My Bank Has Paid Me $188 in Passive Income Over the Last 4 Months. Are You Missing Out on Free Cash?

I'll admit, when the Federal Reserve began raising rates, and online-only banks started raising their savings account APYs in turn, I became very curious about the benefit I might see from moving my money to one of those accounts. Ever since my teen years, I have banked with the same large national chain brick-and-mortar bank. And while I've always experienced good customer service and convenience with accessing my money when I need it, the savings account rate I've been given is just a paltry 0.01%. So I decided to make a change. I started by scouting offers touting the highest savings account interest rates. When I found one offering an astounding 5.02% (a rate that is no longer offered by the same bank today, unfortunately), I pulled the trigger and opened an account. I then made an initial deposit by transferring funds from my previous savings to the new account.

I was hesitant to put my trust (and money) in a new bank after all these years, so I started by transferring just about half of my savings balance -- $10,000. Now, four months later, that decision has earned me $188 in completely passive income. Find out how you could be earning some easy cash of your own.

What kind of funds should you stash in a high-yield savings account?

Online-only banks have become well known for being able to offer much higher rates on their banking products than brick-and-mortar banks can. This is mostly because online-only banks operate without the overhead that banking institutions with hundreds of locations requiring employees and real estate do, so they're able to pass some of those savings along to their customers.

While there are different account types for different savings goals -- perhaps a CD for down payment funds you'll need in a couple of years, or an IRA or brokerage account for retirement funds -- a high-yield savings account is arguably the best place to keep funds that you expect to need access to in the shorter term. Notably, your emergency fund.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.80% Rate info 3.80% annual percentage yield as of December 28, 2024. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.80% Rate info 3.80% annual percentage yield as of December 28, 2024. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

Experts recommend keeping three to six months' worth of living expenses in an emergency fund for things like home repairs, unexpected medical costs, or to use in the event of job loss. The amount you should keep in your emergency fund will vary based on your personal situation, but you can use an emergency fund calculator to give you a good starting estimate of what yours should look like. Once you have your emergency savings started, finding the best place to stash it should be a priority.

The great thing about today's high-yield savings rates

The high rates being offered today haven't been seen since before the Great Recession and they give us as consumers an opportunity to earn more passive income on our funds than we've seen in years. As our savings earn interest and that interest adds to the total savings balance, those new, higher balances also benefit from the power of compounding. While you only earn interest the first month on your initial deposit, the second month you'll earn interest on the initial deposit plus the first month's interest, and so on and so forth each month after that.

The $188 I've earned over the last four months was based on an initial deposit of $10,000 in early March and an additional $5,000 deposit in mid-May. Today, the balance of that account sits at $15,188.75, and the only thing I had to do to earn those extra dollars was to simply leave that money alone. Talk about easy money! When you consider that the same $15,000 left alone for a full year in my old bank account would have only earned me a pathetic $1.50, the realization is even more shocking.

How much passive income could you earn?

Not everyone will have tens of thousands of dollars to deposit right away, so let's take a look at a few different scenarios to see what you stand to earn just by moving your current savings to a bank account with a higher yield. There are savings accounts today offering over 5% APY, but let's go with 4.5% for our illustration, as that's a more common number and typically comes with fewer conditions to meet. For our brick-and-mortar bank, we'll stick with the 0.01% my old savings account earns. Our calculations assume an initial deposit only, with no recurring or additional deposits made.

As you can see, even someone with a beginning savings balance of just $500 stands to miss out on more than $20 just by being complacent in their current account. And the more you have saved, the more you're missing out on. As easy as it is to change banks these days, there's really no excuse NOT to move your money and maximize your passive earnings.

As you're looking for your new savings account, be sure to keep an eye on any account terms and conditions, as some banks require a higher minimum deposit amount to earn their maximum APY. Also take a look at what options you'll have for accessing your money once it's in your new account, as you'll want to make sure the bank's available options will work for you. Once you find the perfect account and make your deposit, all that's left to do is to sit back, relax, and watch as your balance grows over time.