New Study Finds Most Savers Earning Below 3% Despite Better Options
A new Bankrate report found that only 22 percent of savers are earning at least 3 percent or more on their accounts, while 75 percent of online accounts offer an annual percentage yield (APY) higher than 3 percent. Bankrate surveyed 63 savings accounts and money market deposit accounts that are available online that have an average APY of 3.33 percent.
“Higher returns on federally-insured savings and money market accounts represent the only free lunch in finance,” said Greg McBride, CFA, Bankrate’s Chief Financial Analyst. “You get additional return and don’t have to take any investment risk to get it.”
Among U.S. consumers with short-term savings, only 7 percent earn 4 percent APY or more, and only an additional 14 percent earn between 3 percent and 3.99 percent APY. Nearly a quarter of savers—24 percent —earn between 1 percent and 2.99 percent APY, and the same share earns less than 1 percent APY. 16 percent of savers do not earn interest at all, and 14 percent do not know what interest they are earning.
Millennial savers are most likely to earn at least 3 percent on their savings at 26 percent, compared to 23 percent of both Gen X and Gen Z, and 17 percent of baby boomers. Additionally, 31 percent of households earning $100,000 or more annually are earning 3 percent or more on their savings, while the lowest-income households are most likely to not earn any interest on their savings, at 24 percent.
The top reasons savers do not have accounts with online banks include preference for a local branch at 46 percent, comfort with their financial institution at 41 percent, and concerns about the security of their money at 30 percent. However, McBride said that consumers “have no excuse not to open an account today and start earning much more interest on your savings.”
75 percent of the 63 savings accounts and money market deposit accounts surveyed by Bankrate earn at least 3 percent APY, and 40 percent earn at least 4 percent APY. Of the accounts surveyed, 60 are available nationwide, and the same share also offers a mobile app.