Volume 2: Putting Your Money to Work · Chapter 5
Your Savings Rate Dropped. Is Moving Worth the Trouble?
Your bank cut your savings rate. Work out the dollars a move would earn, price your time, and see when a higher rate repays the trouble.
- Read time: 6 min
- Complexity: Intermediate
- Topic: Rate drops
SwitchWize Research DeskReviewed by Jay Rege, Head of Financial Research, on Oct 9, 2026Updated Oct 9, 2026
The short answer
Say your savings rate fell from 4.20% to 3.60%. Another bank pays 4.50%. On $25,000, moving would earn $75 a year more than your old 4.20% rate. On $6,000, it would earn $18. The same move is a good idea for one saver and a waste of an afternoon for the other. This chapter shows how to tell which one you are.
Chapter 1 deep diveShould You Switch Savings Accounts? When the Move Pays for ItselfThe Switching Guidebook has the full break-even calculator. This chapter uses the same math and adds a simple bar you can set before you look at any rate.What is the $75 question?
The $75 question is this: is a yearly gain of about $75 worth the work of moving? To find your own number, multiply your balance by the gap between the two rates.
All the rates in this chapter are made-up examples. Check live rates before you act. The table uses a gap of 0.30 points, which is 4.50% minus 4.20%.
- Extra interest per year
- $18
- Per month
- $1.50
- Extra interest per year
- $75
- Per month
- $6.25
- Extra interest per year
- $150
- Per month
- $12.50
- Extra interest per year
- $300
- Per month
- $25
The gap stays the same. The balance is what changes the answer. So do the multiplication before you compare bank names.
What does a move really cost?
The cost is mostly your time. You fill in an application and wait for the first transfer. You move any direct deposits and automatic bills. You learn a new app and keep one more password. A bank that pays you $10 or more in interest also sends a tax form, called a 1099-INT. That is one more form at tax time.
Put a price on that time. Suppose it takes 3 hours and you value an hour at $25. The cost is $75. That equals the yearly gain in the table for $25,000. So the first year only breaks even, and only if the new rate does not fall.
Chapter 6 deep diveHow to Switch Banks Without Missing a PaymentIf you decide to move, this chapter walks through the steps that keep your bills and paycheck from missing a payment.What is a good bar to set?
Pick a number before you look at rates. For example: "I move only if I gain at least $100 a year." Write it down. Your own bar can be higher or lower.
A $100 bar with a 0.30-point gap means a balance of about $33,333 or more. Below that balance, stay unless the gap is wider. A bar takes the mood out of the choice. You stop reacting to every rate cut and start comparing dollars.
When does moving pay?
Moving pays when the gap is wide and the balance is large. Suppose your bank cuts your rate to 3.60%, and another bank pays 4.30%. That is a gap of 0.70 points on $25,000.
Month interest = Balance x ((1 + APY)^(1/12) - 1). Break-even month = first month where cumulative extra interest >= switching cost.
- Balance
- The money you would move, held constant
- APY
- Annual percentage yield of each account, as a fraction
- Switching cost
- Hours x value of an hour + one-time fees - bonus you will actually receive
- 1. Month interest if you stay$25,000.00 x ((1 + 3.60%)^(1/12) - 1)$73.79
- 2. Month interest in the new account$25,000.00 x ((1 + 4.30%)^(1/12) - 1)$87.86
- 3. Extra interest per month (month 1)$87.86 - $73.79$14.07
- 4. Cost of switching3 hours x $25.00 + $0.00 - $0.00$75.00
- 5. Break-even$75.00 / $14.07 per month, rounded upMonth 6
- 6. Net gain over 12 monthsCumulative extra interest - $75.00$93.90
Switching comes out ahead by $93.90 over 12 months on these inputs.
Taxes and any fees are excluded unless a step says otherwise. Change the inputs in the calculator to see your own numbers.
If the new rate holds, you earn about $14.07 extra in the first month. The move repays its $75 cost in month 6. After 12 months you are ahead by $93.90. The model keeps your balance the same and ignores tax. It also assumes the new rate does not fall. That last point is the weak spot, and the next section covers it.
What if the high rate does not last?
Some banks pay a high rate for a few months, then cut it. The rate is a way to win new customers. Your old bank may have done the same thing in the other direction.
Run the $25,000 case again with a made-up twist. The new rate is 4.50% for 3 months, then it falls to your old 4.20%. You gain about $18 in those 3 months. Your time cost is still $75. After a year you are $56.97 behind.
Also read the fine print. A rate may apply to only the first $5,000 of your balance. It may need a monthly deposit or a minimum balance. A rate with conditions pays on only part of your money. Check what applies to your full balance.
Chapter 3 deep diveThe Four Fine-Print Checks Before You Open a Savings AccountThe fine-print chapter lists the four checks to run on any new account before you move your money.When is staying put the better choice?
Stay when the yearly gain is below your bar. Stay when the move would split your money across several banks that you then have to watch. Stay when your balance is small and any good account will do.
Each extra account also uses up some attention. A saver with one account she checks every few months can do better than one with four accounts she forgets. Each bank also adds a form to your tax return. The FDIC insures at least $250,000 per depositor at each insured bank, so a balance below that does not need a second bank for safety.
What should you do next?
- Write your bar in dollars per year.
- Look up your balance and the best rate you can really get. Use the full balance, not a capped part.
- Multiply the balance by the gap. If the result is below your bar, stop and stay.
- If it is above, price your time and ask how long the rate has lasted at that bank.
- Check again once or twice a year, not after every cut.
For how long top rates tend to last, read the Switching Guidebook chapter on top savings rates.
Chapter 6 deep diveSavings Account or Money Fund: Does Tax Change the Winner?Tax can change which account pays more. The next chapter shows how a state with income tax tips the choice between a savings account and a money fund.Limits of this guide.
- Every rate and balance here is made up. Check live rates before you act.
- The math ignores tax, treats the balance as fixed, and does not count any sign-up bonus.
- It is general information, not advice for your situation.
Frequently asked questions
Should I move my savings every time my bank cuts its rate?
No. A rate cut only matters if another account pays enough more, on your balance, to beat the cost of moving. Multiply your balance by the rate gap to get the yearly gain, then compare it with the hours you would spend. Many savers check once or twice a year instead of after every cut.
How do I know if a high rate will last?
You cannot know, but you can look. Check whether the bank has held a competitive rate for many months, and read whether the rate is an introductory offer. For most savings accounts the bank can change the rate at any time, so treat any rate as a snapshot and plan for it to fall.
Does moving savings to a new bank hurt my credit score?
Opening a savings account is not a loan, so it adds no debt to your credit report. Some banks run an identity check when you apply, and a few use a credit check for that. Read the application wording before you submit it, and ask the bank in writing if it is unclear.
Will I owe tax on the extra interest from a move?
Yes. The IRS treats bank interest as taxable income, and a bank must send a Form 1099-INT if it paid you $10 or more. Tax takes a share of the gain but does not change which account pays more. Each extra bank also adds one more form to your tax return.
Sources
Educational content, not individualized financial, tax or legal advice. Examples use hypothetical figures unless a source is cited. Report an error at our corrections page.