INDIANAPOLIS — It is important to shop around for your savings account like you would shop around for insurance.
That is because some banks are paying customers very little interest on their cash, while others are paying a lot higher returns.
Greg McBride, with Bankrate, said online banks with high-yield savings accounts are regulated and federally insured, just like your current bank.
"You're not changing anything about your day-to-day banking routine. You're going to keep your current bank, your current checking account for branch access," McBride said. "You're just going to send your savings someplace where it's going to be welcomed with open arms and higher yields."
The yields are higher right now, in part, because of the current interest rates.
When you deposit money in a bank, the bank turns around and lends it to other customers, charging them interest.
Banks are charging higher interest rates or more money for those loans, so there is an opportunity for depositors to earn more money.
McBride said online banks also pay customers more interest because of lower overhead costs.
"You see these higher yields because, oftentimes, these are banks that don't have branches, or maybe they have a limited number of branches," McBride said. "That lower overhead translates into higher returns for savers."
Right now, a traditional savings account might earn .06% APY versus an online account paying 4.35% APY.
If a person opens a new account with $100 and then contributes $50 a month for a year, the bank paying .06% would end up with a $700.22 balance if the rate did not change.
If a person did the same thing in an account paying 4.35%, the balance would be $716.55.
To calculate and compare interest rate earnings, Bankrate offers this simple savings calculator.