing the highest yield is worth the time and effort.
Ondrei Ronhaar, a 40-year-old energy broker, recently faced this dilemma when a friend suggested he move his savings to a bank offering a slightly higher rate. The new account promised just 0.4 percentage points more than the 3.8% he earns at Ally Financial. After doing the math, Ronhaar determined that the minimal increase in interest wouldn’t justify the effort of switching accounts.
He’s not alone. Many savers are finding the returns from hopping between banks are diminishing. For example, the highest yield on a savings account tracked by Bankrate this month is 4.85%, down from 5.55% over the summer. The national average rate sits far lower at 0.48%.
Switching banks for a slightly higher interest rate often yields minimal gains. For instance:
- Parking $10,000 in an account earning 4.85% annually, compounded monthly, would generate around $2,700 in interest over five years, assuming the rate remains steady.
- Opting for an account with half a percentage point less would result in just $300 less over the same period.
“It has to be worth the effort,” explains Scott Hildenbrand, chief balance-sheet strategist at Piper Sandler.
Marginal differences in interest rates rarely justify the hassle of opening new accounts, updating automatic payments, and managing multiple bank logins.
During the Federal Reserve’s rapid rate hikes in 2022 and 2023, many consumers eagerly moved funds into high-yield accounts, certificates of deposit (CDs), money-market funds, and Treasury bills. These shifts were driven by inflation and rising interest rates, which prompted banks to offer competitive yields.
Now, with inflation cooling and the Fed cutting rates, banks aren’t as aggressive in raising savings account yields. According to Curinos, a banking consulting firm, deposits into new and existing high-yield savings accounts at online banks dropped from $174 billion in 2022 to $119 billion in 2023.
Online banks, which often lead the market with high yields, are more resistant to lowering rates than traditional banks. However, even their offerings vary, and some institutions may pay lower rates to long-term customers while advertising higher ones to attract new accounts.
For dedicated rate chasers, the effort involved can feel overwhelming. Travis Warden, a marine safety specialist in Houston, says switching banks regularly helped him build his six-figure savings. But now, with rates closer together, he hasn’t moved his money in two years.
“You’re essentially trading your time on earth for money,” Warden explains.
He noted that chasing a marginally better rate might yield only $50 more annually—hardly worth the effort.
Similarly, 30-year-old engineer Marshall Abrahantes, who maintains multiple accounts, is eyeing slightly better rates offered by online institutions but plans to research their trustworthiness and withdrawal limits before switching.
“I’ll get to it after the holidays,” he says.
