More Americans Are Ditching Banks With Low Interest Rates. Should You?

Savers no longer have to settle for bank savings accounts with near-zero interest rates. According to recent analysis from Bloomberg, during 2023, Americans moved a total of over $1.6 trillion into "large CDs" (deposits of more than $100,000) and money market accounts. Big banks like Wells Fargo and JPMorgan have reported higher competitive pressure to pay more for deposits.

More competition for bank deposits is ultimately good news for bank customers. With interest rates high, banks should pay more for your savings. But there is more progress to be made -- as of May 3, 2024, the FDIC's national average savings account interest rate was only 0.46%. And some major banks are still paying a paltry 0.01% APY on savings accounts.

Let's look at a few reasons why Americans should consider moving money to a higher-interest savings account -- or other options -- to earn a higher yield on savings.

The best savings accounts and money market accounts pay more than 5.00% APY

If your money is still sitting in a bank savings account that's paying near-zero interest, you can do so much better. The best savings accounts today offer up to 5.36% APY. The best money market accounts (another type of savings account) are offering similarly high yields (up to 5.30% APY).

Our Picks for the Best High-Yield Savings Accounts of 2024

SoFi Checking and Savings APY up to 4.60% Rate info You can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet. Min. to earn $0 Open Account for SoFi Checking and Savings Member FDIC.	APY up to 4.60% Rate info You can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet.	Min. to earn $0
Citizens Access® Savings APY 4.50% Min. to earn $0.01 Open Account for Citizens Access® Savings Member FDIC.	APY 4.50%	Min. to earn $0.01
American Express® High Yield Savings APY 4.25% Rate info 4.25% annual percentage yield as of May 31, 2024 Min. to earn $1 Open Account for American Express® High Yield Savings Member FDIC.	APY 4.25% Rate info 4.25% annual percentage yield as of May 31, 2024	Min. to earn $1

Why would you say "no" to that free money? Is your current bank's customer service and mobile app really so amazing, that it's worth not earning yield on your cash? Just by opening a new savings account at a different bank, you can earn 5.00% APY or higher on your savings, and you'll have complete flexibility for when to withdraw your cash if needed.

The best CD rates are highly competitive

If you have cash savings that you're willing to commit for a set timeframe (or "term"), you can open a CD with your savings. The best CD rates on our curated list are up to 5.15% APY. The exact amount of yield you can earn on a CD will vary based on the amount of cash you put in, and for how long. Longer-term CDs tend to pay higher APYs.

The best reason to open a CD instead of a savings account is that CD interest rates are fixed, while savings account rates fluctuate along with the Federal Reserve's latest moves. So if you open a CD, it can let you lock in a higher APY ahead of possible Fed interest rate cuts.

But remember: CDs are not as flexible and "liquid" as a savings account or money market account. You cannot pull your deposits out of the CD until the term is up -- if you do, you will owe early withdrawal penalties.

Other accounts can pay higher yield on cash

If CDs feel too inflexible and savings accounts feel too "boring," there are a few other places to put your cash savings that can give you better yield than a near-zero interest bank account:

Brokerage cash accounts

Most of the best online brokers offer cash management accounts or "cash sweep accounts" where you can stash your extra cash savings. But you don't have to use this cash to buy stocks. Instead, your cash can earn interest by being invested in low-risk, short-term assets like money market funds.

For example, the Wealthfront Cash Account and Betterment Cash Reserve are both paying 5.00% APY now, and both provide FDIC insurance for your cash deposits.

Wealthfront Automated Bond Portfolio

Want to invest your cash in something that's similar to a CD, but with the chance of higher yields? Check out the Wealthfront Automated Bond Portfolio. This is a unique, innovative account that lets you invest your cash in a diversified mix of bonds, with tax-efficient investing and professionally managed risk management.

After Wealthfront's advisory fee, this product has recently been paying a variable APY of 5.49% -- better than the best CD rates.

Save Market Savings Account (up to 9.07% variable APY)

If you're willing to commit your money for at least one year and accept some investment risk -- but still get the safety of FDIC insurance for your cash deposits -- an innovative fintech called Save® (joinsave.com) has another interesting option for your cash savings. Save's Market Savings Account lets you deposit your cash in a high-yield online savings account (with FDIC insurance), and then Save invests the interest for you in a diversified portfolio of stock and bond ETFs.

Based on recent market performance, the Save Market Savings Account can deliver a potential yield of 9.07% variable APY for a one-year investment term. Keep in mind that this yield is not guaranteed, but your cash deposits are also never at risk -- you might not gain that full 9.00% yield, but you also won't lose any of the money you put into your savings account in the first place. If you're considering a 1-year CD, take a look at the Save Market Savings Account instead -- the higher yields could be worth pursuing.

Bottom line

It's the principle of the matter: You deserve to earn a yield on your savings. Stop letting big banks make money off of your hard-earned cash, and go get more money for yourself with the power of compound interest.