Key Takeaways
- Most big banks—including Chase, Bank of America, and Wells Fargo—pay virtually nothing on savings, with many customers not realizing how much more they could be earning elsewhere.
- Your savings are just as safe at smaller or online banks, thanks to federal deposit insurance that protects balances up to $250,000.
- Opening a high-yield savings account usually takes only minutes online, making it easy to stop settling for poor rates.
How Big Banks Keep Their Savings Rates So Low
It’s common knowledge that banks pay interest on savings accounts. They do so because they want you to deposit your money with them and keep it there, allowing the bank to issue loans with those deposits to earn profits. What’s less understood is just how dismal the biggest banks’ payouts are. Research shows that most account holders have no idea what rate they’re earning, and the big banks take advantage of that by paying them peanuts.
The nation’s three largest banks—Chase, Bank of America, and Wells Fargo—pay a measly 0.01% on their standard savings accounts. That’s not 1 percent—it’s one one-hundredth of a percent. On a balance of $10,000, that means you’d earn a single dollar of interest in a whole year.
In contrast, putting that same amount in one of today’s best high-yield savings accounts—a process that can often be completed online in minutes—could mean earning more than $400 extra annually.
The takeaway is clear: Shopping around pays. Savings account interest rates vary widely, and the bigger banks often count on their large customer bases staying put. They assume many people don’t realize there are equally safe, lesser-known institutions offering far higher payouts—or that opening an additional savings account elsewhere can be done quickly and easily.
Why This Matters
Earning a competitive return on your savings helps your money grow instead of quietly losing buying power to inflation. By moving from a big-bank rate to one of today’s top offers from a smaller institution, you could add hundreds to your balance.
The Real Cost of Leaving Your Money in a Low-Rate Account
The three biggest banks in the U.S. have long been notorious for their stingy returns, and that continues to be the case today. Wells Fargo offers 0.01% on its standard and premium accounts, while Chase and Bank of America also offer 0.01% to standard customers, along with a fractional bump for those considered “premium” or “preferred.”
At Bank of America, that still only means 0.02%, 0.03%, or 0.04%, depending on your Preferred Rewards tier. With Chase, meanwhile, you’ll earn 0.02% if you link your savings account to a Chase checking account that you use at least five times a month.
How does this stack up against the competition? Poorly. The national average savings account rate is 0.40%, while plenty of banks are paying more than 4%—with some even going as high as 5.00%.
Here’s how much those differences add up to in real dollars over a year.
Balance
0.01% APY big bank rate
4.50% APY high-yield rate
Money lost over one year
$1,000
$0.10
$45
$44.90
$5,000
$0.50
$225
$224.50
$10,000
$1.00
$450
$449.00
$25,000
$2.50
$1,125
$1,122.50
$50,000
$5.00
$2,250
$2,245,00
$100,000
$10.00
$4,500
$4,490.00
One explanation for smaller, lesser-known banks being more generous is that they are hungry for deposits. Without the name recognition or massive customer bases of the big banks, they need to stand out—and offering higher interest rates is one of the easiest ways to do it. Banks primarily earn profits by lending money, and depositors supply the funds that make that possible.
Operating costs also play a role. Many of the banks offering the best yields are online-only, which allows them to save on branch expenses and pass those savings back to customers in the form of better rates.
Why Big Banks Aren’t Automatically the Safer Choice
Laziness isn’t the only reason people stick with the big banks. Another powerful motivator is the belief that money is safer with them. These are household names that have been around for decades, and many people assume they’re “too big to fail.”
The reality is that smaller banks are just as safe because they offer the same federal protections. If any FDIC bank or NCUA credit union fails and your deposits are lost, the government would cover you up to $250,000 per person, per institution. That applies whether you bank at Chase or a small online bank that barely anybody has heard of.
Opening a High-Paying Savings Account Is Surprisingly Easy
Another common excuse people use for not moving their funds to an account with a higher interest rate is not having the time. But today, it’s easy to identify which accounts offer the best rates, with our daily ranking of the best high-yield savings accounts making the research easy.
Once you’ve identified the right account for you, it usually takes just a short online application to open it—a quick process that requires answering a few basic questions—and then making an initial transfer to activate the account. Transfer times between banks vary, but in most cases, your money will arrive at the destination bank in one to three business days.
With all this in mind, there’s little reason to keep settling for lousy rates. Opening a better savings account takes minimal effort—and the payoff could be hundreds of dollars or more each year.
Important
A high interest rate isn’t the only thing to look for. Make sure you also choose an account that doesn’t charge monthly fees or set a required minimum balance you’re not sure you can maintain. You’ll also want to check that the institution is FDIC- or NCUA-insured.
