One of the most common questions we get here goes something like this:
“I just got a $500 bonus. What should I do with it?”
Or: “My wife just inherited $9,000. What should I do with it?
Well, there are all kinds of things you could do. Buy some stock.
Fund your IRA.
But what a lot of us end up doing — assuming we don’t spend it — is parking that money in a savings account.
These days there are lots of banks who’d love the chance to sit on your cash.
And that means you can find some pretty competitive rates.
Marketplace’s Lisa Napoli went in search of a way to max out the interest.
LISA NAPOLI: Last year, I sold my apartment in New York City. The proceeds have been languishing in a savings account collecting 4.6 percent interest ever since.
I’ve ignored it, until I find a new place to buy.
When I started to do my taxes, I realized I had made enough in interest to pay for this very big splurge.
My new, used car.
It’s a luxury and indulgence, funded by my inability to make a decision about my assets.
TODD DAVENPORT: The banks love you. They call you dumb money. And they’re excited to have you.
That’s Todd Davenport of the industry newspaper American Banker. He says “dumb money” is passive cash the banks put to better use while I’m just letting it sit around. And he says some banks are so eager to get their hands on that “dumb money” that they’re happy to give me a better interest rate than the one I’m getting now.
Laura Bruce of Bankrate.com says I didn’t even have to leave my home to find one.
LAURA BRUCE: The online banks are really fighting for these deposit accounts, raking in the money and the customers.
Bruce says customers who aren’t afraid of doing transactions online are starting to get turned off by brick and mortar banks.
BRUCE: They’re not content with putting their savings in an account that’s paying them a quarter to a half percent, which is just a sin.
She says in order to get your business, a lot of online banks are dangling the promise of a savings account that’ll earn your money 5.5 percent.
Or even better. Bankrate.com ranks the top interest rates that are out there on its website.
The honor role, please?
In Cleveland, Ohio, one bank offers 5.36 percent. Another in Queens, New York promises 5.3 percent.
But, Laura Bruce says, not everyone with a savings account feels the need to be at the head of the class.
BRUCE: It’s definitely worth opening up a high-yield account to start with. But just because your bank isn’t offering THE highest yield doesn’t mean it’s really a good move to go open up another account somewhere else.
Unless you do have more than a few thousand dollars you want to keep liquid.
Or unless you like to chase interest rates, like Jonathan Ping.
JONATHAN PING: I was moving money around left and right for a little while.
Ping’s a computer science graduate student in Portland, Oregon. He and his wife are saving to buy a house-so every extra penny counts.
PING: A lot of people don’t pay attention and they don’t really think about it if you actually run the numbers if you’ve got 10-thousand dollars, that’s 500 in interest every single year.
Jonathan Ping took the time to read the fine print on all the offers. He found some banks have better rates but have less flexibility when you want to take the money out.
Others let you write checks and give you an ATM card. Ping blogs about his experiences at MyMoneyBlog.com. He even created the Ultimate Interest Rate Chaser Calculator so you can see what you’d earn if you switch banks.
Another thing to consider when you shop for an online bank: teaser rates like the 6 percent HSBC is offering right now are just that-designed to get you in the virtual door.
Now you may feel it’s worth it to move your money only to have the rate drop back down after a promotional period.
Then again, as Todd Davenport of American Banker points out.
DAVENPORT: The difference between $100 and $200 becomes a little bit less consequential unless you are devoted to the full-time cause of squeezing the penny as much as you can.
Even Jonathan Ping gave up the squeeze — and recently settled down. He chose a local bank that had a good solid rate.
In Los Angeles, I’m Lisa Napoli for Marketplace Money.
As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.
Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.
Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.