Why does the interest rate on my savings account suck so hard?

I’ve never really been one to squabble over my bank’s interest rates. Historically I haven’t saved that much, and the interest I’ve earned on what I have saved has always amounted to such a pittance (

$10 or $20 per year), that I decided it wasn’t worth my time to relearn those formulas from Algebra I.

Recently though I sold my car, which netted a healthy chuck of change. Some of which I used to buy our scooters, and the rest I put in a money market savings account I opened at Wells Fargo (my bank). In the month between selling the car and buying the scooters I got the largest interest payment I’d ever seen, something like $16. I was livin’ large. But after that, I’ve been getting like $2 and change a month. So out of curiosity I decided to find out why.

My checking account at Wells Fargo pays no interest. This is pretty much par for the course. My savings account only pays 0.5% interest per year. That means if I have $1000 squirreled away, by the end of the year I’ll have $1005. Considering inflation hovers between 2 and 3%, my savings account is losing me money.

When I had over $10,000 in my Wells Fargo money market account (after selling my car), my interest rate was a whopping 1.54%, hence the “big” payout. But after purchasing the scooters and dropping below 10k, my graduated interest rate dropped too, to a measly 0.75%.

Now somewhere, someplace I got the idea that a good savings account should return between 4 and 5% interest, a long term CD between 5 and 6%, and a diversified stock market portfolio between 7 and 8% (over the long term). So I’m not sure why I’m suffering sub 1% interest rates at Wells Fargo.

Truth be told, the real reason I decided to look into all this was that I was checking on my IRA at Schwab when I saw them advertising an FDIC insured checking account with no minimum balance and an APY of 4.25%!

Schwab savings account rate

That itself wasn’t what caught my eye, because at the time I didn’t have a clue what sort of interest rates my Wells Fargo accounts had. What did strike me was this: “Zero ATM fees. We’ll automatically reimburse any ATM fees you’re charged.” Which for me would translate to no more hunting around for Wells Fargo ATMs, and no more worrying about stupid $2-3 per withdrawal ATM fees every time I need a twenty. That’s huge.

What’s the catch? You have to open it with a Schwab One Brokerage Account—basically their umbrella investment account for trading stocks, bonds, and mutual funds. My IRAs don’t count—they’re different. But I’d already been toying with the idea that it might be useful at some point to throw some money at the stock market. So this seems like a really good deal. After discovering how much my current savings accounts at Wells Fargo suck, it’s starting to look like an amazing deal.

Thought leadership for banking and financial services professionals

Posted on February 20th, 2014

This article originally appeared on MyBankTracker.com.

A s MyBankTracker has grown over the past few years, our focus on banking has never wavered, as we have tracked 6,927 FDIC insured banks and compiled useful information for consumers to make smart banking decisions. We currently have just over 8,600 bank reviews from real bank customers for the purposes of building banking transparency.

Our criteria for picking the top rated online banks are based around report card ranking comprised of bank health, fees, technology, rates, location and mobile access. According to MyBankTracker’s reviewers, the top banks are: Ally Bank, Charles Schwab, USAA Bank, Capital One 360, and Bank of Internet.

*In determining which banks topped the list, we chose banks that each had at least 20 reviews.

Schwab savings account rateAlly Bank ranked three out of five stars by reviewers, with a total of 417 reviews, an “A” grade, and an overall rating score of 83%.

Without branches, Ally is able to offer free ATM use on any machine by reimbursing customers for surcharges, and offers high yields and 24/7 customer service for checking and savings. Ally interest checking comes with no maintenance fee with higher than average interest rates — accruing 0.4% on up to $15,000 and 0.75% above that. Ally Online Savings is also free, and offers a competitive interest rate on all balances, coming in at a flat 0.84%.

Charles Schwab Bank has been rated by our reviewers as three out of five stars with a total of 48 reviews, an “A” grade, and an overall rating score of 81%.

Besides checking and savings accounts, Charles Schwab offers a multitude of services, including help in saving for retirement, ways to invest, and trading tools. Consumers can stay connected by being able to talk with specialists, going online with mobile apps, and heading to workshops, such as free retirement workshops. Schwab’s High Yield Investor Savings comes with no account minimums, no monthly service fees, unlimited free rebates from any ATM worldwide, the ability to deposit checks from anywhere (Schwab Mobile Deposit) with an interest rate of 0.12%. The Schwab Bank High Yield Investor Checking Account gives customers 0.10% variable interest on any balance, and offers free bill pay, free standard checks, a Visa Platinum debit card, and a linked Schwab One brokerage account without fees or minimums.

3. Bank of Internet

Schwab savings account rate

Bank of Internet has been rated three out of five stars with a total of 24 reviews, an “A” grade, and an overall rating score of 77%.

Bank of Internet is an online, branchless bank which offers high-interest checking, savings, certificates of deposit, and money market accounts. There are no overdraft fees and consumers receive things like ATM fee reimbursement, free online banking, free bill pay, mobile deposit and more. Bank of Internet’s homepage advertises rewards checking with the potential to earn up to 1.25% APY, 6 times the national average, as well as low interest rate mortgages.

Schwab savings account rate

USAA Bank has been rated three out of five stars by 220 reviewers, a “B” grade, and an overall rating score of 65%.

Established in 1983, USAA Federal Savings Bank provides a full range of financial products and services to the military community globally. USAA offers military members and their families investment products, checking and savings products, credit cards, and life insurance. Like the other banks on our list, USAA has free ATMs nationwide, and offers mobile and technological ways of accessing and managing your money, bills, spending, and budgeting. The bank advertises interest rates that are twice the U.S. average, but this does not compare to Bank of Internet’s APY of 6 times the average. Rates on USAA savings vary from 0.10% to 0.20%. USAA checking comes with an APY of 0.01%.

5. Capital One Bank

Schwab savings account rate

Capital One Bank has been ranked two out five stars on average by 67 reviewers, but earns a “B” grade.

Capital One has some competitive features, such as no fees for opening an account and no monthly maintenance fees. They also have a savings APY of 0.85% for a minimum deposit of $100 and an APY of 0.90% for a minimum deposit of $25,000. Additionally, the bank offers many cards designed for business owners with varying features, APRs, and rewards.

As seen in our list of the top online banks, banking has become more competitive, with online banks now offering more lucrative features for consumers than traditional banks such as high-interest and free ATM use. The future of banking, we predict, will move even further in that direction, with banks continuing to move to the online sector and consumers growing disenchanted with the traditional approach to banking.

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The best checking account I’ve found with free checking, no minimums, overdraft protection and unlimited reimbursement of any ATM usage.

Schwab savings account rate

Most of us hate our banks for gouging us for fee after fee, requiring minimums, and offering teaser rates that turn into nothing more than the same old BS accounts.

I’ve studied most of the checking accounts on the market and today, I’ll show you the best one I’ve found. In fact, it’s the one I use as my primary checking account.

Why is it important to choose the best checking account?

I talk a lot on this blog about building an automated personal finance infrastructure — a system that funnels your money to where it needs to go on a schedule, with minimal involvement from you. This way, the money left over after bills is yours to spend guilt-free. Chapter 5 of my book is all about how this system works and how to build your own.

Schwab savings account rate

Of all the components in that system, none are more crucial than your checking account. As I wrote in the book:

“I think of my checking account like an e-mail inbox: all my money goes in my checking account, and then I regularly filter it out to appropriate accounts, like savings and investing, using automatic transfers.”

Your checking account is the center of it all, the nexus of your bulletproof personal finance system. Unfortunately, as I also point out in the book, checking accounts are the number one place where unnecessary fees are levied. That’s why I wrote this post today: to share my favorite checking account, the one I personally use.

BEST CHECKING ACCOUNT: Schwab Investor Checking

Most people think of Charles Schwab as an investment bank. But they also offer what I believe to be the best checking account available. Why?

  • Interest on your deposits
  • No fees
  • No minimums
  • No-fee overdraft protection
  • Free checks
  • Deposit checks via pre-paid envelopes or via iPhone app (snap photos of your check — no need to go into branch)
  • An ATM card
  • BEST BENEFIT: Unlimited reimbursement of any ATM usage

This last point is critical. How often do you go out with friends and have to withdraw money from out-of-network ATMs? How often do you find yourself at a liquor store at 3:30am, needing to withdraw $280, but you hesitate because of onerous ATM fees?

Those fees can add up, and Schwab reimburses you for all of them. If you rack up $200 worth of ATM fees in a month, you’ll see a $200 deposit from Schwab before the month ends. This means you can use ANY ATM — corner stores, other banks, whatever — without having to look for some specific bank’s ATM.

When I saw this account, I wanted to marry it.

“But I don’t want to use an online bank.” Some people will balk at using Schwab because it’s an online bank. That’s fine, but I urge you to reconsider: It’s rare to find a checking account that (1) avoids screwing you at every turn, and (2) actually rewards you for using them.

Remember: the whole point of having an automated personal finance system is that your money gets taken care of automatically. Who wants to visit a bank branch for routine financial matters? Once this system is up and running, you wont have to.

You know by now that I’m all about big wins. The ATM-fee reimbursement for the rest of your life is enough of a benefit, but stack on the trust Schwab has built with me, and I’m a long-term customer.

Open a new checking account with Schwab

To get started with the Schwab Checking Account, click here. I have no relationship with Schwab except being a happy customer.

To learn how to fully automate your finances — including ultra-specific recommendations on accounts, investing, debt, negotiation, money & relationships, and buying a car/house — pick up a copy of my book, on sale for less than $10.