After years of low-interest payments, savings accounts are now starting to pay higher returns, following a series of rate hikes by the Federal Reserve. However, many Americans still do not receive the best interest rates for their savings.
Despite concerns about inflation, according to a new survey from Santander Bank, nearly 70% of the American middle-income population has not yet moved their savings to high-yield accounts.
Yet by the end of May, up to 93% of the respondents stated that competitive interest rates are a top priority, and they would consider this first when choosing a bank.
Despite a significant decrease in the annual inflation rate over the past year, the inflation rate is still 3% higher in June compared to last year, according to a report from the U.S. Bureau of Labor Statistics this month.
As per data from DepositAccounts, as of July 25, the yield of the top 1% of savings accounts has exceeded 4.5%, while the average yield of traditional banks is just 0.42%.
Kevin Brady, Vice President of Wealthspire Advisors and a Certified Financial Planner in New York, explained that this is due to a conservative perspective. People are too busy with daily life to research alternatives and make changes. Others know they can get higher savings returns elsewhere, but still do not want to make the change.
Brandon Gibson, a Wealth Manager and International Financial Planner at Gibson Wealth Management, mentioned that for many of them, it is simply not worth the effort.
If a client has a million dollars in their investment portfolio, they might not want to bother earning an extra 2% to 3% on a $50,000 cash reserve.
This is especially true when choosing between online banks and brick-and-mortar banks. Online banks may lack convenience, and new institutions might lower rates in the future.
According to a survey by Experian, 40% of savers with returns lower than 3% believe they do not have enough savings to make a change. Given the current interest rates, the interest for savers with only a few hundred dollars in their balance is negligible. A lack of awareness of higher rates, convenience, and "not having time" are other reasons why they continue to choose low-yield banks.
