Why Should You Switch Savings Accounts?

by The Smarter Wallet on Managing Money

Do you ever take a look at your bank and online savings accounts? I mean really look at them and consider whether they are still working for you?

Here are some well known bank and savings accounts that are yielding above the national average:

Online Bank
Savings Product
Interest Rate
Min. Balance
EverBank Yield Pledge Money Market Account 2.25% $1,500
EverBank FreeNet Checking Account 1.02% to 1.46% $1,500
EverBank Yield Pledge CD 0.75% to 3.39% $1,500
FNBO Direct Online BillPay 1.10% $1
FNBO Direct Online Savings Account 1.10% $1
Sallie Mae High Yield Savings Account 1.30% $0
Ally Bank Online Savings Account 1.25% $0
Ally Bank Classic High Yield CD .74% to 2.74% $0
Ally Bank No Penalty CD 1.32% $0
Ally Bank Interest Checking 0.50% to 1.05% $0
HSBC Advance Online Savings Account 1.10% $1
HSBC Advance Online Payment Account 0.85% $1
HSBC Advance Online CD .10% to 1.70% $10
ING Direct Orange Savings Account 1.10% $1
ING Direct Electric Orange Checking Account .25% to 1.25% $1
ING Direct Business Savings Account 0.95% $0
ING Direct Orange CD 0.75% to 1.25% $0
WT Direct Savings Account 1.21% $1

When you open a new account, you’ve probably done a lot of research to find the best savings account for you that pays the best rate of interest at the moment. But then you tend to forget about it, and hey presto in a year from now that great account could have turned into a lemon. And there are many reasons why this could happen. This is a cautionary article on why you should keep your eye on your bank accounts and not forget about them completely (even though it’s easy to do).

Why Should You Switch Savings Accounts?

So here are some reasons why you should consider switching to a different financial institution or moving your funds into different bank products.

1. You’ve got an old account paying next to nothing in interest. Do you own a savings account? There’s a good chance that it will be paying you a paltry amount of interest. If you’re generally unhappy with your bank, then the interest rate could be the last straw. In this case, don’t focus on being loyal to your bank –- switch allegiance immediately! It’s good practice to check your savings accounts and how well they are performing on a regular basis. If you’re seeing other accounts that have great features and solid reputations and that pay more for the same type of access, you should look into making a switch.

2. You don’t have tax free savings. Ensure that you take advantage of tax benefits that are afforded you whenever they are available. Use any tax free allowances you are permitted to have right away. Sure, you’ll always need a certain amount of cash that remains liquid and readily available for your use, but once this is sorted out you need to make the most of tax free savings. This will earn you more on your money because the tax man won’t be able to take his usual slice. If you find your current bank to be subpar, you can open a tax-advantaged online brokerage account elsewhere to house your savings.

3. You’ve got some savings you can happily put away and forget about for a year or more. If you can do this, then look for accounts that offer you a better rate, in exchange for tying up your cash. There may be CDs or time deposits that can do the job for you (this review of EverBank discusses some great options). You’ll probably be penalized if you want to get at the money sooner, but if you can keep your funds in the account up to the length of time it’s required to be there, you will end up earning more as a result. You might need to sit down and figure out how much and for how long you can invest before you do this.

4. You’re on a variable rate of interest when a fixed rate might be better. Different savings accounts offer different perks for the saver. A variable rate means that you will be constantly unsure of how much the rate might rise or fall. A fixed rate gives you an assurance that you will receive a specific rate for a specific length of time. What you want to watch out for is the chance that the interest rate goes up, while your savings account stays at the same low level.

You can see that in certain circumstances, sticking with the same savings account for a prolonged period of time can potentially be a bad thing. Of course it is easy to get lazy and be a victim of inertia when you settle for whatever your bank is giving you. But this is what the banks are banking on!

The sooner you can research the market and find the best deals for you, the more you will be making on your investments. And remember, regular checks are necessary in order to keep on top of things. Otherwise you’ll be letting the banks get away with charging you fees you don’t deserve while paying you next to nothing.

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