Hello to strange banks and super high rates

Current. Synchrony. SoFi. Varo. Can you guess what they all have in common?

View in browser NextAdvisor ISSUE 107 July 26, 2022

Current. Synchrony. SoFi. Varo. Can you guess what they all have in common? They're made-up words, but they're also all real FDIC-insured banks — even if you've never of them. At a time where interest rates are rising, these online banks offer something that many other household banks don't right now: the best yields on savings accounts and CDs. That's because they're online-only banks and don't have to factor in the operational costs of physical branches, so they're able to pass off those savings to their customers. It's no surprise that an unusual name offering a good rate makes us raise a cynical eyebrow. But just because a bank name is unfamiliar doesn't mean you should write it off, experts say. "There are over 4,000 [insured] banks in the country. So the fact that you have not heard of them is not unexpected," Greg McBride, CFA, chief financial analyst at Bankrate, told NextAdvisor. If you currently have a savings account with a well-known brick-and-mortar bank, odds are that you can get a large increase in your interest rate by switching to a bank you haven't considered before. For example, let's compare Chase to Current, an online bank I use to hold my emergency savings. A savings account at Chase right now earns 0.01% APY, whereas Current offers 4% APY on up to $6,000 worth of savings. If you deposited $6,000 in each account and compared the two over a year period, you'd save $180 more with Current (if rates didn't shift in that period). That number may seem small, but it can add up over time. In five years, that's $900 more you'd earn just for letting your savings sit in a different account. If you're looking to make the switch, my colleague Dashia Milden recently covered some tips to keep in mind. First of all, a bank should pass your sniff test if it's FDIC-insured, which means that if the bank goes bust your deposits are safe. Aside from deposit insurance, look at a bank's assets and liabilities to get a sense of its health and check that the bank's website and mobile app are secure. If you feel good about it, you can begin to evaluate features that will make the most of your money and help you meet your goals such as banks fees and APYs on savings and CD accounts. Keeping your money safe and secure is the first step to smart money management, so it's important to do your due diligence before opening a new bank account. But you also shouldn't hesitate to move your money around should you find a better bank or a better offer. If you're not earning at least 1% APY or more on your savings account, it may be time to start shopping for other options. What do you think of these weekly emails? Any other topics you're interested in reading about? Tell me at alex@nextadvisor.com or @AlexGailey on Twitter.     Keep Your Savings Secure With Banks You've Never Heard Of Read the full article       THE BOTTOM LINE It can pay to look beyond the financial institutions you already know and bank with — for potentially higher returns on your balances, convenience, and security. More soon, The NextAdvisor Team     Was this email helpful?       Did your financially savvy friend forward this to you? Subscribe to get our next newsletter directly in your inbox.   Sign up     Your next move Follow us on social media for more great tips like these.

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