Comparing savings accounts to get the best APY can help you rack up a lot of extra interest — but watch out for impressive introductory offers that are attached to less-than-stellar long-term accounts.
How much difference does an APY increase of 0.50% or 1.00% make?
A percent, or even half a percent, difference can add up to significant savings over time. For example, Rebecca puts $40,000 into a savings account with a 2.50% APY, and adds $750 to her account each month. After five years, she’s made $8,200.45 in interest.
If she would have opened an account with a 3.00% APY instead of 2.50%, she would have made $9.949.71 in interest, or about $1,749 more in the same time period.
Now consider if Rebecca’s APY was 3.50%, she would have made $11,737.30 in interest— that’s an extra $3,537 over five years! In this example, choosing an account with an APY that’s just 1% higher would lead to several thousand extra dollars after only five years.
How to get higher interest rates
To get a bump in your savings account APY:
Compare accounts. It’s worth it to take the time to compare accounts at different banks and even within the same bank. If you meet the monthly minimum balance, a money market account might net you a higher interest rate than a traditional savings account. If you won’t need to access your money anytime soon, consider opening a GIC account.
Consider online and challenger banks. Newer online-only and app-based “challenger banks” don’t have to deal with the overhead that comes with operating physical bank branches, and they can pass those savings on to you in the form of better interest rates.
Hidden fees and lower interest rates in the fine print
Banks might require you to meet a minimum balance requirement in order to get the advertised interest rate. Some will charge monthly fees if you don’t meet the required balance threshold, which can quickly eat into your savings.
Compare all savings accounts
Even a small difference in interest rate can make a significant difference to your savings over the course of several years. If you’re not convinced that you’re getting the best interest rate out there, compare other savings accounts and see if making a switch can start saving you more with a better APY.
Frequently asked questions
You can see some examples and learn how interest is calculated in our savings account calculation article You’ll have to take into consideration your initial deposit, any ongoing contributions, and your APY in order to calculate your total interest earned.
Sometimes banks will be willing to negotiate with you, but not often. You may have luck negotiating at a small, local bank — particularly if your account carries a large balance.
As the assistant publisher of banking and investing at Finder, Ryan Brinks melds more than a decade of experience in business news and online content into creating comprehensive and helpful comparisons of the companies you trust your money with. He loves to innovate and put money to work while keeping a careful eye on managing risk. Beyond work, Ryan's also passionate about his family and serving his community.
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