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How to score better savings account interest rates

LEILA FADEL, HOST:

If you're stashing your money in a basic savings account at a major bank, there's a good chance you're making next to nothing keeping your money there. But it doesn't have to be that way. NPR's Arezou Rezvani reports.

AREZOU REZVANI, BYLINE: Sixty-six-year-old Angela Cosimano has always been a dedicated saver. For years, the retired schoolteacher stashed a lot of her money at a major bank until she noticed something in her banking app a few months ago.

ANGELA COSIMANO: I was looking at it, and I saw that I was making .01% interest.

REZVANI: With the sharp increase in interest rates this last year, Cosimano expected to see a better rate of return for her savings to at least take some of the sting out of climbing inflation. But like many Americans who have basic savings accounts at the major banks, she'd been making mere pennies.

COSIMANO: I have all this money in your bank, and you give me 12 cents a month? And I keep seeing that banks are making all this money, and your CEOs are getting zillion-dollar bonuses. I'm not real happy.

REZVANI: So she moved her money. She opened an online account through American Express that offers 3.5%. It may sound like a hassle - the research, the money transfers and getting familiar with new systems. And those higher rates are still nowhere near the rate of inflation. But Greg McBride of bankrate.com says that's exactly why people should consider the move.

GREG MCBRIDE: Having your money in the right place could be earning you the best yields you may have seen in the last 15 years.

REZVANI: What that requires is shopping around. What banks pay for people to save with them depends on how much they need those deposits. And the bigger banks - many of them are doing just fine. During the pandemic, personal savings rates soared. Government stimulus checks boosted household income while household spending dropped. A lot of these excess savings ended up at those bigger banks. So why then the skimpy returns to savers?

MCBRIDE: They're running a business. And so what they pay on deposits is not done out of benevolence. What they're trying to do is keep their cost as low as possible until they can lend out what they have.

REZVANI: On the other hand, smaller institutions that are eager to bring in deposits - they'll do it by paying a higher interest rate.

MCBRIDE: And as a saver, you know, that's the only free lunch in finance.

REZVANI: Those higher rates are something Dennis Devine, the CEO of Alliant Credit Union, has been able to offer his members.

DENNIS DEVINE: We've increased our deposit rates now 15 times over the last eight months.

REZVANI: They're currently at about 3%. And at some other credit unions and small banks, they're even higher. But the rate at Alliant is high enough that its membership has skyrocketed in recent months. Devine says credit unions are able to offer significantly better rates than the bigger banks for two big reasons. One, there are fewer expensive brick-and-mortar branches to maintain. And two, there are no shareholders to impress.

DEVINE: Rather than having to worry about, what does the shareholder return look like at the end of the quarter, we're able to think entirely about how do we do what's in the best interest of our members? Our members are the owners of the credit union.

REZVANI: Now, if you do move your savings, the American Bankers Association says to be sure, wherever your money ends up is covered by federal insurance. What you earn might not be life changing, like a few hundred bucks for a $10,000 deposit, but for Angela Cosimano, any little bit counts.

COSIMANO: I mean, I don't necessarily, quote-unquote, "need it." I'm happy to have it not be lost.

REZVANI: Not lost to the banks, only partly gobbled up by inflation.

Arezou Rezvani, NPR News, Los Angeles.

(SOUNDBITE Of GREY SONG, "OUT OF MY HANDS") Transcript provided by NPR, Copyright NPR.

Arezou Rezvani is a senior editor for NPR's Morning Edition and founding editor of Up First, NPR's daily news podcast.