Why Your Savings Account Is Robbing You

Becca Hartwell: Welcome back to Money Unlocked. I'm here with Maya and okay, we have a good one today. We really do like genuinely good. Becca Hartwell set it up. Okay, so get this. Your savings account is probably earning you almost nothing. And I mean that literally. We're talking embarrassingly close to zero. According to the FDIC, the national average savings rate right now is 0.38%. On $5,000, that's about 19 bucks a year. $19 on $5,000. I've tipped more than that on a sandwich. Right? But here's the thing. The top high-yield savings accounts right now are paying up to 5.00% APY. Fortune's been tracking this daily. Same five grand, $250. That's not a rounding error. That's a real difference. And your money is still just sitting there. Safe. FDIC insured. Maya: Mhm. Becca Hartwell: You didn't take on any extra risk. So today we're going to break down what these accounts actually are, because there's a myth that an unfamiliar bank name means sketchy bank. Spoiler, no. We're also getting into the fine print, because some of those flashy rates have conditions attached that you need to know before you sign up. Oh, the fine print, my favorite. And we'll talk about whether you should wait for the Fed's June 17th meeting before opening anything. Short answer, probably not. But we'll get into why. Plus, we're ending with a concrete action. You can literally do this today, even if you only have $47. Forty-seven is enough. We're starting the clock. Let's get into it. All right, segment one right now. Speaker 3: Okay. Becca Hartwell: Okay, so get this. You have $5,000 sitting in a regular savings account. How much do you think you earned last year? Speaker 3: I mean, a hundred bucks? Something like that? Becca Hartwell: Nineteen. Speaker 3: Wait, wait, wait. Nineteen on 5,000? Becca Hartwell: Nineteen. That's it, because the national average savings rate right now is 0.38% APY, per FDIC data. Duh. Speaker 4: Wow! Becca Hartwell: That's what most people's accounts are paying. Speaker 3: So not even enough to cover a single dinner out. Becca Hartwell: You could not even cover a burrito bowl with that. And here's the thing that gets me: nobody told you. Your bank didn't send you a letter. Speaker 3: Shocking; the bank didn't volunteer that you could be earning more somewhere else. Becca Hartwell: Right? According to Fortune, the best high yield savings accounts are paying up to five percent APY right now. Now, same five thousand dollars, same federal insurance on your money. Speaker 3: So that same five thousand earns around two hundred and fifty dollars instead of nineteen. That's not a rounding error. That's like a 13 to 1 difference. Becca Hartwell: Yeah, yeah, yeah. And this isn't a trick. No extra risk, no locking your money up. The Motley Fool confirmed the 0.38% national average just this month using FDIC data. Speaker 3: Hmm. But I think most people figure, you know, it's savings, it's safe, that's the job done. Becca Hartwell: That is exactly the mistake. Safe and earning are two different things. Your money being protected is not safe. Tected is the floor, not the finish line. Speaker 3: So the bank is just keeping the difference? Becca Hartwell: Ding, ding, ding. And the gap is historically wide right now. CBS News has been covering this all month, noting that rates are still elevated compared to just a few years ago. Speaker 3: So basically most people have no idea this gap even exists. Becca Hartwell: Most people have never been told, and banks are not going to bring it up unprompted. Speaker 3: Okay, so the obvious next question is, what... What actually is this High-Yield Savings Account people keep mentioning? Like, is it some complicated product or? Becca Hartwell: That is exactly the right question. And the answer is way simpler than most people expect. Speaker 3: So building on that gap we just laid out, what even is a High-Yield Savings Account? Because High-Yield sounds like it belongs in a hedge fund brochure, right? But here's the thing. It's genuinely just a regular savings account. Same deal. Your money goes in, earns interest, you can pull it out when you need it. The only difference is the rate. That's it. That's it. And here's why the rate is higher. According to CNBC Select, most High-Yield Savings Accounts come from online-only banks. No branches, no tellers, no real estate costs. That overhead savings goes straight to you as interest. Becca Hartwell: Oh, that is the generic ibuprofen moment right there. Same active ingredient, way less packaging. Speaker 3: Exactly. And the safety piece, Fortune confirms these accounts carry FDIC or or NCUA insurance up to $250,000, the same as any branch bank. Becca Hartwell: Okay, but, and I'm voicing every skeptic right now, what if I've literally never heard of the bank? Like Vio, SoFi, who are these people? Speaker 3: I know, I know. Here's the thing, though. NerdWallet actually points out that Vio is the online division of MidFirst Bank, one of the largest privately held banks in the U.S. The name on the door is unfamiliar, the institution. and backing it is not. Becca Hartwell: Oh, so the sketch factor is basically just branding. Speaker 3: Branding, that's all it is. The FDIC sticker is the same sticker. Becca Hartwell: And this is where it gets good. Because the common mistake people make is assuming unfamiliar equals unsafe, so they stay with Chase. Speaker 3: And Chase's savings rate per U.S. News, one of the lowest in the country. Big national banks basically offer 0.01% APY on savings. Ah, plot twist! The bank you trust most is probably paying you the least. Every time. So this week's action item is simple. Google FDIC plus the name of any online bank you're considering. Takes 30 seconds. If they're on the list, your money's protected. Becca Hartwell: And once you know it's safe, then the real question becomes which one One actually has a great rate and no strings attached because not all of them do. Speaker 3: Oh no, we're not done yet. Some of these rates come with more fine print than a cell phone contract. Becca Hartwell: Yeah, that's exactly where we're going. So now flip that around. Knowing these accounts are legit is one thing, but not all advertised rates are what they look like at first glance. Maya: Oh, this is where it gets good, because the fine print, it does a lot of heavy lifting. Becca Hartwell: Okay, so get this. Varo Bank advertises 5.00% APY. You see that number, you're excited, 5%. 5%, but according to NerdWallet, that 5.0% 0.00% only applies to your first $5,000 and Maya: BGHOST1wow. Becca Hartwell: you have to receive at least $1,000 a month in qualifying direct deposits to unlock it. Maya: Wait, wait, wait. So if you're just parking your emergency fund there without using it as your main bank? Becca Hartwell: Deadpan. You get 2.50%, half the rate, the one they put in the small print. Maya: So it's a 5% account that most people never actually earn 5% on. Becca Hartwell: Exactly. And that's not a knock on Varo. It's a real rate for the right person. But the mistake is assuming the headline number applies to you automatically. Maya: Likely. Becca Hartwell: This is the trap. Banks use high teaser rates to get you in the door. The incentive is customer acquisition, not generosity. And some accounts use straight up promotional rates-five percent for ninety days, then it quietly drops to one percent. Fortune flagged this specifically: a rate that expires after a few months is not a five percent account, full stop. Surprise! You've been voluntarily bamboozled. The fix is just knowing what to check before you apply. Three things, honestly. Hit me. Does the rate apply to your full balance or just the first chunk, any monthly fees, and does the rate expire? That's it! Those three questions. Oh, and FDIC insured, we covered that last segment, but always confirm it. Nodding. Quick sidebar, NerdWallet's top-rated pick this year was Newtek Bank at 4.20% APY, no strings attached. But as of this month, Maya: Wow. Becca Hartwell: they've paused new applications due to overwhelming demand. Seriously? The account got too popular? Which honestly proves these accounts are real and people are paying attention. But it also means availability shifts, so always confirm before you apply. Okay, so you know what that means, right? The how-to part. We should actually walk through opening one of these. With excitement, that's exactly where we're headed, and it's faster than you'd think. Okay, so you've done the checklist, you've picked your account, now what? Here's the thing, actually opening one takes about ten minutes. 10 minutes? That sounds like one of those things where someone says 10 minutes and they mean like two hours. Right? But no, Bankrate literally had a staff member do it and clocked it under 10 minutes. Social Security number, a government ID, and your current bank's routing number. That's the whole checklist. Maya: That's it? Becca Hartwell: That's it. Most accounts have zero minimum opening deposit. Motley Fool confirmed that That too. No fee. No minimum. You could move $50 and you're in the game. Okay, but here's what I know people are thinking. Do I have to close my current bank account? No. Hard no. Your checking account stays exactly where it is. The high-yield savings account just sits next to it. You link them and transfers usually take one to two business days. It's like getting a second wallet that actually holds value. That is exactly what it is, yeah. And the other thing I hear, what if I only have $200 right now? Is it even worth it? 100%. Because here's the part people miss. Interest compounds daily at most of these institutions and gets paid out monthly. Every day you wait is a day the math isn't working for you. So procrastinating is literally costing you money. Maya: Money, like a real number. A real, countable number. And look, the most common mistake? People think they need to get organized first, wait until they move, wait after the holidays, wait until things settle down, and then it's March. Becca Hartwell: Then it's March. Maya: The account's not going anywhere. Start with whatever you have. Okay, so action item, this week you pick one account from a list you trust, NerdWallet. Becca Hartwell: Lit, Bankrate, Fortunes, all of them have current rankings. Open it, move $100 or whatever you've got, you're done. And once it's open, the only question left is, are these rates going to stay this good? Because the Fed has some opinions about that. Yeah, that's the conversation we need to have next. So here's the question I know listeners are thinking right now. The Fed meets June 17th. Should I just wait and see? Oh, that one is so tempting. And the answer is a hard no. Hard no. But Maya, walk us through why. Okay, so here's the thing. The Fed has held rates at 3.50 to 3.75% three times already in 2026. According to NerdWallet, some accounts have... Accounts have already drifted a little lower since April, small moves, but Maya: Uh Becca Hartwell: the gap between a high yield account and your regular savings, still massive. Maya: Right, we're talking about the 0.38% national average we covered earlier. That gap doesn't disappear with one Fed cut. Exactly. One 25 basis point cut, the most likely scenario, shaves maybe a fraction off your APY. You're still lapping a regular savings account by a mile. The gap is structural. It has existed across multiple rate environments. Exciting! So you're not trying to time the perfect moment. Becca Hartwell: And you're just stopping the bleeding? Yeah, that's the whole thing. Every week you're waiting, you're earning 0.38% on money that could be earning 10 times that. That's not a timing game. That's just math. OK, but I hear people say, "What if rates keep dropping over the next year?" They probably will a little, yeah. Honest answer. But Fortunes top accounts are still over four percent APY right now, and even a modest cut doesn't change the core math. So the play is not "Wait for the Perfect Moment." The play is "Stop losing money while you wait for the Perfect Moment." Yeah, nailed it! One thing though, I've heard about CDs as a way to lock in a rate. the rate before it drops. Yes, brief version, a certificate of deposit lets you fix your rate for six to twelve months. Trade-off is your money's less accessible. For your emergency fund, probably not the right fit. But if you've got extra cash sitting around beyond that? Worth a look. Got it. So the honest picture is, yes, rates will likely edge down over the next year or two. And no, that does not change what you should do today. The Rate App is not going away. The national average isn't suddenly going to 4%. That structural difference? It's been there through rate hikes and rate cuts alike. And speaking of what you should do today, we're actually about to get really Speaker 5: - Becca Hartwell: To get very specific, like emergency fund specific. So here's the thing about everything we just covered today, it all lands in one place. Maya: The emergency fund. Becca Hartwell: The emergency fund. Three to six months of expenses, you've heard it a thousand times. And here's why a high yield account is the right home for it. It has to be accessible, not locked in investments, not in a CD, sitting there, ready, but also actually earning something while it waits. Exactly. And this is where Maya's going to hit you with the real number. Maya: Okay, so $10,000 emergency fund, the difference between sitting in a regular savings account at that 0.38% national average versus a high yield account at 4.00% APY and... $362 a year. Becca Hartwell: Wow. Maya: CBS News ran this math. That is a car registration, a vet bill, a month of groceries. That's not a percentage, that's just your money that was already yours, just parked in the wrong place. And here is what I love about the emergency fund framing specifically. You're not trying to get rich, you're not taking on risk, you're keeping money safe that you need to keep safe. Safe. The High-Yield Savings Account just stops punishing you for doing it right. Right. You followed the advice, three to six months saved up, and your bank said, cool, here's $19. $19. So, this week's action. Here it is. Pick one account. Fortune, CBS News, and NerdWallet all have lists. Becca Hartwell: Mm-hmm. Maya: Open it and move whatever you have in savings today. Even if that's forty-seven dollars. You don't need a full emergency fund to start. You don't. The account exists so you can build toward one and actually earn something while you do. That's it. One tab open. Ten minutes. Done. And twelve months from now, you're not staring at nineteen dollars wondering where it went. Becca Hartwell: You've got $362 more and an emergency fund that's working for you instead of just existing. Maya: That's the move. Becca Hartwell: That's the move. Maya: Okay, so that was a lot, but in the best way possible, right? We basically handed you a cheat code for your savings account. The moment that got me was the $19. 5,000 bucks sitting there all year and the bank hands you $19. And Maya said it best, that's not a rounding error. That's a 13 to 1 difference. The math just does not lie on that one. Bottom line from today, safe and earning are two different things, and you don't have to pick one. And according to Fortune, top high-yield accounts are sitting at up to 5.00% APY right now. The gap is real, and it's open. So this week, one account, even if you start with $47. $47 is a perfectly fine start. If this episode answered something you'd been putting off, send it to someone who needs it. New episodes drop every Tuesday. Follow wherever you listen, and thanks for being here. We'll see you next week.