Michele Norris Shares Kitchen Must-Haves and the Nerds Break Down Switching Banks for Better Rates

Summary

NerdWallet's Smart Money Podcast: Michele Norris Shares Kitchen Must-Haves and the Nerds Break Down Switching Banks for Better Rates

Release Date: April 21, 2025

In this episode of NerdWallet's Smart Money Podcast, hosts Sean Pyles and Elizabeth Ayoola delve into two primary topics: investing wisely in kitchen appliances and the intricacies of switching banks to secure better financial rates. The episode seamlessly transitions from a lively discussion with guest Michele Norris on kitchen essentials to a comprehensive money management segment addressing a listener's query about banking strategies.

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Investing in Kitchen Essentials with Michele Norris

Understanding Quality vs. Affordability

The episode kicks off with a relatable conversation about kitchen spending. Sean Pyles shares his experience with investing in a high-quality gas range, explaining how it has enhanced his cooking experience:

“...it has more than paid for itself with delicious meals.” [00:04]

Elizabeth Ayoola counters with a humorous note about a seldom-used ice cream maker, highlighting the balance between necessity and luxury in kitchen purchases.

Guest Insights: Michele Norris on Smart Spending

Guest Michele Norris, an esteemed host and award-winning journalist, offers expert advice on making informed kitchen investments:

“If it's something that you're going to use all the time, it's worth getting the best that you can get.” [02:10]

Michele emphasizes the importance of selecting versatile, high-usage items like quality knives. She advises against overspending on ultra-premium brands unless necessary, suggesting that good mid-range products can suffice:

“You don't necessarily have to buy the $500 Japanese knives... but get at least a good carving knife or a paring knife.” [02:10]

Practical Tips for Kitchen Upgrades

The discussion advances to specific appliances, with Michele addressing the debate over high-end brands versus more affordable alternatives. For instance, she compares Vitamix blenders to their less expensive counterparts, noting the added benefits of higher-end models for specialized tasks like making soups or gelatos:

“If you are making soups, if you are making pesto, you can make almost something like gelato in a Vitamix...” [04:56]

Essential vs. Aesthetic Purchases

The conversation then shifts to balancing functionality with aesthetic appeal. Elizabeth shares her insights as a renter who appreciates the look of electric stoves but recognizes the practical advantages of gas stoves for maintenance and longevity:

“...a gas stove might be better in terms of maintenance and longevity...” [08:13]

Michele reinforces the importance of prioritizing personal cooking habits over social media-inspired kitchen trends:

“Ignore the social media pressure. Find the kitchen that's gonna work well for you.” [08:13]

Protection and Longevity

Towards the end of the kitchen segment, Michele advises on the value of protection plans for major appliances, suggesting that items like stoves and refrigerators may benefit from extended warranties. She also shares a personal anecdote about her favorite kitchen item, a jade green mixing bowl, underscoring the sentimental value of certain kitchen tools:

“It's something that has a handle on it... I have two of them now because they make me happy.” [11:26]

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Switching Banks for Better Rates: Listener Q&A with Ruth Sarial

Listener Introduction: Rachel's Financial Situation

The second segment features Rachel, a listener grappling with managing credit card debt and optimizing her savings strategy. She shares her predicament of juggling accounts across Wells Fargo, Ally, and recently, Sofi, aiming to maximize interest rates while dealing with emergency expenses:

“We keep hitting those snags of actual emergencies. For example, our roof, we had to put in a new roof...” [16:52]

Evaluating Online Banks: Pros and Cons

Ruth Sarial, NerdWallet’s banking editor, provides Rachel with a thorough analysis of the benefits and drawbacks of online banks versus traditional brick-and-mortar institutions.

Pros of Online Banks:

• Higher Interest Rates: Online banks often offer significantly higher APYs compared to traditional banks.

  “The much higher interest rates are a great incentive for switching to an online bank.” [24:10]

• Lower Fees: Reduced overhead allows online banks to minimize or eliminate various fees.

  “They can pay higher interest rates.” [24:10]

Cons of Online Banks:

• Limited Physical Access: Challenges include fewer ATMs and the absence of in-person banking services.

  “...if you prefer to do bank tasks in person, like go to a teller.” [23:06]

• Cash Deposits: Difficulty in depositing cash without extensive logistical steps.

  “If you often need to deposit cash, you'd need to make sure that your online bank makes it easy...” [24:10]

Strategic Switching Tips

Sean and Ruth advise Rachel on the practical steps involved in switching banks, emphasizing the importance of:

• Listing Automatic Payments: Identifying all automatic transactions to ensure a smooth transition without missed payments.

  “...make a list of all the things that you would need to transfer over.” [29:33]

• Maintaining Old Accounts Temporarily: Keeping the old account open for a buffer period to accommodate any lingering transactions.

  “Keep it open for a little while... you were going to have anything that hasn't cleared yet.” [29:33]

• Exploring Credit Unions: Ruth suggests considering credit unions as a hybrid option, offering both physical access and favorable rates.

  “There might be a credit union for teachers in your area...” [32:22]

Balancing Multiple Accounts

Rachel reflects on managing multiple banking accounts, contemplating the balance between accessibility and maximizing interest rates. Ruth encourages maintaining both traditional and online accounts to leverage the strengths of each:

“Being a customer of both types of banks can be really useful.” [25:46]

Final Considerations and Recommendations

As the segment concludes, Rachel gains clarity on her banking options, considering a phased approach to switching and the potential benefits of integrating credit unions into her financial strategy. Ruth highlights the importance of:

• Reviewing Bank Policies: Understanding account closing procedures and potential fees.

  “Get confirmation in writing... check what your bank's policy is for reopening accounts...” [30:41]

• Maximizing Savings Yields: Despite recent rate cuts, online banks and credit unions still offer competitive interest rates.

  “Some of the best online savings accounts right now have rates as high as 4.40% or even higher.” [27:20]

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Key Takeaways

1. Kitchen Investments:

   • Prioritize quality for high-usage items to enhance cooking efficiency and safety.
   • Balance functionality with aesthetic preferences, avoiding succumbing to social media trends.
   • Consider protection plans for major appliances to safeguard against unforeseen issues.

2. Banking Strategies:

   • Online banks offer higher interest rates and lower fees but may lack physical accessibility.
   • Traditional banks provide in-person services and extensive ATM networks but typically offer lower savings yields.
   • Credit unions emerge as a viable middle ground, combining favorable rates with some physical banking features.
   • Switching banks requires meticulous planning to ensure all automatic transactions are transitioned smoothly, avoiding missed payments and fees.

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Conclusion

This episode of NerdWallet's Smart Money Podcast effectively balances practical advice on everyday financial decisions, from optimizing kitchen expenses to strategically managing banking relationships. Michele Norris's insights empower listeners to make informed choices about kitchen investments, while Ruth Sarial's expertise guides them through the complexities of modern banking, ensuring they can achieve better financial outcomes with confidence.

Listeners are encouraged to engage with the NerdWallet team for personalized financial guidance, leveraging the wealth of knowledge shared in this episode to enhance their financial well-being.

Transcript

[Elizabeth Ayola]

Sean, what's the most expensive kitchen item you own?

[Sean Pyles]

Well, when my house was being built, I splurged on an oven with a gas range instead of the standard electric range. And let me tell you, Elizabeth, it has more than paid for itself with delicious meals. What about you, Elizabeth?

[Elizabeth Ayola]

Mm, it's probably the ice cream maker I received as part of a team building activity, but never use. Thank you, NerdWallet.

[Sean Pyles]

Well, this episode we're talking about where it's worth splurging when it comes to home kitchens. If you're thinking of upgrading your appliances or maybe just buying a really fancy knife set, this one is for you. Welcome to NerdWallet's Smart Money podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Pyles.

[Elizabeth Ayola]

And I'm Elizabeth Ayola. This episode, we talk with a listener and a fellow nerd about switching banks amidst falling yields on savings accounts.

[Sean Pyles]

But first, we are going to chat about where it's worth spending your money in the kitchen and when you might be able to get by on that knockoff version of whatever countertop appliance is trending at the moment. My partner, Garrett, is the cook of the house, and I like to encourage him along by buying nice things for the kitchen every once in a while. And let me tell you, some of this stuff can get so expensive. Elizabeth, what was the last kitchen gadget or appliance that you bought and how much did it cost you?

[Elizabeth Ayola]

It was a small cutting knife that I bought from target for like 12 bucks. But whether you need to buy a knife set or restock your spices, all that stuff can add up. Now we're going to chop it up with Michelle Norris about where it's worth spending a lot of money in your home kitchen. Michelle is a host of podcast you, Mama's Kitchen, author of Our Hidden Conversations, and a contributing editor on msnbc. I will also add that Michelle has an impressive resume. She has won Peabody, Emmy, Dupont, and Goldsmith Awards over the years. Welcome to Smart Money. Michelle.

[Michelle Norris]

Hello.

[Sean Pyles]

Well, Michel, shopping for items in your kitchen can be a little intimidating sometimes because there are so many options and different price points. How do you think people can strike a balance between buying quality items while also working within their budget?

[Michelle Norris]

This is a really good question, and it depends on the individual. So I'm going to try to give you a blanket answer. But you're going to have to edit this based on where you live, how you cook, how often you cook, and what your budget is generally, I think if it's something that you're going to use all the time, it's worth getting the best that you can get. Get the best knives that you can get and then take care of them. If you're cooking, you're gonna use a knife every day. And a really good knife can make a difference. It's about safety, making sure that you keep the knife sharp. You're less likely to cut yourself. That knife is less likely to sort of slide outside the onion and cut you accidentally. If you get a good clean cut through something, you don't necessarily have to buy the $500 Japanese knives, you know, that may not be necessary. But get at least a good carving knife or a paring knife, something that you use every day to chop and then something that's a little bit heavier that you can use, say to chop root vegetables. If you want to cut up a chicken, you know, something that has a little bit of weight and a really nice sharp edge on it. And then take the time to, if you're getting the knife set, invest in what you need to keep it sharp. So that's an example of where it might be worth spending money.

[Sean Pyles]

I like your tip about being selective around what kind of knives you get, because I bought my partner a very nice knife block for Christmas and I think it came with eight knives. We use two of them on the regular. So that's a good point around just knowing which ones you're actually going to be using day in, day out.

[Michelle Norris]

If you're on the keto plan and you don't eat a lot of carbs, you don't eat a lot of bread, you don't need the bread knife, you know, you might not need the whole set. So there is a lot of talk with the Duchess on tv, Meghan Markle about Le Creuset.

[Elizabeth Ayola]

Yes.

[Michelle Norris]

And this is another example. You know, do I really need an actual Le Creuset pot? Well, it depends on how much you cook and it depends on if you're willing to make an investment. There are some pretty good alternatives and there are some pretty good knockoffs. So you might not need to spend the money. But you know, Staub Lodge, there are a lot of other people who make cast iron or enamel cookware that are also very, very good. One of the questions that people ask, do I really need a Vitamix? You have lots of options. There's, you know, there's a Vitamix, there's the Ninja, there are a couple of other high end blenders, you know, Vitamix is going to set you back. It's going to cost a couple hundred dollars. They go on sale every so often. That's a good way to get it is when they go on sale. Sometimes you can buy refurbished or open box items. But this is another individual question.

[Sean Pyles]

One thing I wonder too is how much people can really tell the difference between the smoothie coming from a Vitamix versus a less expensive blender. Are you refined enough in your cooking and your smoothie consumption to tell the difference? I'm not personally.

[Michelle Norris]

Well, if you're cooking smoothies, you might not need a Vitamix, right? Magic Bullet makes a pretty good smoothie, even if you gunk it up with some of that high protein powder that you can use or you know, and it's still does a good job. But if you are making soups, if you are making pesto, you can make almost something like a gelato in a Vitamix because it has that much horsepower. It has so much horsepower that you can make a soup and it heats the soup in the Vitamix. So it depends again on what you're doing.

[Sean Pyles]

I'm wondering whether there are some kitchen items that people should never be cheap about, even if they are beginner cooks.

[Michelle Norris]

A stove is an item that gets a lot wear and tear and so you want the best one that you can afford, not just for cooking, but for safety. So you know, whether it's electric, whether it's induction, whether it's gas, you want to make sure that it's safe. But I would say a word about replacing a stove, again, this is know your skill level, know how you cook. We are inundated, particularly on social media with people who have these high performance kitchens. And, you know, it looks like a restaurant stove. Do you need a griddle? Do you ever make pancakes? Do you need all six burners? Do you need a super high performance stove? Because if you don't cook, you're gonna burn everything up. Trust me on this. The other benefit that people don't recognize, perhaps in some of the higher performing stoves, and some of the mid range stoves are starting to pick up on this now also is the simmer function. So if you like to make a nice ragu on a Sunday and you wanna make a pot of greens on a Sunday, you wanna make a lovely soup of some kind, you can keep it on such a low simmer that you can keep it on the grate or on the induction surface for 3, 4 hours and not worry about it burning up or reducing too Much. It's this constant, low, just barely there flame that lets something really cook down. That lets the flavor sort of marinate and move all throughout the dish without worrying about it burning or sticking to the bottom.

[Sean Pyles]

You're making me want to make a nice sauce for some pasta now, but completely agree that a good stove can really make the difference between whether you want to cook at all or not. I had plenty of crappy apartments in my early 20s where I was fighting my stove every egg I cooked. And I ended up eating out a lot more than I probably should have because it was such an uphill battle to cook anything.

[Elizabeth Ayola]

And I love this conversation about stoves because as I guess a newbie to appliances. And even though I'm renting, I have an electric my house. I am Nigerian, so I cook a lot of stews and sometimes fried foods. And what I'm finding is that the stove top is staining with oil on the electric stove. And I grew up with gas stoves. Aesthetically, I love the look of an electric stove, but I'm realizing that once I get to a point of buying a stove of my own, a gas stove might be better in terms of maintenance and longevity and things like that. So what do you have to say, Michelle, for people who are maybe drawn to kitchen appliances or any kind of kitchen items because of the aesthetics, but are not thinking about what works best for them, especially with social media pressure and just wanting your kitchen to look aesthetically nice?

[Michelle Norris]

Ignore the social media pressure. Find the kitchen that's gonna work well for you. And it's really hard to do because I have in my own house a stack of kitchen magazines, you know, with a dream kitchen that I love to have. But then I think about how I really cook. And that's what you really have to do, is be aware of how you cook, how often you cook, how many people are in the kitchen when you cook, do the things that make sense. And that's true for appliances, too. You know, when you have. We now have kitchens that have entire appliance garages because people have so many countertop appliances and they're trying to find a place for them. Like, I purchased an instant pot because I saw everyone using an instant pot, and that thing is taking up a whole lot of space in a cupboard right now. I just don't have a lot of use for it. Other people love it. It's probably going to make its way to a friend of mine's house who does a lot of cooking and makes a lot of stews, and she probably would make better use of it. You talked about things that are worth spending a little bit of money on. I think an air fryer is something that's worth researching to understand. Again, safety is a big part of this because you don't want something that's going to leach anything into the food. So you want to look at what it's actually made of and how you cook and how you're gonna use the air fryer. Do you need a small basket? Are you gonna put an entire chicken in there? Are you cooking for a family of four? So you wanna be able to put four salmon filets to get a nice crust on that. If you're doing like a hoisin brown sugar maple glaze on that, but the fish stays really soft and moist inside. Or will a small basket do if it's just two of you and you occasionally wanna roast some broccoli or do something a little simpler?

[Sean Pyles]

Yeah, we use the air fryer on the daily in my house. It is just so convenient, and I love the way it crisps food. It's been really worth the cost.

[Elizabeth Ayola]

All right, Michelle, I wanna ask a quick question around protection plans on expensive kitchen items. Do you think that that's worthwhile? I know that some tend to already come with a warranty anyway, but do you think it's worth people after maybe splurging on the items, as we said, that are important, getting a protection plan on that?

[Michelle Norris]

You know, this is a tough one because it depends on whether it's a countertop appliance or whether it' a big item that you plan to use quite a bit. And I think stoves and refrigerators and dishwashers probably fall in a slightly different category. I think the garbage disposal might be in that category as well. If you live in an area where you're allowed to have garbage disposals. So for a big appliance that you really depend on, if your dishwasher breaks, can you live without it? Probably. Will you enjoy life without it? Maybe not. For your oven, it may be worth doing the extended warranty for some of the other appliances. I'm not so sure about that. But it's probably not a bad idea to register things. So if you do have problems, if you do take just a moment to fill out that card that they give you and send it in if you ever have a problem down the road, you're much more likely to get a much more welcoming response if you actually took the time to register it.

[Sean Pyles]

Michelle, before you go, we have two final questions for you. What is your favorite kitchen item and how much did it cost?

[Michelle Norris]

I'm thinking a lot about my mom these days because she went to glory last year and she's just kind of on my mind all the time. And if you had asked me that a while ago, I might have said the air fryer, because I too, use it every single day. That is an appliance that gets a workout. I have this mixing bowl that is jade green. And I have always loved this bowl. And then when I was going through photos, I realized it was almost this little rosebud moment. I realized that in a bunch of pictures in our kitchen, my mom had the same bowl, jade green. And I got mine, I think from William Sonoba, maybe Sur La Tub. I got it one of these high end culinary stores and it was on sale and it just spoke to me and I purchased it and I just love it. It's where I make pancake batter. If I make cornbread, it's where I make the batter for that. It's, you know, it's something that has a handle on it. It looks like a pitcher, but it's a big kind of mixing bowl. And it's jade. And that jadeite, I think is what they called it. I don't know if it was made by Corning or Anchor Hawking, but it was quite popular for some time. And then I realized what I was doing is buying something from my youth, something that I saw on because my mother made her own bread. She made cakes and pies all the time. She made rhubarb crisps. She was a. She was a fantastic cook and a very good baker. And so I realized what I was buying is something that subliminally I remembered from the kitchen counter in my childhood kitchen. And I have two of them now because I found a second one on sale. Also, I'm always scouring sales for kitchen items.

[Sean Pyles]

That's what we like to hear. Yes.

[Michelle Norris]

And I have two of them, and they make me happy.

[Sean Pyles]

That's so beautiful.

[Elizabeth Ayola]

I love that. Michelle Norris, thank you for joining us on Smart Money. Thank you for all the tips and also the stories.

[Michelle Norris]

Thank you. It was really, really good to be with you.

[Elizabeth Ayola]

All right, we're about to get to this episode's Money question segment where we help a listener think through switching banks.

[Sean Pyles]

But before we get into that listener, I've got a question for you. What is your money question? That financial thing that keeps you up at night or that goal you just can't seem to make progress on?

[Elizabeth Ayola]

Maybe you're not sure how to tackle your credit card debt or you're wondering whether this is a good time to do a cash out refinance on your home. On the other hand, you may wonder whether you should pay off your car note or invest that money instead. Whatever your money question, we nerds are here to help. Leave us a voicemail or text us on the Nerd hotline at 901-730-6373. That's 901-730-Nerd.

[Sean Pyles]

And we know that a lot of you might be feeling anxious or uncertain about the volatility and mixed signals that we've been seeing in the economy and whether recent changes at the federal level might mean that you need to pivot your financial plan on smart money. Our job is to help all of you listening make the smartest financial decisions, and that means putting the news in context so you know when it's time to adapt to changing circumstances and when it's okay to stay the course. So for timely guidance about what the news means for your money, listen to our weekly Money News segments which go live on Thursdays, and send us your questions and thoughts about what's happening in the economy.

[Elizabeth Ayola]

Alright, let's get to this episode's Money Question segment. That's up next. Stay with us.

[Sean Pyles]

Today's episode is sponsored by the Best One Yet, a podcast from Wondery. Did you know that Netflix borrowed a growth hack from Ludacris? Or that the White Lotus Effect has the power to boost tourism by 20%? Or how women postponing hair appointments is an economic indicator? Watch out for recession brunettes. Every morning on the Best One yet podcast, best friends and ex Wall street guys Nick and Jack break down the three most interesting business stories in just 20min minutes. They call it Pop Biz, where pop culture meets business news. Their show is formerly known as Robinhood Snacks Daily and that delivers takeaways and laughs in a digestible 20 minute episode to start your day. Whether you're aiming for that promotion, launching the next big thing, or just want to be the most interesting friend at brunch who spots a recession Brunette Start every morning with business news from the Best One Yet. Follow the Best One yet on the Wondery app or wherever you get your podcasts. Or you can listen ad free right now on Wondery Plus. We're back and answering your money questions to help you make smarter financial decisions. This episode we're joined by Rachel, a listener with some questions about when switching banks to get the best rates is worth the potential hassle involved. Rachel, welcome to Smart Money.

[Rachel]

Hi. Thank you.

[Sean Pyles]

To help me answer your banking questions, Rachel, we have NerdWallet banking editor Ruth Sarial. Ruth, welcome to Smart Money.

[Ruth Sarial]

Hi, Sean. Thanks for having me.

[Sean Pyles]

So, Rachel, I want to start by hearing a little bit about your financial life right now. Like, where do you feel good? Where do you think you might have some room for improvement?

[Rachel]

I feel good about lowering our debt on credit cards slowly but surely. And we did start some high yield savings accounts for our children through Ally, which has a really high interest rate. But we're kind of stuck on saving up for our emergency fund. Like, we can't quite get that right. But we, we keep hitting those snags of actual emergencies. For example, our roof, we had to put in a new roof for that. So I think we're struggling with our emergency fund, but I think slowly but surely we're knocking down our credit card.

[Sean Pyles]

Tell me a little bit more about your credit card debt. How much do you have?

[Rachel]

Right now I have about three or four thousand and my spouse probably about the same.

[Sean Pyles]

How do you approach paying that off?

[Rachel]

I pay off a little bit more than they're asking, sometimes double. We racked up the debt because we were trying to conceive and unfortunately, you know, the health insurance only covers so much, so our debt has a lot to do with that. But we're done having kids now, so we are paying that down.

[Sean Pyles]

Well, I'm glad to hear you're making some progress on that debt. One thing I would encourage you to do is play with a debt payoff calculator and see how quickly it would take you to be fully out of debt, paying a little above the minimum, or maybe even paying a hundred dollars more on that a month. Because you might be surprised by how quickly you can accelerate your debt payoff if you pay just a little more each month. Because often paying the minimums will keep you in debt for quite a long time. Well, I could spend all day talking about debt because it's one of my favorite topics. But you wrote to us with questions about banking and whether it makes sense to switch to having only an online bank for checking and savings. Talk with us a little bit about why you're thinking about switching and what's drawing you to an online bank.

[Rachel]

I was thinking about switching because, honestly, I saw the advertisement that SOFI was doing about 0.5% interest rate for a checking account, and I found that interesting and also a higher interest rate compared to the the bank that we have. We're with Wells Fargo and they just make it so convenient. Whereas Sofi, you know, they don't have actual banks. So there's very little that I know about strictly online banking. As far as checking accounts go, I do have to admit I have the, the checking account and the savings account. I opened two accounts, apparently I just clicked on savings and I think they automatically enroll you or, you know, sign you up for both at the same time.

[Sean Pyles]

With so far, you mean?

[Rachel]

Yeah, with Sofi. And I don't, I didn't put any money in it. So these interest rates come with stipulations. So if you read on and like read the fine print, you know, they say, oh, you can get up to $300 for a bonus, for this, for that, and up to, I don't know what they said, 3.8% interest on savings. But then when you read on, they tell you you have to put direct deposit in these accounts.

[Sean Pyles]

Yes. Sign up bonuses often come with catches like that where in order to get the sign up bonus, you might have to have a certain minimum amount in the account for a certain amount of time. And some high yield savings accounts, it may be that you have to have a certain amount of money in the savings account to get that higher yield on the savings. So that's something to consider as well. Looking into the fine print there.

[Rachel]

Yeah, so I was just looking into switching because of that reason. And also I just want to move away from those bigger banks. I have a checking in a savings account, joint savings account with my spouse and she also has a checking account and they give us pennies, like literal pennies in our savings account. So we just use that savings account kind of to like transfer us if we need to pay certain bills or for me to transfer money into the ally savings account that has a higher interest rate for our emergency fund. So I just want to get away from Wells Fargo.

[Sean Pyles]

Ruth, I'd love to hear from you a little bit about when you think it's a good idea to switch, maybe exclusively to using online banks or whether in your opinion as a banking editor, it might be a good idea to keep a brick and mortar bank in the mix.

[Ruth Sarial]

Yeah, it sounds like Rachel has the right idea. I think it's a great idea to switch to online banks when you are looking for an account that earns a lot more interest than a traditional bank will offer you or if you prefer to do most or all of your bank tasks online. And the great thing about some of these online banks savings accounts is that they'll have sub accounts so you can really specify what you're putting money away for. You can specify that it's for free vacation or say IVF or whatever needs you have coming up.

[Sean Pyles]

Rachel, it seems like you've been using your savings account with a little bit of that savings bucket, savings goal, sinking fund, whatever you want to call it, functionality where you've been saving for your kids, right?

[Rachel]

Yeah, I had one for about six years now for my oldest and just recently opened up a new one for our nine month old. I also have a separate account for myself because I'm a teacher. I have to save up money for myself over the summer. When they save up for you through the school or whatever, it's just in escrow and it doesn't earn interest. So I figured this is a better option where at least if I'm saving up thousands of dollars for myself over the summer, at least it's earning interest. And yes, I do have to pay taxes on that, but it's better than nothing. So. Yeah, we have several different accounts now with Ally.

[Sean Pyles]

Just so I'm keeping track. You have Wells Fargo accounts, you have Ally accounts and Sofi accounts.

[Rachel]

Yes.

[Sean Pyles]

How do you keep all of those straight? Does it get confusing ever?

[Rachel]

No. I mean right now I just opened the Sofi accounts and they have zero dollars in them. I'm deciding on what to do with that. Do I really want to switch over, like lose my checking account with Wells Fargo and just keep the savings account? Because I looked into it a little bit and SoFi does have a lot of ATMs around I was afraid of, like how do I take out actual cash? Because Ally doesn't offer that, I don't think. Or it takes a while for you to get cash money out of those accounts. Whereas Sofi sends you a card that.

[Sean Pyles]

Makes me think we should probably outline some of the pros and cons of online only banks. So do you have any other concerns besides maybe not having access to ATMs easily?

[Rachel]

What are some other cons that I might not be thinking of besides the whole like the actual cash? I mean there aren't. I don't think they're drive throughs ATMs. That's a con.

[Sean Pyles]

Ruth, are there any other cons or maybe huge pros that we haven't addressed around online banks that you think Rachel should keep in mind?

[Ruth Sarial]

Yeah. As far as cons go, generally online banking is tough if you prefer to do bank tasks in person, like go to a teller. And you mentioned atm. So if you often need to deposit cash, you'd need to make sure that your online bank makes it easy and ideally free to do so because some online banks don't accept cash, as you mentioned. Or they may limit how much you can deposit. Or they might charge a fee for making cash deposits, though some do let you deposit cash for free. As for pros, again, the much higher interest rates are a great incentive for switching to an online bank. And then along with that, you'll pay fewer fees because online banks don't have the overhead costs that come with having branches. They're able to minimize or not charge fees and they can pay higher interest rates.

[Sean Pyles]

And Rachel, have you looked into any fees that you might have to pay from either your Wells Fargo account and how that might compare to Ally or Sofi?

[Rachel]

No, I have not.

[Sean Pyles]

That might be a good thing to consider as you're looking at these three different banks that you could go with. Which one maybe gives you the best interest rate, which one has the lowest fees, which one is as accessible as you want it to be. Those seem like the three big categories that would be important to you.

[Rachel]

Yes, definitely.

[Sean Pyles]

And you know, it's important to note too that like you have set up right now, Rachel, you can have both a traditional and an online bank and they may well serve different purposes for your banking needs. Ruth, I'd like to hear maybe some of the pros and cons of traditional banks too.

[Ruth Sarial]

Being a customer of both types of banks can be really useful. Traditional banks do offer some advantages. You can generally get that in person service. And the biggest traditional banks have a lot of branches and a good number of ATMs, so access to those kind of things is convenient. If you need like quarters or crisp bills, for example, it's helpful to be able to walk into a bank and get those things. And the big banks do generally offer robust online and mobile services that can compete with those of online banks. But the biggest downside of traditional banks is a really big one. And as we just mentioned before, it's interest rates. So traditional banks apys are generally dismal like 0.01%. So you have no reward for keeping your money with them. And another big drawback is that many traditional banks still charge expensive overdraft fees and other fees, whereas a lot of online banks and credit unions have eliminated those.

[Sean Pyles]

Well, I want to talk about credit unions for a minute actually, because that hasn't been discussed so far. I am a huge proponent of credit unions. They're a way where you can keep your money in your community. They tend to offer really favorable rates for their members on things like auto loans, and they may allow you to align your money with your values a little more. And, Rachel, it seems like that's something that's important to you, too, having your money in an institution that reflects some of your values. Have you considered a credit union?

[Rachel]

No, I have not.

[Sean Pyles]

I bet you have a bunch in your area that might be worthwhile to look into. You would have the likely convenience of being able to go in and get a check if you want a check, or cash if you need cash. There will be ATMs around. So it's a nice mix of having the infrastructure of a traditional bank with some of the alignment with your values, potentially, that you may not have with a traditional bank. The downside is that they might not have all of the bells and whistles that a fancy online bank might have. But in my experience, using both a credit union and an online bank, I find that I have my needs more than met with both of them. I want to talk a little more about yields on savings accounts. We've been seeing yields fall due to the rate cuts over the past year, the federal rate cuts over the past year. So, Ruth, do you think it's still worthwhile to pursue opening an online bank account, or is the falling yield that we're seeing on them maybe making other accounts, like at a credit union something that's more appealing?

[Ruth Sarial]

I definitely think those higher APYs are still a huge draw. You can grow your money at a much higher rate with an online bank than a traditional one. Rates have fallen some in the past year, but they're still really strong at a lot of online banks and credit unions. Some of the best online savings accounts right now have rates as high as 4.40% or even higher.

[Sean Pyles]

All right. And Rachel, you mentioned that you're curious to know about the process of switching from maybe a traditional bank or your current online bank to a new bank, and that there might be some administrative burden to that. What are your thoughts there?

[Rachel]

I was thinking about just the logistics of it, like automatic payments that I have through my checking in Wells Fargo, about the timing of all that. I think I would probably have to really sit down and make a list of all my payments and do a switch and all the accounts. I just have to make sure I switch everything so that I don't miss a payment, because that's definitely not something that I want. My credit score is very good right now, and I don't want to mess that up because I forgot something. So it's just. I think it's just a lot of steps If I were to completely change over my checking from Wells Fargo to.

[Sean Pyles]

Sofi, it could be a little, I don't know, bureaucratic and boring, I would say. I went through this a few years ago, and it took me about an hour to make sure that I had all of my payments switched over to my new bank. And it wasn't a fun hour, but I was relieved to have it done and to know that I was as thorough as I needed to be. So you can go through your recent bank statement and just see what are all of these auto payments that you have set up and just transfer them over to your new bank. And I will say there's also an opportunity in this to review auto payments that you have set up that might not be serving you anymore. It's those streaming subscriptions that maybe you're not using as much. What are the things that you have auto set up that maybe you don't even want anymore? So you could maybe save some money there, too?

[Rachel]

Yeah, that sounds like a great idea.

[Sean Pyles]

Okay. And, Ruth, is there anything else around transferring over to a new account or maybe even closing an account that Rachel should keep in mind?

[Ruth Sarial]

Sounds like you have the right ideas in mind. Making a list of all the things that you would need to transfer over. I think having your Wells Fargo account still open is a great idea that we can, you know, easily transfer money as you need to to the new account. And then it's a good idea to keep it open for a little while. That way, if there's anything that comes through that hasn't cleared yet, say, like an automatic payment, as you mentioned, or maybe a check that needs to clear, you will still be able to have that go through, and you'll just need to make sure that you have enough money in that old account to meet any minimum balance requirements so that you didn't get charged with the fee. And I will also say that when you do close your old account, you should get confirmation in writing. And you should also check what your bank's policy is for reopening accounts in case, you know, you did forget to cancel an automatic bill payment or something. The bank may reopen the account, and that could result in a negative balance and overdraft fees, so be careful of that. And I would keep an eye out for any communication from your old bank about unexpected activity once your account is closed.

[Rachel]

Okay, that was very insightful.

[Sean Pyles]

Thank you, Rachel. You also asked us about the functionality of a debit card from an online bank. What. What are your questions there? What do you think you might need a card from a bank for that.

[Rachel]

Card would be great to use to buy things with that checking account that I would have with the online bank, as well as taking money out of an ATM. So that's what I was thinking, because SoFi has that and Ally, I don't believe has the card.

[Ruth Sarial]

The thing with debit cards at an online bank is that you might need to request the debit card. They might not always automatically send you one, but just like a debit card from a traditional bank, you'd be able to use it to pay bills, make purchases, withdraw cash.

[Sean Pyles]

Rachel, I'm wondering how you're feeling now about the process of switching over to a new bank. Whether you think you'll go more into SoFi, you'll stick with Ally, maybe consider a credit union. What are your thoughts?

[Rachel]

Yes, I'm definitely. I definitely have a lot to look into now. I've heard about credit unions, but I haven't really done more research on them. So that's something that I'm going to look into as well, as I was very adamant about totally closing out my Wells Fargo checking account, but now I think I might have it there just in case. I just have to make sure that I know if there's any minimums or any requirements that are needed and that they are met just in case. I don't want to be charged for anything, but I think it is a good idea to keep my bank account open with them because they are a brick and mortar bank.

[Sean Pyles]

There's also nothing wrong with having a period of transition where you're maybe gradually moving over from Wells Fargo and going further into Ally or maybe considering Sofi or a credit union. I did that when I was rearranging my banking setup a few years ago, and I actually still have a checking account with a big national bank that I've had open since middle school. And I pretty much only keep it open to pay my mom, my part of the cell phone bill and a couple other payments here or there.

[Ruth Sarial]

Rachel, I just want to add that there might be a credit union for teachers in your area and they might have, like, special benefits and perks that would be beneficial to you and that would be a good medium or good replacement for a traditional bank because then you could still be able to walk in and deposit or withdraw cash there. And if you need to have that account to transfer money to your online bank account.

[Sean Pyles]

Well, Rachel, thank you so much for joining us.

[Rachel]

Thank you for having me.

[Sean Pyles]

And Ruth Sarial, thank you for coming on and answering the banking questions. With us.

[Ruth Sarial]

Thanks for having me.

[Sean Pyles]

That's all we have for this episode. Remember, listener, that we are here to answer your money questions. So turn to the Nerds and call or text us your questions at 7306373. That's 901-730-nerd. You can also email [e-mail] come back on Thursday where we'll cover the latest financial news and answer a listener's question about how to pay off tens of thousands of dollars in credit card debt. Follow Smart Money on your favorite podcast app, including Spotify, Apple Podcasts and iHeartRadio to automatically download new episodes. Here's our brief disclaimer. We are not your financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. This episode was produced by Tess Viglund. Hilary Georgie helped with editing. Nick Karisimi mixed our audio. And a big thank you to NerdWallet's editors for all their help. And with that said, until next time, turn to the Nerds.