I Could Get a Higher Interest Rate on My Savings at Another Bank. Here’s Why I’m Not Switching

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Chasing a higher interest rate doesn’t always make sense. Read on to learn more. 

It’s a pretty good time to have money in a savings account. The Federal Reserve has been raising interest rates since early 2022 in an effort to cool inflation. And while it’s paused those rate hikes in recent months, the result is the same — banks are paying quite generously on savings accounts, and they’re likely to continue to do so until the Fed cuts rates. That’s unlikely to happen until 2024 at the earliest.

I’m pretty happy with the interest rate I’m currently getting on my savings. But I will acknowledge that there are other banks paying more interest than mine. However, I’m not making a switch for these key reasons.

1. I don’t want to deal with the hassle

Opening a new bank account isn’t necessarily a difficult task, but it can be more time-consuming than expected. You have to fill out paperwork and then take steps to get your money transferred.

Also, if you bank online, which I do, switching banks means having to learn a whole new interface and get used to a different app. These aren’t insurmountable challenges, but since I’m reasonably happy with the rate on my savings I’m getting at present, I don’t feel compelled to put myself through the extra work.

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2. The difference in interest income isn’t so huge

I currently have my savings at Capital One, where I’m earning 4.3% on my money. If I were to move to another bank, I could snag a higher interest rate. CIT, for example, is offering 5.05% on balances of $5,000 or more.

The idea of earning extra interest on my money is nice. But when I run the numbers, the difference isn’t so huge.

I’m not going to divulge what I actually have in my savings account. But let’s say it’s $20,000. The difference in annual interest between a 4.3% APY and 5.05% is $12.50 a month. That’s not a negligible sum, but it’s not a life-changing one. And also, it’s hard to know how long these rates will last, which leads to my final point.

3. Savings account rates aren’t set in stone

If I were to open a 1-year CD (or one with a longer term), I’d specifically look at accounts offered by different banks and try to find the best rate out there. That’s because with a certificate of deposit (CD), your rate is guaranteed for its entire term.

But savings account rates are not guaranteed. CIT might be paying 5.05% now, but what if I were to go through the motions of moving my money over, only to see the rate on my savings drop down to 4.5%? I’d feel truly annoyed if I were to put myself through that work to earn an extra couple of dollars a month.

In some cases, it could pay to move your money over to a new bank that’s paying more interest. But for the above reasons, I’m keeping my cash where it is.

You may want to shop around for CDs if you’re tying your money up for a longer period of time, and you may want to find a new savings account if the interest rate you’re getting is well below what most banks are paying today. But otherwise, there’s nothing wrong with deciding to leave your money where it is and stick with a bank you know.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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