Save and Invest

70% of Americans make this simple banking mistake—and it could cost them $50 billion

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Americans are leaving what could be billions of dollars on the table by using traditional savings accounts at brick-and-mortar banks.

Almost 70% of people earn less than 2% on their savings accounts, according to a recent survey by Bankrate. That includes 24% who earn no interest at all. The average savings account interest rate in the U.S. is 0.09%, according to the FDIC, and some of the country's largest banks pay even less.

Online banks can offer over 20 times more in interest — and consumers are missing out.

Bankrate surveyed 60 online savings and money market accounts from 57 financial institutions — including Ally, Alliant, Goldman Sachs, Sallie Mae and more — and found that they offered an interest rate of 2.18%, on average. Over one-quarter of them pay 2% interest or more, are available nation-wide, have no monthly maintenance fees and have no minimum deposit or balance requirements.

By keeping their money in low-rate accounts, Anand Talwar, a deposits and consumer strategy executive for Ally Bank, told CNBC that Americans are foregoing $50 billion of interest each year.

"There is no excuse for not putting your hard-earned savings into a better-yielding account," Greg McBride, chief financial analyst for Bankrate.com, said in a statement. "You're preserving the buying power of your savings and not losing ground to inflation."

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The perks of online savings accounts

Survey respondents generally say they do not have enough money to make a high-yield account worthwhile, Bankrate finds. But you don't need to have a ton of cash on hand to benefit from or open one. More than half of the accounts surveyed require a minimum deposit of $100 or less, and 35% have no minimum deposit required to earn the advertised interest rate.

What's more, 62% of the accounts have no ongoing balance requirement to earn the high yield, and 77% have no monthly fee.

"It doesn't matter how little you've saved or where you live, you can and should be earning a competitive return on your savings," said McBride.

It doesn't matter how little you've saved or where you live, you can and should be earning a competitive return on your savings.
Greg McBride
chief financial analyst, Bankrate

Another worry: Having access to a physical bank office. Per Bankrate, 34% of survey respondents who don't have an online account say they want to be able to go to a local branch. While you can't necessarily visit an online bank in person, these savings accounts do offer dedicated help lines 24/7, and some now have live chat features on their sites.

And, as McBride notes, "by linking an online savings account to the account at your primary institution, you retain the local branch access." That could get you the best of both worlds.

How to bank online

While you won't necessarily need ATM access for your savings account, you should familiarize yourself with your online bank's situation so that you're not stuck paying fees down the road. Synchrony does not charge customers a fee to use any ATM, for example, though the company that operates the machine might charge you.

Alternatively, you can keep a cash reserve in a linked checking account at your primary bank, as McBride suggests, and transfer funds as needed. Some online banks let you deposit checks electronically by taking a picture with your smart phone.

To use an online account, shop around for the best rate and other features that appeal to you. Then set up an automated direct deposit into the account so that your savings can keep growing.

Don't miss: The best high-yield savings accounts

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