Is it worth changing banks for a better interest rate?

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As consumers, it’s in our nature to compare prices. If you’re the grocery shopper of the household, you probably know where to go for the best deals on eggs, milk and bread. If you’re in the market for a new camera, gaming console or computer, you may have also shopped around for the best deal and compared prices online and in the store. Shopping around can definitely save you a few bucks - even a few hundred bucks - in the course of a year.

But is it worth shopping around when it comes to your bank?

While banks generally provide the same range of interest rates, there are a few banks that provide significantly higher interest rates and deals than others. Many of the common, larger banks offer a measly 0.01 percent annual percentage yield (APY) on your savings - hardly enough to make saving money worth your while. But compare that to some of the best online savings accounts offering upwards of 1.00 percent APY and you could see why shopping around for a better interest rate is an appealing idea.

With those kind of numbers, why not just throw in the towel with the big financial institutions and switch today? Even though the math clearly shows that switching is the smart choice, there are a few other factors to consider before you run off and switch banks:

  • Accessibility: Do you like to keep your savings totally separate from your checking account? Or do you prefer easy access to your cash stash? Depending on your preference, switching your savings over to a different bank may be a really smart choice - or it might just be another inconvenience.
  • Minimum balance requirements: Many online banks with higher interest rates don’t require a minimum account balance. However, a few select online banks will provide savers with a preferred interest rate if they meet a minimum deposit amount. If you meet those requirements, you could reap the reward of a significantly higher interest rate.
  • Ease of switching: Let’s face it: many of us would switch banks today if the process were painless and instantaneous. But we all know what a hassle it is to uproot yourself from an account that you’ve had for years. Keep the process in mind before you switch, as it could cause you more financial headache than it’s actually worth.

About Stephanie Halligan

Stephanie is the founder of The Empowered Dollar, a site dedicated to helping millennials to fix their finances and find their stride in money and life. When she's not blogging, Stephanie is designing school curricula and online games to teach students about smart money management.

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Compare banks for mortgage, auto, savings and CD rates.