News Flash: Why Your Savings Account Interest Rate Is So Low

Let’s rip the bandaid off right away: Your savings account is probably looking about as lively as a houseplant you forgot to water. Nationwide, the story’s the same—interest rates are barely waving from the bottom rung. According to the FDIC’s latest gossip, the average national savings rate clings to just 0.04%. Yikes, right?

Why the bleak landscape? Well, a little global pandemic upended the world (no big deal), spurring the Federal Reserve to hack rates down to nearly zero—its way of jumpstarting the economy from its couch potato phase. Americans, meanwhile, have been tucking away cash like squirrels before winter. As of January 2021, we’d set aside a jaw-dropping $3.93 trillion, compared to a ho-hum $1.33 trillion just a year before.

“A lot of people received stimulus payments and were able to keep their jobs. Pair that with reduced chances to spend money due to shutdowns,” says Ken Tumin, founder of DepositAccounts.com. In other words, banks are floating on a sea of deposits and barely have room for another dollar-shaped drop.

This oversupply slaps savings interest rates right in the face. Banks make money by lending out your hard-earned deposits, but when they’re basically swimming in funds, they aren’t exactly bending over backwards to attract even more deposits by raising rates. Even the online high-yield accounts that once made us giddy are playing the low game. Talk about raining on our parade.

“If you’re hoping to earn more on your savings with APY right now, this is one of the most challenging periods in recent history,” says Tumin. And honestly, I feel that in my soul.

So, what’s a saver to do—curl into a ball and wait? Can you sweet talk, or strong-arm, your bank into bumping up your rate? Here’s the real scoop.

How to Request a Higher Savings Rate from Your Bank

You’d think that waving your loyal customer flag might buy you a better deal, but, alas, reality bites. According to Tumin, success in negotiating rates is about as predictable as the weather during spring.

Each bank has its own quirks (and mood swings). Sometimes, if you get a particularly empowered manager with their coffee freshly brewed, you might get somewhere. But frontline customer service folks? They’re usually shackled to the script.

If you’re feeling bold, do your homework. March in with proof that a competitor is offering a sweeter deal—just make sure it’s a real comparison. Your little neighborhood credit union won’t care about rates from some Silicon Valley app banking startup fresh out of beta testing. And don’t mistake flashy promo rates for the real thing.

“You need to focus on standard, ongoing interest rates,” Tumin says. “Be sure you’re making a fair comparison—comparing apples to apples, not apples to oranges.” Sage advice from someone who’s seen it all.

Still, temper that optimism. The best-case scenario? You might squeak out a quarter of a percentage point. Time to celebrate? Maybe hold off on the confetti.

Why Your Bank Could Be Open to Negotiation

Here’s where things get a bit juicier: bank fees. This is one battleground where customers actually stand a fighting chance.

Wanna know a shocking number? According to DepositAccounts, banks collectively pocketed about $34.6 billion—yes, billion—in fees back in 2016. Meanwhile, the average checking account is leeching $9.60 a month from its owner. Ouch.

“When you open a checking or savings account or get a credit card, you’re handed lengthy terms of service documents that almost nobody reads,” points out Paul Kesserwani, CEO of fintech startup Cushion. (Guilty as charged—I’ve never read a single one cover to cover.) Most of us don’t really know what we’ve signed up for.

Kesserwani encourages us to speak up about fees—complain a little (or a lot)! With 15,000 financial institutions scrapping over customers, banks would much rather smooth your ruffled feathers than lose you and spend big bucks luring someone new. Result? They often refund fees if you sound the alarm.

“They would much rather give you back some fees than risk losing your business and spending more to replace you,” he explains, as if he’s seen this reluctant generosity happen a million times.

How to Lower Bank Fees Without Direct Negotiation

If you’re not the confrontational type (and, honestly, who among us looks forward to a twenty-minute hold time?), let some digital muscle handle it. Enter services like Cushion: for about $36 a pop, their bots will go to bat for you, seeking out fee refunds and reductions on your bank and credit card accounts—ATM fees, late charges, you name it. If they strike gold, the savings flow right to your account. Sweet, right?

Now, paying someone to save you money on fees might sound paradoxical—like buying more shoes to save on a “buy one, get one” sale. But Cushion’s main draws are convenience and expertise. Money magazine even gave them a nod alongside other bill-reducing tools. And according to Kesserwani, in February alone, Cushion clawed back $1.2 million for folks who’d rather not get into a spat with their bank.

“We recover a surprising amount—funds people had assumed were lost forever,” he muses. It’s like finding a crumpled twenty-dollar bill in your coat pocket from last winter.

Final Takeaways: Temper Expectations, But Advocate For Yourself

Here’s the straight talk: With the right person at your bank and some supporting evidence, you might eke out a (very) modest rate improvement on savings. But let’s keep it real—it probably won’t send you running to update your spreadsheet with excitement. When it comes to waving goodbye to annoying bank fees, however, you stand a much better shot.

And even if you enlist a third-party service, don’t be shy about dropping hints that you’re unhappy enough to take your dollars elsewhere. Banks may play hardball at first, but they still want to keep you locked in. As Tumin says, “If you’ve been a loyal customer, they’re usually more willing to waive a fee or offer a better deposit rate from time to time.” Reassuring, even if only a little.

So, keep your chin up, your questions ready—and who knows? Maybe there’s a slightly less disappointing savings statement in your future.

MORE FROM MONEY:

• Interest Rates for High-Yield Savings Accounts Probably Won’t Bounce Back ‘for the Foreseeable Future’
• What’s a ‘Good’ Savings Account Interest Rate, and Where Can I Get One?
• I Was Skeptical of Online Banks — Until Experts Showed Me Their Money-Saving Potential