Getting high on yield

Is it worth it to chase high yield savings accounts?

High-yield savings accounts pay interest rates far higher than the national average of 0.09% annual yield. They’re generally offered by online-focused banks and credit unions. But sometimes rates change for established customers, and not always for the better.

If getting the best rate made you choose an online savings account, should you keep chasing the highest rate even if it means switching accounts again? Here’s what experts say:

1 Know rates

If the rate on your savings account is close to the national average and you’re comfortable with an online bank, consider switching to a high-yield account. If it’s a minor difference, then probably not, but it depends.

Certified financial planner Dan Stous recommends doing some quick math to decide. Multiply your current rate by your savings balance to estimate your annual interest. Now do the same with the better rate.

The result might surprise you. The difference between the interest 2.00% and 1.50% will earn you on a balance of $10,000 over one year is only $50.

“The higher the balance in [your] account, the more reason there is to switch to a higher rate,” says Stous.

2 Weigh pros and cons

The perk to chasing the highest savings rate is, of course, maximizing your interest earnings. But the reality is more complicated. Competitive rates change over time. If the Federal Reserve drops its rate, many banks drop theirs, too.

A more abstract downside to chasing rates is losing perspective.

“The habit of saving is more important than the rate,” says Natalie Slagle, a founding partner at Fyooz Financial Planning . “If you don’t have a great habit of saving, it doesn’t matter what the rate is.”

Regular contributions to your savings account, such as monthly transfers from your checking account, usually play a bigger role in growing your money than interest does.

Whenever you choose to open a new savings account, the rate is important, but so are other features. Factor in fees, minimum balances required to earn interest, and access to customer support.

This article was provided to The Associated Press by the personal finance website NerdWallet. Want to suggest a personal finance topic that Quick Fix can address? Email apmoney@ap.org.