Should You Switch? The Break-Even Math

Which of these are you?

• You hold a large balance at a rate far below the best accounts. The math almost always favors moving. Run the steady example below, then check deposit insurance limits before you move a large sum.
• You hold a small balance, or the gap is a few tenths of a point. Time cost dominates. Use the minimum-gap table to see whether the move can repay you at all.
• Your bank just cut your rate and you wonder if you should react. A cut changes your side of the comparison, not the other bank's. Recompute the gap, then ask how long the better rate will last.
• You are tempted by a rate that looks too high. Read the fine print first (chapter 5) and model the rate falling, as the second example does.

What is the decision rule for switching?

Switch when your net gain over your horizon is positive and you will keep the money in the new account at least as long as the break-even month. Net gain is the extra interest you earn minus your switching cost. Everything else in this chapter is a way to estimate those two numbers honestly.

Three definitions, used the same way throughout this series:

• Switching cost = hours spent x the value of an hour + one-time fees - any bonus you will actually receive. A bonus counts only if you will meet its terms.
• Extra interest in a month = Balance x ((1 + new APY)^(1/12) - 1) - Balance x ((1 + your APY)^(1/12) - 1). The balance is held constant and interest is not compounded on interest.
• Break-even month = the first month in which cumulative extra interest covers the switching cost.

Taxes are ignored. Interest on a savings account is taxable income at both banks, so the comparison is pre-tax on both sides and the tax takes a share of the gain without reversing the ranking. The IRS says interest on bank accounts is taxable and must be reported even if no Form 1099-INT arrives, which banks issue at $10 or more.

Two inputs people forget are the hour value and the horizon. Your time is worth something even if it is not a wage. Put a number on it, such as $25 an hour, so a two-hour move has a $50 price instead of a price of zero. The horizon is how long you expect to hold the money here, in months. Money you will spend in three months has a three-month horizon whatever the account is called.

How big does the rate gap need to be?

The minimum gap that repays a cost within a given number of months is cost x 12 / (balance x months). For a 12-month horizon this is cost divided by balance. On $25,000 with a $50 cost the minimum is 0.20 percentage points; on $5,000 it is 1.00. Bigger balances need much smaller gaps.

The formula is a straight-line approximation: it treats the extra interest as gap x balance x months / 12, and the tested model differs from it by about $1 on the $25,000, 0.20-point case ($48.95 of extra interest against $50). The table uses 12 months. Costs are the hypothetical time prices of 2, 4 and 8 hours at $25 an hour.

Shorten the horizon and the required gap grows in proportion. On $25,000 with a $100 cost, the minimum is 0.40 points over 12 months and 0.80 over 6, because there are half as many months to earn it back.

This table is why the generic advice to switch only for a gap of some fixed size, such as one point, misleads in both directions. On $5,000 with an 8-hour move, a 1-point gap does not cover the cost in a year. On $100,000, a 0.20-point gap roughly repays the same $200 cost within a year. The rule that holds for everyone is the ratio of cost to balance.

For the full gap-by-balance view of the cost of staying put, see chapter 2.

What does a steady switch look like?

Take a hypothetical $25,000 held at 0.45% APY, moved to an account at 4.20% APY that stays there. The move takes 2 hours, valued at $25 an hour, with no fees and no bonus. Extra interest is $76.50 in month 1, the $50 cost is covered in month 1, and the 12-month net gain is $868.05.

If the rate held for a full year, the gain would be $918.05 before the $50 cost, which gives the $868.05 net. A case this lopsided is the reason switching often pays: the cost is a few hours, and the gap is several points on a sizable balance.

The same lopsidedness makes small balances a closer call. The same move on $5,000 earns $15.30 extra in month 1, covers the $50 cost in month 4, and nets $133.61 over 12 months. It still pays, with less to spare for the same two hours. And if the new account paid only 0.95%, the $25,000 move would net $74.20 over 12 months with a break-even in month 5. That is real money for little work, and also the gap where a bad surprise in the next section would erase the gain.

What if the new rate does not last?

Model the new rate falling and recompute. Suppose a hypothetical $10,000 at 0.45% moves to a 4.20% account whose rate holds for 2 months and then falls 0.75 points a month until it reaches your current rate in month 7. The move costs 3 hours at $25 plus a $25 fee, $100 in all. Net gain at 12 months is $22.82.

The break-even month is still month 4, and the result is still positive. But the same $10,000 with a rate that stayed at 4.20% would have netted $267.22. The drop in the new rate took $244.40 out of the gain, which is the whole difference between a good move and a barely worthwhile one. The tool in this chapter lets you set the hold and the decline so you can run your own pessimistic case.

Why model decline at all? Because rate cuts by the bank you move to are possible. Regulation DD requires a bank with a variable-rate account to disclose that the rate and APY may change, how the rate is determined, how often it may change, and any limit on the amount of change (12 CFR § 1030.4(b)(1)(ii)). It also exempts changes in a variable rate and APY from the 30-day advance-notice rule that applies to other adverse term changes (12 CFR § 1030.5(a)(2)(i)). A rate can fall without a warning period, so run the case where it does.

Enter your own balance, both rates, your time cost and a pessimistic hold. The calculator uses the same tested model as the worked examples. The defaults are hypothetical, not current market rates. The bank switch ROI calculator covers a related view with its own inputs.

What does our data say about how long a top rate lasts?

Top spots are short-lived, but mostly because other banks pass the leader, not because the leader cuts its rate. That distinction matters for your decision: in our data about half of the banks we track never changed their rate, so a gap you measure today is closer to a constant than the headline "teaser rates fade" suggests. The study measures each bank's best savings rate, not the rate on your particular account. Chapter 3 teaches the full study.

The figures come from the SwitchWize Rate Half-Life study, which ranks the 126 institutions we track by their best savings APY each day. The window is 167 days, 2026-04-20 to 2026-10-03. A stay is an unbroken run in the top 10.

Among the 40 banks that entered the top 10 and had a rate 30 days later, the median change in their own rate was zero, and 10% were lower.

The limits matter as much as the numbers. This is one rate cycle, 167 days, and it covers only the institutions we track, so a bank we do not track could outrank everyone here. Rates are scraped from public pages and can lag a change at the bank by a day or more. Promotional and balance-tiered rates are not separated out. The study is preliminary and describes the past; it does not forecast a falling or rising cycle.

What this means for the switch decision is narrow. A high rate at a bank that does not move it is not a trap in itself. But a stay in the top 10 that lasts a median of 15 days says the top of the list is crowded and changes fast, so do not pick an account because it is first today. Pick it because the gap to your own rate repays your cost with room to spare, and recheck periodically.

What should you do before you move?

Run four checks before you move money, in this order: deposit insurance, the terms behind the rate, the timing of your payments, and whether any bonus is one you will really receive. Each one can turn a good-looking gain into a loss, and each has its own chapter.

First, insurance. The FDIC standard amount is $250,000 per depositor, per insured bank, per ownership category. A large balance moved to one bank can exceed it, depending on how the account is titled.

Second, terms. The rate you see may be a teaser, apply only up to a balance tier, or require activity.

Third, timing. Payments that draw on the old account must move in a safe order.

Fourth, check what can go wrong that has nothing to do with the rate.

When is staying the right answer?

Stay when the net gain is negative or marginal, when your horizon is shorter than the break-even month, or when the money is better placed elsewhere. A small gap on a small balance is the clearest case, and the third example shows it.

A hypothetical $10,000 earns 3.90% and could earn 4.10% elsewhere. The move costs 4 hours at $25, or $100. The extra interest is $1.61 in month 1 and the 12-month net is -$80.71. Break-even does not arrive until month 63, more than five years out, and a 24-month horizon still nets -$61.41.

The same 0.20-point gap on $100,000 reverses the answer: extra interest of $16.08 in month 1, break-even in month 7, and a 12-month net of $92.94. The gap has not changed. The balance has.

A decision that fails the test today can pass later. Balances grow, the gap widens when the field moves up, or your bank cuts your rate. That is a reason to put a review on the calendar, not to move now, and to decide in advance what size of net gain would trigger a move. Chapter 8 turns that into a one-page policy.

If your reason to switch is that your own bank cut your rate, the arithmetic is unchanged: your side of the gap is the new, lower rate. The distinction that matters is whether the better rate elsewhere is likely to last. Our data says the top spots turn over quickly, so compare your rate with the field, not with where the leader sits today. For the live reference, the best savings APY we track is 4.27% and the national average savings APY is 0.38%. Treat both as a dated snapshot, and put your own rate beside them in the calculator.

Whether you stay or move, check the same list before you act: the rate you will earn, how long it is likely to last, your switching cost in time and fees, and the FDIC coverage of what you are moving. If the numbers favor a move, do the move in a safe order. If they do not, rerun them when anything changes.