When I learned that the inflation rate is around 2.9% a year, I started to freak out. this means that the money I have sitting in the bank getting interest of .01% a year is losing basically 2.89% buying power every year. The money I was saving I was actually losing.
The crazy thing is most people were also in the same position as me, keeping their funds at a brick and mortar bank and only getting .01% interest. So, guess what I did? I switched my savings account from Chase to Barclay online saving. They give 2.5% interest on your money. Yes, that is correct, two-point-five percent per annum.
How They Do It
How do they give such a high rate of return compared to other brick and mortar banks? It’s because the brick and mortar banks have to pay property taxes, air conditioning, TV commercials, bill boards, building insurance and so on. They aren’t asking their shareholders for the money for this, these costs eat directly in to the amount of interest the banks get on your money.
Whats the Difference
A bank usually get between 4-6% per annum, and brick and mortar banks keep most of it. On top of that they also often charge fees on your account for just having it open. On the other hand, online banks give you roughly half of the interest they bring in on your money, and normally never charge fees. They still have overhead costs, but they aren’t as nearly as high as other banks.
So why didn’t I do it until now?
Why haven’t you switched yet. The most important reason is banks have spent literally hundreds of years and billions of dollars to try to keep you, their cash cow, lifetime loyal. Your parents used the same bank, so you use the same bank. The banks don’t want you to know that it doesn’t hurt your credit to change banks, and can actually save you tons of money, because of more competitive interest rates.
Another reason is that brick and mortar banks what you to think that online banks are not safe. Online banks (reputable ones) however have the same FDIC backing that other banks have.
Probably the biggest reason is that online banks don’t allow you face time with you banker and that there is a lack of ATM’s. There will be more ATM’s in the future, but I solved the problem now by keeping my chase checking account, and linking the Barclays saving account to it. This way I get to use chase checking but get the high interest from Barclays.
In Conclusion
So don’t be oppressed and ignorant to the institutionalism imposed upon you from hundreds of years of brick and mortar overloads, stop losing money and get an online bank savings account. Unless you want to make some money…Read A Guide to Bank hopping, Getting Paid to Save.
