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The national average savings account pays just 0.38% APY, according to the FDIC. And for checking accounts it’s way lower — a paltry 0.07% APY on average.
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So if you’ve got $10,000 parked in one of these at a big bank, you might be earning about $3 per month in interest (or less). That’s barely enough for a decent coffee these days.
Meanwhile, several online banks are paying 4.00% APY or higher. And that adds up to hundreds in interest per year with the same money.
The difference an APY makes
Most people shrug off bank interest because it seems like small potatoes — a few bucks here, a few bucks there. Not exactly life-changing money, right?
Well let’s look at the real math. Here’s what you could earn in a year with an online high-yield savings account (HYSA) earning a 4.00% APY:
Balance | 1-Year Earnings |
|---|---|
$5,000 | $200 |
$10,000 | $400 |
$25,000 | $1,000 |
Data source: Author’s calculations.
I’m living proof that this isn’t just theoretical.
A few years ago, I moved my emergency fund (about $25,000) from a checking account with Chase bank earning 0.01% APY into an online HYSA. In those few years I’ve earned over $2,000 in interest.
Once you see that kind of money coming in passively, you start to realize: bank interest isn’t small potatoes after all.
In my opinion, everyone should have an HYSA for savings. You don’t need to move everything over to an online bank — just keeping your emergency fund, travel fund, or any short-term savings in a high-yield account can make a big difference.
Check out our list of the best high-yield savings accounts to start earning REAL interest on your savings
Why online banks pay more
Online banks don’t have physical branches, tellers, and all the expensive overhead that comes with traditional banking.
Without those extra costs, they can pass more of the profits back to customers in the form of higher APYs.
It’s kind of like shopping directly from a brand instead of a middleman. Fewer expenses = more discounts and value for customers.
And even though they operate online, the best ones are still FDIC-insured. Meaning, your money is just as safe as it would be at a big-name brick-and-mortar bank.
By the way, many top online banks are actually “big names.” Large financial institutions like American Express National Bank (Member FDIC), Discover® Bank, and Barclays offer high-yield accounts with great rates.
How to switch banks in under 30 minutes
I’ve helped multiple friends and family members make the jump from traditional banks to online ones. Some of them were with the same bank for 20+ years — they didn’t even realize they were getting hosed until I showed them the numbers.
It’s way easier to switch than most people think. Here’s a quick overview of the process:
Pick a high-yield savings account with no fees and a strong APY.
Apply online or via the mobile app. Should take five to 10 minutes.
“Link” your old bank account. I love modern tech. Most banks let you virtually connect accounts across institutions for quicker transfer.
Transfer some money over to the new account.
Set up any automatic deposits you want
From there, you can just sit back and watch your money earn interest.
You don’t even need to close your old account. In fact, as long as you’re not being charged fees, there’s no harm using two banks (I do). One for checking and day-to-day activity, and the other for cash storage and high interest.
Don’t settle for $1 when you could earn $500
Big banks might offer convenience, but they rarely offer competitive interest. And that means your money is quietly falling behind.
A high-yield online savings account pays real money. And when it’s paired with no fees and the same security, there’s not much reason to stay with a sluggish, low-paying bank account.
So, which would you rather earn this year?
$1… or $500?
Compare top online savings accounts now and start earning more.
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