Hyperdrive, also known as warp speed or a number of other terms in science fiction, refers to traveling faster than light. While theoretically impossible for objects due to the special theory of relativity, moving at this incredible pace is possible for your money. While you have a savings account earning continuous interest, you are becoming slightly richer not every second, not every microsecond, but every infinitesimal portion of time. That’s fast.
If your money is earning 0.25% yearly interest in a standard brick-and-mortar savings account, you are not making the most of your money. For no more risk you can be earning up to 20 times as much. Savings, whether in a high-yield account or not, is among the safest of all investments. Here is the first tip for putting savings into hyperdrive. Keep in mind that the terms “savings account” and “money market account” (not “money market fund”) are interchangeable.
1. Open a high-yield savings account. Many banks are getting away with murder. They know that most customers are fine letting their money sit without looking for better alternatives. Comfortability plays a role.
If you’ve been with a bank for 15 years, you feel comfortable with them and are less inclined to feel the need to shop around. This is acceptable behavior as long as you understand that you could be missing out on significant interest income. Take a look at this list of high-yield savings accounts or look for the lists on BankRate.com.
Many of the banks that pay the highest interest do not have brick-and-mortar branches. These branches are expensive to run. Without having to manage branches, banks can theoretically save more income and pass that savings onto account holders in the form of interest.
There is no reason to feel nervous about opening an account with a bank that only exists online. As long as they are insured by the FDIC—and all the banks listed here are—you have the same protections you have with a traditional bank. Also, you’re safer sending your information over a secure, encrypted internet connection than you are traveling to a branch with your money.
Opening a high-yield savings account is a no-brainer. With a $10,000 balance at the beginning of the year and no further deposits, a savings account with an annual percentage yield (APY) of 4.5% earns $450 in interest, $425 more than the typical savings account offering 0.25% APY.
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“Many banks are getting away with murder. They know that most customers are fine letting their money sit without looking for better alternatives.”
You are right – I still can NOT believe with as many online banks offering over 4% for an account with no minimum that they still offer accounts with 0.5% interest! I guess they figure as long as people are sticking with them, they don’t need to raise the rates…
On top of foregoing the comfortability of staying within your brick-and-mortar bank, you have to do the research to find out how to freely move your money. My bank (huge B&M) charges a fee to “transfer” money from them to another bank, but if you set up EFT (electronic fund transfer) with the receiving end, EFTs are free since it is impossible to discern between an EFT for a purchase and an EFT for savings. It’s impossible to tell whether situations like this are innocent side-effects or maliciously misleading, but it does represent a hurdle to potential rate-shoppers.
I was skeptical about an online only bank, but I’m glad I was proven wrong. ING Direct has treated me much better than Bank of America.
It’s also motivating to see my money grow.
Whenever I read posts about savings interest rates, I feel lucky that I get as much as 8.2%pa and the lowest (by choice) is 5%pa. I don’t know what makes New Zealand banks afford to raise their rates so high!
I was really surprised when I found out that my old account earned me .20% interest. My reaction—why bother?
I just wrote an article about how I am losing money with Bank of America’s Keep the Change program, because the interest rate is only 0.2% APY! Even with a minimum balance of only $300 and 5% matching contrubitions from debit card purchases, I am worse off for not having a high yield savings account.
I feel like Mrs. Micah…I earned a whopping $0.14 last month on my “Advantage” account at a B&M. So after reading your article, I opened a high yield online checking account. I can’t wait to try some of your other tactics.
Is GE Interest Plus still a good (safe)place to park a lot of cash?