Survey: Only 21% of Banked Adults Have a High-Yield Savings Account. That’s a ‘Missed Opportunity’

Photo to accompany story about how many adults have high yield savings accounts. Getty Images

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Yes, savings accounts are still worth it. 

Interest rates are down across the board this year due to the recession caused by COVID-19, and most banks are giving out paltry returns compared to a couple years ago. 

But in a tough economy, any move that increases your cash on hand is worth making—and according to a new survey from NextAdvisor, more than half of Americans are missing out on earnings by parking their money in a low-yield account. 

“It seems like a missed opportunity. It takes all of 10 minutes to get a higher interest rate,” says Jill Schlesinger, CFP, business analyst for CBS News and host of the “Jill on Money” podcast

We asked 1,000 adults where they’re keeping their liquid cash right now. Nearly half, or 45%, said they’re putting at least some of their money in checking accounts, which pay little or no interest. Thirty-five percent are turning to low-yield savings accounts at physical banks, and another 7% are using low-yield accounts at online banks. 

Only 21% reported taking advantage of high-yield savings accounts at online or physical banks—which can offer rates that are up to 50 times higher. Another 16% named other high-yield vehicles like certificates of deposit (CDs) or money market accounts (MMAs).

Where U.S. Adults Keep Their Savings

Checking account (little or no yield)45%
Low-yield savings account at a physical bank35%
High-yield savings account at a physical bank14%
High-yield savings account at an online-only bank11%
Money market account 10%
Certificates of deposit9%
Low-yield savings account at an online-only bank7%
Other4%
Not applicable – I don’t have savings13%
Note: Respondents could choose more than one option. The APY (annual percentage yield) threshold used to indicate a high-yield savings account is 0.50%.

Why You Should Have a High-Yield Savings Account

On a $10,000 balance, a high-yield account with a 0.50% APY would earn you about $50 a year more in interest than a checking account right now. But compound interest accelerates those gains over time, and when rates eventually increase again, high-yield accounts will become more competitive. 

High-yield accounts are safer than checking accounts, too. It is more difficult to combat purchase fraud and theft on a debit card than a credit card, so keeping more money than you need in a checking account can cost you in other ways. Experts tend to recommend that you keep no more than one or two months of expenses in your checking account—just enough to ensure you’re not getting hit with overdraft fees when you pay your bills every month. 

Savings accounts at big banks typically don’t offer much more than a checking account. The average APY, or annual percentage yield, for a U.S. savings account is 0.06%, according to the Federal Deposit Insurance Corporation (FDIC) as of August 2020. At many national name-brand banks with physical locations, it’s even lower — usually around 0.01% APY.

But you can still get high-yield savings accounts at online banks with APYs above 0.50%. That’s at least 50 times higher than you’d find at major national bank chains.

The Case for Online Banks

As the upstarts of the financial industry, online banks can be more nimble than their traditional bank and credit union counterparts. The lower operating expenses from not having physical locations allow these online banks to pass on savings to you, the customer, in the form of interest. 

This current interest-rate environment is dismal, but you can get high-yield savings accounts with APYs above 0.50% with banks like Discover and Capital One. The best online banks will not charge fees to open or maintain an account, nor will they require minimum deposits or balances.

Still, our survey found only 21% of banked Americans have a high-yield savings account. Part of that likely has to do with the effort needed to make a change, says Schlesinger.

“I can’t say that anyone wakes up in the morning and thinks, ‘I just love the amount of interest that insert-name-of-large-bank credits to my account,’ because they don’t,” Schlesinger says. “I think the reason is inertia. That’s what the banking industry and brokerage industry often bank off of. It takes more action to move [your money] than not.” 

The potential return on your investment, even if small, can be worth summoning that energy, Schlesinger says. “When you’re in a zero-interest world, anything you can take on without more risk is valuable.”

How to Choose a High-Yield Savings Account

High-yield savings accounts are an easy, low-effort way to get earnings on your savings. First and foremost, we recommend keeping your emergency fund in a high-yield savings account, as those funds should be kept in the bank indefinitely. But a high-yield savings account is also valuable for any money you save for a vacation, a down payment on a home, a car, or any other goals. 

Even if you’re not saving toward a particular goal, it’s valuable to get into a savings habit so you have the financial freedom to make your own decisions. When choosing a high-yield savings account, it’s important to look at not only the APY, but also the minimum balance requirement, required fees, and other factors. We have written guides to help you evaluate what to look for in a bank and what bank account is right for you.

Methodology

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1,202 adults. Field work was undertaken between Aug. 6-7, 2020. The survey was carried out online. The figures have been weighted and are representative of all U.S. adults (aged 18+).