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Switching banks can be worth it for a higher rate, even if doing so is often a hassle. However, there are several factors to consider before making the switch. Learn when it’s a good idea to change banks, the benefits of doing so and which banks offer high rates.
Reasons to Switch Banks for a Higher Rate
The main reason to switch banks for a higher rate is obvious: You’ll earn more interest and end up with more money in your account.
As of Apr. 15, 2024, the average national savings rate is only 0.46%, according to the FDIC. But many banks offer high-yield savings accounts with around 5% annual percentage yield (APY). APY is the rate you earn in a year on your cash, including compound interest.
How much money can you earn by switching banks? Consider the example below of $10,000 deposited into a savings account with 0.5% APY versus a high-yield savings account with 5% APY.
| Deposit Amount | How long funds are in the account | APY (%) | Interest earned |
| $10,000 | 5 years | 0.5% | $252.51 |
| $10,000 | 5 years | 5% | $2,762.82 |
If your funds sit in that account earning 0.5% for five years, you’d earn $252.51 in interest. But if you deposit the $10,000 in an account offering 5%, you’d earn $2,762.82 in interest after five years.
It’s the same deposit amount and timeframe, yet there’s a $2,510.31 difference.
While increasing your savings is the most appealing aspect, there are other reasons you may want to consider switching banks.
Other benefits to switching banks
- Promotional deals
- Many banks offer bonuses ranging from as much as $200 to $2,500 for opening an account.
- Convenience
- When it comes to banking, convenience is important. You may be able to access more ATMs or a physical branch by opening an account elsewhere.
- Better customer service
- You may also want to consider switching banks if you’re not happy with your customer service. You can read customer ratings and reports like J.D. Power’s customer satisfaction study.
- You may also want to consider switching banks if you’re not happy with your customer service. You can read customer ratings and reports like J.D. Power’s customer satisfaction study.
How Long Does It Take to Switch Banks?
While each bank has its own unique timeframe and process, it generally shouldn’t take longer than several business days to switch banks. Transferring funds alone can take less than a day.
Caveats to Be Aware Of
While a higher rate may be appealing, there are several other factors to consider before you switch banks.
- Saving rates aren’t set. Some banks offer promotional savings rates that are higher than normal. However, the high rate is usually only offered for a limited period of time or if you maintain a certain balance. Banks also tend to follow the lead of the Federal Reserve’s federal funds rate, which changes based on the economic environment.
- Interest rates aren’t everything. Fees and convenience are also important factors to consider when choosing a bank. If you switch accounts but you now have higher fees or no longer have easy access to an ATM, the higher rate may not be worth it.
Banks With High Rates
If your current bank isn’t giving you the growth you want, it may be worth changing banks. Below are current rates for high-yield savings accounts with well-known banks.
Make sure to confirm that the bank is FDIC-insured and fits your financial needs before making the switch.
Sources:
Picchi, A. (2024, January 31). The Federal Reserve’s First Rate Meeting of 2024 Is Today. Here’s What Economists Say About Rate Cuts. Retrieved from https://www.cbsnews.com/news/federal-reserve-interest-rate-cut-meetings-2024/
FDIC. (2024, January 16). National Rates and Rate Caps. Retrieved from https://www.fdic.gov/resources/bankers/national-rates/index.html
Caliber. (2023, June 28). Nearly a Quarter of Consumers Are Likely to Switch Banks in the Coming Year Amid Declining Public Support for Industry. Retrieved from https://www.globenewswire.com/news-release/2023/06/28/2696104/0/en/Nearly-a-Quarter-of-Consumers-Are-Likely-to-Switch-Banks-in-the-Coming-Year-Amid-Declining-Public-Support-for-Industry-Shows-New-Reputation-Report-from-Caliber.html
FNBC Bank. (n.d.). A Complete Guide to Switching Banks. Retrieved from https://www.fncb.com/complete-guide-to-switching-banks
