A recent survey shows that many Americans believe their savings accounts are not keeping up with inflation, highlighting the possibility that those seeking better interest rates may not be exploring enough options.

In a survey conducted by the personal finance platform WalletHub, 65% of bank customers felt their savings were not outpacing inflation. This data comes from a representative survey involving over 200 consumers.

Banking experts suggest that if a consumer’s savings account offers an interest rate lower than the inflation rate, it may be due to the customer’s lack of effort in searching for alternatives.

“People often do not compare options sufficiently when deciding where to store their money,” stated Odysseas Papadimitriou, CEO of WalletHub. “They tend to choose the most convenient option.”

According to WalletHub research, the typical savings account at an online bank offers an average annual interest rate of 3.6%. Many high-yield savings accounts provide even better rates. This average is above the current inflation rate, which stands at 2.9% as of December.

With a quick online search, one can find numerous banks proposing high-yield savings accounts with interest rates of 4% or higher annually. These improved rates result from a significant increase in the prime lending rate, which is the rate banks charge their most reliable customers.

“This opportunity is accessible to almost everyone,” explained Greg McBride, chief financial analyst at Bankrate, a personal finance website. “Opening one of these accounts takes just a few minutes.”

Savers are hesitant to take advantage of higher interest rates

Despite this, consumers are slow to make the switch. A 2024 survey by Bankrate revealed that two-thirds of savers are still earning less than 4% interest.

One major reason for this is that the most favorable interest rates are typically offered by online banks, which have few or no physical locations.

Traditional banks usually provide much lower interest rates on savings accounts, with the average rate being only 0.55%, as reported by Bankrate.

Experts say online banks can afford to offer some of the best rates in the market as they have reduced operating costs compared to large physical banks, which incur the expenses associated with maintaining branches and staff.

Additionally, bigger banks hold an advantage over smaller online ones: they already have you as a customer. Switching banks can be cumbersome, and many consumers may not be familiar with online options.

“Many people feel apprehensive about applying for a new financial account,” Papadimitriou remarked. “There is a perceived lack of security with smaller banks and credit unions, even though they often provide better rates.”

A survey from November by Santander Bank indicates that only 29% of consumers are utilizing high-yield savings accounts.

Confusion surrounds high-yield savings accounts

There is significant confusion regarding high-yield savings. Most consumers are unaware that they can open a high-yield savings account while keeping their primary bank. Many do not realize that these accounts are typically insured by the FDIC, similar to standard bank accounts, and about 40% of consumers are unclear about the interest rates they’re currently receiving.

“There exists a basic misunderstanding of what it takes to earn high returns on savings,” McBride noted. “It’s not an all-or-nothing situation. You don’t have to transfer all your funds to another account.”

The WalletHub survey reflects a growing dissatisfaction among bank customers; two-fifths of consumers expressed the feeling that their banks take advantage of them, while three-fifths expressed concerns regarding the potential for a bank hack.

Recently, Capital One customers experienced anxiety when their paychecks and deposits did not show up in their accounts due to issues with a third-party vendor. The bank assured customers that this prolonged disruption wasn’t a hack and that their funds were safe.

Beyond interest rates, bank customers are also notably concerned about fees. In the WalletHub survey, participants prioritized fees above interest rates, customer service, and other factors when selecting a bank account.

When questioned about what could persuade them to switch banks, the top response was “no fees.”

Strong support exists for capping overdraft fees

Seventy-five percent of those surveyed indicated their support for a $5 cap on overdraft fees, which are charged when customers withdraw more money than they have in their accounts.

In December, the Biden administration proposed capping overdraft fees at exactly $5 as part of its initiative against “junk fees.”

However, banking industry leaders caution that this cap could negatively affect the most vulnerable customers who rely on overdraft protection for financial stability. The future of this cap remains uncertain under the incoming Trump administration.