Many Americans stash their savings at the country’s largest banks, and they do so for a number of reasons. Institutions such as Chase and Bank of America maintain a vast network of branches and ATMs, offer a wide range of financial products and have spent years building up their reputation as safe and reliable banks.
But if your savings sit in a traditional account at one of these banks, you’re essentially losing money. That’s because those major brick-and-mortar banks pay you almost zero interest. Those funds aren’t keeping up with inflation, and they’re not earning what they could be earning elsewhere.
[See: Best High-Yield Savings Accounts: Up to 4.57% APY]
Traditional Savings vs. High-Yield Savings: Comparing Potential Earnings
Online banks and credit unions typically offer the best rates on high-yield savings accounts. This is partly because these institutions save money on costs — online banks don’t have to staff hundreds of physical branches, and nonprofit credit unions don’t need to generate earnings for shareholders. Large banks also have other advantages that allow them to build their customer base without the need to offer high interest rates on deposits.
Still, the difference in rates is considerable, especially in the relatively high-rate environment we’re currently in.
Chase, Bank of America and Wells Fargo all pay just 0.01% APY on their traditional savings accounts. Meanwhile, even though interest rates have dropped slightly since their highs of 2024, some online banks still offer yields around 4%. Here are several banks that still offer competitive rates on high-yield savings accounts:
— Newtek Bank: 4.35% APY
— EverBank: 4.05% APY
— Synchrony Bank: 3.8% APY
Some larger institutions do pay competitive savings rates. For example, Capital One offers 3.4% APY on its 360 Performance Savings account.
Here’s a look at the potential difference in earnings on $5,000 over time if you deposited it in a high-yield savings account at 4% APY vs. a traditional savings account at 0.01% APY. Interest is compounded daily.
| 1 Year | 3 years | 5 Years | |
| High-yield savings (4% APY) | $204.04 | $637.45 | $1,106.96 |
| Traditional savings (0.01% APY) | $0.50 | $1.50 | $2.50 |
| Potential interest lost | $203.54 | $635.95 | $1,104.46 |
Of course, the difference becomes even more pronounced on larger balances. Here’s a look at potential earnings on a deposit of $25,000, with interest compounded daily.
| 1 Year | 3 Years | 5 Years | |
| High-yield savings (4% APY) | $1,020.21 | $3,187.24 | $5,534.73 |
| Traditional savings (0.01% APY) | $2.50 | $7.50 | $12.50 |
| Potential interest lost | $1,017.71 | $3,179.74 | $5,522.23 |
[Read: Best Online Banks.]
Switching to a HYSA: Here’s What to Look For
High-yield savings accounts can provide solid returns, but they work best for certain purposes and generally shouldn’t be used as your main bank account. Ideally, you should keep some funds in a checking account that you can access quickly and conveniently.
“Depending on what the financial goal is, it may make sense to keep a portion of savings at a major bank for immediate access and use a high-yield account elsewhere for longer-term growth,” says Chikako Tyler, executive vice president and chief operating officer at California Bank & Trust. “It’s all about balancing your need for liquidity, convenience and reliability.”
Here are some factors to consider if you’re looking to open a high-yield savings account.
— APY. Start by comparing the interest rates offered by various institutions, but keep in mind that they can fluctuate. One bank may have the highest rate this month, but that could change. Some experts even recommend opening two HYSAs and regularly shifting your balance to whichever account is paying the highest yield.
— Minimums. Some banks require you to make an initial deposit — often $500 to $1,000 — when you open your account. You may also be required to keep your balance above a certain threshold.
— Fees. Make sure you understand any fees you might incur. These could include fees for withdrawals, low balances or excessive transactions.
— Ease of access. Federal regulations used to limit the number of savings account withdrawals you could make each month. Those rules were removed five years ago, but many banks still restrict you to a certain amount of monthly transactions, usually six.
— Customer service. If you’re mostly leaving your savings alone to grow, the availability and responsiveness of the bank’s customer service team will rarely be a concern. However, keep in mind that in addition to having no branches, some online banks have limited phone hours and long call wait times.
Also, consider your specific requirements for the account and how you plan to use the funds in it. For example, if you’re stashing a large balance that you have pegged for a major purchase, check to make sure the full balance earns the top advertised rate and make sure you’ll be able to withdraw it all at the same time if you need to.
“As a general rule of thumb, you should look for accounts that don’t have any rate tiers or minimums and allow you to withdraw at least $250,000 per day,” says Gary Zimmerman founder and CEO of MaxMyInterest. “Even if you don’t need that level of liquidity today, you might someday when you do purchase a home.”
Finally, make sure you choose a bank that has a strong reputation for maintaining proper security protocols and safeguarding your money.
“While most ‘experts’ might focus on yield, a wise saver should make security of their savings their primary consideration in choosing a HYSA,” says Erik Beguin, CEO and founder of Austin Capital Bank. “It doesn’t matter if you’re earning an extra 0.25% in interest if you lose 100% of your savings.”
[Ranked: Best National Banks]
When It Makes Sense to Stay at a Big Bank
Major banks offer many benefits that may outweigh their meager interest payments, depending on your priorities. For example, the convenience of a nearby branch and a nationwide ATM network may be more important to some customers, especially those who prefer to do their banking in person. A large bank also typically offers a wide range of products, such as loans and credit cards, and you may get discounts for holding multiple accounts with that institution, which could be more valuable than the interest you’re missing out on.
“High-yield accounts can provide a faster avenue to build a savings if you can let your interest compound,” says Tyler. “However, building a relationship with your local branch where you can get advice from a banker is also an important consideration long term.”
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Do You Keep Your Savings at Chase or Wells Fargo? Here’s How Much You’re Losing originally appeared on usnews.com
