“Remember days of skipping school, racing cars and being cool?”
Sure, Bon Jovi’s 1987 song “Never Say Goodbye” summed things up nicely about the good ole days. But how about the long-forgotten days when banks actually paid people a decent amount of interest? Talk about a distant memory!
Is your money sitting in a savings account at a “big bank” earning nearly next to nothing in interest? I certainly hope not, but many people don’t realize there’s a MUCH better option that’s also easy and fast. That’s right, you can earn more money for nothing.
No, I’m not talking about investing it, buying real estate, or putting it under your mattress.
Again, we’re talking about your SAVINGS account — your rainy day fund; heck, your sunny day fund. Call it whatever you like, but one thing is for sure: it doesn’t need to collect only pennies in interest per month!
I’ve had discussions with many others about better savings account options, and not only do they quickly realize the benefits (free money) they’ve been missing out on, the conversation usually concludes with them saying, “Just tell me what to do!” They’re eager to get started and don’t want to wait another day LOSING money, because that’s how you should look at it — that extra interest hasn’t been going into your account!
But there’s something you can do about it. And I’d like to help you claim that extra money you’re missing out on.
How do you earn more money for nothing? It’s easy…
A great alternative to a savings account with a major bank — say, a Bank of America or Chase or Wells Fargo or Citibank or U.S. Bank — is one with an online bank. In other words, a high interest online savings account.
The idea might sound foreign, but it will make a lot of sense once we get through this. And soon enough you will be well on your way to earning more interest (money) on your savings.
All you need to do is make the switch to an online savings account, and the rest will take care of itself. Your money will immediately work harder growing for you. Nice, right?
Why big bank savings accounts stink
Online banks don’t have branches throughout the country. As a result, they have much less overhead — no bank tellers to pay (not many people go to tellers these days anyway); they don’t have numerous locations to lease and operate either. Those savings are meaningful, and the best part is YOU reap the benefits. How? Those savings are passed on to you!
If you check the latest financial news, you’ll come across stories about the Federal Reserve (the “Fed”) raising interest rates and so on. But do big banks pass along those interest rates hikes to their customers’ savings accounts?
Why? Well, because they can.
They’re big banks. Many of their customers don’t even realize they have the option to take their savings elsewhere and earn a lot more interest. Some might be complacent. Others (incorrectly) believe that if they’re bank isn’t paying that much interest, then no other bank is either.
So if you have money in a typical savings account, no matter the amount — $1,000? Great! $10,000 or more? Spectacular! — you can have that money work much harder for you.
The best part? You don’t have to do anything besides moving your account to an online bank’s high interest savings account.
How to earn more money (for nothing)
Take Bank of America, for example. Their current savings interest rate (or “APY,” short for “annual percentage yield”) is around .03% to .05%, depending on the savings amount or program you’re in, so let’s meet in the middle and go with a .04% annual interest rate for this example.
If you have $10,000 in their savings account, you’re earning a whopping $4 per year in interest, or about 33 cents per month! ($10,000 x .04%) That’s an insult to your hard-earned money! It deserves better! YOU deserve better!
Let’s take that same $10,000 amount and see how much you would earn in an online savings account, which currently pays in excess of 2.00% in interest annually: well, it comes out to over $200 per year, or a little over $16 per month. Pretty big difference! And each month, you’ll not only keep earning interest on your money (the principal), you’ll ALSO earn interest on the interest you’ve received — also known as compounding, which REALLY pays off over the long term.
Some more examples:
- $50,000 in savings:
Typical bank would pay $20/year in interest vs. $1,000/year at an online bank! (That’s $980 more!)
- $100,000 in savings:
Typical bank would pay $40/year in interest vs. $2,000/year at an online bank. (That’s $1,960 more…literally a mortgage or rent payment for some!)
And what do you have to do to reap benefits like this? Just move your savings account to a high interest online savings account. That’s all.
Even more ways to earn more money for nothing!
Some online banks even run promotions periodically that will give you bonus cash ($100 or more) when you open a savings account with them to help get you started. How nice is that?
YOU will have more money YOU decide what to do with:
YOU can do as YOU please with your extra money:
“How would you like that?” – Bank teller (looking at Josh’s paycheck of $187.30)
“Three dimes, a hundred dollar bill and 87 ones.” – Josh
(Tom Hanks, from the movie Big)
YOU can take comfort knowing YOUR money is growing:
Lyrics from the Pink Floyd song, “Money”
Still not convinced?
Here are a few other things to keep in mind to help reassure you:
- We’re talking about an online SAVINGS account. Money you want to keep safe and readily available. It’s NOT money you’re investing or will lose sleep over if the stock market drops. Your money will not fluctuate like a stock.
- Like all the other big banks, money in a high interest online savings account is also FDIC-insured (typically up to $250,000). So it’s protected — no threat of it somehow disappearing if there’s a financial crisis.
- Online banks automatically pass along interest rate increases on to you more frequently than a typical big bank. You don’t need to do anything when their interest rate increases. You’ll just be notified that it went up, which means even MORE money for you!
- Keep your existing checking account at your current bank if you like. Just use it as it’s intended: an account to pay your bills. (Forget “interest” checking accounts. They usually don’t earn much, and you shouldn’t look towards your checking account as a way to earn extra money. There’s no reason to keep much more money than necessary in your checking account.)
All you need to do to start earning much higher interest…
- Open an online savings account. There are several options out there that offer similar, high interest rates. It comes down to your preference. I have a couple of my own, but you can go with Barclays, Ally, Capitol One 360, CIT, Synchrony, among others.
- Once you have set up your new online savings account, connect your existing checking account to the new account, so you can transfer money between the two accounts going forward.
- Move your old savings account funds to your checking account, then go ahead and close your old savings account. There’s no need to keep it open once your new account is open.
- Transfer the savings you moved into your checking account to your new online savings account.
- Congratulations! You will now earn more money for nothing via a lot more interest on your savings!
What about going forward?
Continue to transfer “extra” money that’s in your checking account (i.e. what you’re not using to pay your bills) to your new online savings account. Try to make it a monthly habit.
Of course, there will be times an unexpected expense comes up that you’ll need to access your savings account to pay for it. No problem! All you need to do is transfer whatever the amount is from your new high interest online savings account back into your bank’s checking account. A few clicks on your computer (or app) and your money will be on its way.
And if you ever have questions or issues, you can always call the online bank’s customer service on the phone or have a chat session with them on their website. Some are available to assist 24 hours a day, 7 days a week. So there’s no trade-off in customer service availability for getting a better interest rate.
Keep your eye on the prize
I almost find it comical that some banks offer CDs (certificates of deposit) that barely pay more than an online bank’s everyday savings account interest rate. For those of you that don’t know much about CDs, a bank offers to pay you a higher interest rate ONLY if you lock up your money with them for a set period of time. It could be 6 months, a year, etc. If you withdraw your money before the period of time is up, you’re penalized and lose out on the interest. Now why would you want to do that when you can have a savings account that’s already paying a healthy interest rate PLUS you can access the funds whenever you want or need (without penalty)?
No matter your situation or circumstance, saving money is a good thing. Earning more interest on that money is a great thing!
I’ve introduced the concept of high interest online savings accounts to many friends and family members over the years. After they start enjoying the benefits themselves, they usually ask, “How did I not know about this before?” or “I’m surprised more people aren’t aware of this!”
Well, as the saying goes, knowledge is power.
It’s helped me and my nostalgic mind. I hope it helps you too.
You cannot improve what you cannot measure!
Lastly, but just as important to improving your financial health: Keep track and have a good understanding of all your finances.
I have my own methods, but you can have it done for you free of charge through a website called Personal Capital — it offers free tools to help you keep track of — and better understand — all your finances: this includes your savings account (now with an online bank, right???), checking account, investments, retirement accounts and analyzing how much you’re paying (or overpaying) in fees, budgeting and more.
Again, it can all be done for you free tools. All you need to do is sign up and input your information. They take care of the rest. They also offer a free trial for advisory services if you’re interested, but it’s not required and completely up to you.
Either way, it’s ALWAYS good to know how your finances are performing — don’t procrastinate! You will likely find the results helpful and enlightening, and you will feel empowered in the process.
Make the switch and start earning more money now!
Once you take control of your finances, you can start improving them immediately.
After switching to a (high interest) online savings account, you won’t ever want to go back to typical low-paying savings accounts big banks are taking advantage of, I mean, offering their customers. It should be clear by now that there’s no reason or incentive to have one!
Yes, it’s true: you can absolutely earn more money for nothing — that’s the way you do it — and no need “to install microwave ovens or play your guitar on the MTV.”