Are You Losing Thousands a Year By Using a Standard Savings Account?

• Author: Jacob Greene
• Posted: 2024-03-28

Conventional wisdom for saving money used to be quite simple. "A penny saved is a penny earned" was the mantra, and pennies saved could garner quite a bit of interest. Just a simple savings account could often get a 5% yearly return. Over the years, of course, this could add up to be a good sum of money.

Unfortunately, this has changed over the years due to inflation levels and what people have come to expect from banks. If anything, it's now the opposite more than anything; after all, people are expected to pay banks for the privilege of holding their money, which is typically loaned out to other patrons at a high interest rate. It's a lose-lose scenario.

Even in the low-interest post-pandemic marketplace, there are still clear winners and losers when savings accounts are stacked up. Keep reading to see if you're getting ripped off with your own savings account.

Your Yearly Return Amount

Yearly returns are often expressed as a percentage, and these are the most common basis for scamming consumers. Even credit unions often utilize this tactic to prey on members who are purportedly "owners" of the credit union but have very little say in how their own money is allocated.

It's the norm to say that a consumer can "avoid paying a monthly fee" if they have some average daily balance, but that they get no APY. If you get no APY, even if you have one dollar in savings, it's time to look for other banks.

APYs close to 0% are also scams. For example, plenty of banks call 0.05% APY "high-yield savings", which is a complete misnomer. The standard high-yield savings as of November 2020 is approximately 0.6% APY. This rate can be found on many popular online banking platforms. Some local credit unions and banks may have even more attractive checking and savings offers, so be sure to check around and read the fine print!

Your "Account Fees"

Remember, any time that you're "avoiding paying a monthly fee", all you're really doing is dodging an artificially placed fee designed to coerce you into utilizing one bank more than you naturally would. Typically, these are the most predatory banks.

However, they often have far more fees than you might imagine. It'll take a good, long look at your monthly statements over the course of 12 months. Looking at just a single month's statement simply is not enough, because fees for the whole year are often assessed just one random month out of the year to make it less visible to you.

Bogus "account fees" often include "ATM access fees". Some banks can reasonably charge these if they are members of one of the large ATM networks, such as AllPoint, and you choose to use an ATM that isn't in that large network. However, other large banks are only members of their own ATM networks, and even the largest of banks' own ATM networks are very small compared to the major nationwide ones. These fees in themselves can add up over time to take away a lot of your hard-earned money.

A Lack of Savings Options

Finally, a way that many people see themselves getting ripped off each year by their banks is by a lack of savings products being made available to them. Remember, just savings accounts alone aren't enough. Your bank should readily make available Certificates of Deposit (CDs) with reasonable rates when compared to other banks. You should also be able to open a standard IRA and Roth IRA and ABLE account through your bank.

A lack of these products or a lack of options for any of these products is a major red flag that you may want to look at switching banks sooner rather than later. Although consumer loyalty used to be seen as a virtue, it's now used to guilt-trip people into staying in long-term relationships with companies who see them as a few extra cents a year in their pockets.

Though it can be difficult to face the facts and assess your current financial situation and the situation of your financial institution, it's one of the most important steps you can take in regaining control over your own finances. You will need to do this if you want to achieve financial independence one day, and putting it off won't help this process move any faster.