Finding the Best Interest Rates on Savings Accounts

Summary

WSJ Your Money Briefing

Episode: Finding the Best Interest Rates on Savings Accounts
Date: December 31, 2018
Host: J.R. Whalen
Guest: Emily Shalal, Senior Director of Customer Strategy & Innovation, Ally Bank

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Episode Overview

This episode focuses on how consumers can make smarter decisions about their savings by taking advantage of higher-interest online savings accounts, avoiding common pitfalls, and adopting easy best practices for stronger financial health in the new year. J.R. Whalen speaks with Emily Shalal of Ally Bank about strategies to maximize returns on savings and instill better budgeting disciplines for 2019.

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Key Discussion Points & Insights

The Overlooked Value of Savings Account Interest

• Most consumers are vigilant about everyday expenses but ignore their savings rates.

  • Emily highlights a Harris poll: "Three out of four consumers actually do care about things like their cable bill...they're willing to actually move cable providers to save, you know, $10 a month...A lot of people don't understand that they can get, you know, a pretty hefty raise on their savings just by looking around..." [03:06]

• Shocking Rate Disparities:

  • "On average, all U.S. savings accounts are earning 0.09%. If you look at...your kind of big four banks, it's even less than that...on average, online banks or digital-only institutions are paying 20 times the average...even at Ally today we're paying 2% on a savings account." [03:20]

Decoupling Savings & Checking Accounts

• Beware of Banking Habits:
  • J.R.: "People...make the mistake of opening up the savings account where they have their checking account." [03:57]
  • Emily: "People tend to view those as a sister relationship...for the bulk of your savings, you really should be at the highest rate provider, one that gives you both service and rate..." [04:09]

Pay Yourself First: Rethinking Budgeting

• Old Habits Die Hard:
  • Many people only save what’s left after spending, instead of planning savings up front.
  • Emily: "There's a whole paradigm shift...People tend to look at their budgets and say what's left over at the end of the month for savings. Really, we think it's how much is my income, how much should I be saving out of that income, and what should my expenses be from what's left?" [04:46]

Opening Online Accounts Is Easy

• User-Friendly Process:
  • Emily reassures listeners: "It takes less than five minutes to open a savings account here...our customer base...has been an older, less technology savvy customer base. And if they can do it, anyone can do it." [05:28]
  • Transferring funds between checking and online savings is seamless, with only minor delays for initial account linking.

Best Practices: Subscription Audits & Budget Discipline

• Audit Recurring Payments Regularly:

  • "In today's world, we live in a subscription society...even husbands and wives have their own accounts and don't realize...the other one is also paying...A lot of people get caught up in these free trial periods...never go back to stop paying that fee." [06:14]
  • Track and review all auto-pay services and subscriptions; eliminate unused or duplicated expenses.

• Snapshot Budgeting for Financial Fitness:

  • J.R.: "It's a good idea to take a snapshot of your monthly income and expenses and...put yourself on a budget." [07:02]
  • Emily: "We believe that there is a pretty strong correlation between fitness tracking and financial fitness tracking...If you understand what you're spending and write everything down, you can audit...and make changes going forward." [07:13]

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Notable Quotes & Memorable Moments

• On easy savings gains:

  • "You could get an automatic 2% raise on your money just by doing a quick search." — Emily Shalal [03:28]

• On separating accounts:

  • "For the bulk of your savings, you really should be at the highest rate provider." — Emily Shalal [04:18]

• On the ‘pay yourself first’ paradigm:

  • "It's probably the best and easiest way to start saving is to really shift that way of thinking." — Emily Shalal [04:56]

• On tech-savviness and online banking:

  • "Our customer base...has been an older, less technology savvy customer base. And if they can do it, anyone can do it." — Emily Shalal [05:33]

• On tracking spending vs. mental math:

  • "People do this mental math and they always underestimate how much they're spending on frivolous things." — Emily Shalal [07:47]

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Important Segment Timestamps

• Biggest missed savings opportunity: [03:06]
• Online account interest rate comparison: [03:20]
• Decoupling savings/checking accounts: [04:09]
• ‘Pay yourself first’ budgeting: [04:46]
• Opening a digital account explanation: [05:28]
• Why you should audit subscriptions: [06:14]
• Budgeting & financial fitness tracking: [07:13]
• Key closing advice: [07:59]

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Conclusion

Emily Shalal offers clear, practical advice: take a little time to shop for savings accounts (especially online), detach your savings from checking if it means a higher rate, and regularly audit both your recurring expenses and your budgeting process to maximize your financial well-being. The episode closes with a reminder that just a few simple shifts—in perspective and habit—can add up to significant financial gains.

Transcript

[Small Business Owner]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Advocate for Durbin Marshall Bill]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Advocate for Durbin Marshall Bill]

they need while increasing megastore profits. They deserve it, don't they?

[Small Business Owner]

Tell Congress. Stop the Durbin Marshall money grab for

[Emily Shalal]

corporate megastores paid for by the Electronic Payments Coalition.

[J.R. Whalen]

With your Money briefing. I'm J.R. whalen at the Wall Street Journal in New York. A smart way to invest and protect yourself from stock market volatility is an online savings account. In a moment, we'll have tips on how to maximize your savings in 2019. First, these money and market stories you should know Americans are carrying more consumer debt than ever before, but but so far don't seem to be having much trouble managing it. The Federal Reserve says that consumer debt, including credit cards, auto and student loans and personal loans, is on pace to top $4 trillion in 2019. That comes even as mortgage debt approaches levels last seen during the housing meltdown. Homeowners owed about $10.3 trillion on mortgages at the end of the third quarter. That's up 2.8% from a year earlier, and mortgage debt peaked at $10.7 trillion in early 2008. At the same time, there are few signs that consumers are under major strain. Losses on most consumer loans remain low, wages are growing, and the overall US economy is strong. Plus, unemployment is at a near 50 year low. And check out Wall Street Journal tax reporter Laura Saunders New Year's tax resolutions for 2019. Among them always check for errors on tax forms when they arrive, especially check items such as ID numbers and basic information. Another resolution Be vigilant about tax security. Remember, the IRS doesn't send out unsolicited emails or ask people for PIN numbers or passwords or similar information for credit card, bank or other accounts. And the IRS won't demand credit card or debit card numbers over the phone or threaten to have you arrested by local police and put in jail. See the full list of tax resolutions for 2019 at WSJ.com or or the WSJ app. The stock market jitters and gyrations in the fourth quarter add an extra level of uneasiness heading into the new year, and consumers can stay ahead of the game by being wise with savings and paying close attention to interest rates on their savings accounts. Emily Shalal is senior director of customer strategy and innovation for Ally bank and she joins us on the line. So, Emily, we do a lot of things to SA during the year like adjust our cable TV service and maybe even dial back on the fancy coffee. But a lot of people don't pay attention to interest rates and the value of those rates on their savings accounts.

[Emily Shalal]

We think. It's funny in a Harris poll that we did earlier this year showed that three out of four consumers, you know, actually do care about things like their cable bill and how much they're spending and they're willing to actually move cable providers to save, you know, $10 a month over the course of the period. And what we found is a lot of people don't understand that they can get, you know, a pretty hefty raise on their savings just by looking around and investigating, you know, what banks are providing and paying in the market. And so a quick Google search will show that, you know, on average all US savings accounts are earning 0.09%. And if you look at even the top players in market, so you're kind of big for banks, it's even less than that. And you know, on average online banks or digital only institutions are paying 20 times the average. So you know, even at Ally Today we're paying 2% on a savings account. So you could get an automatic 2% raise on your money just by doing a quick search.

[J.R. Whalen]

And I guess people oftentimes make the mistake of opening up the savings account where they have their checking account. And it's a good idea to know that there's much more to the savings world out there.

[Emily Shalal]

And you know, a lot of people assume that they need their savings account where their checking is. And it's just, you know, people tend to view those as a sister relationship. And what we found is you really should try to decouple those and you have a long term savings and you may need a short term savings and it's fine to have those accounts at the same institution, but for the bulk of your savings, you really should be at the highest rate provider, one that gives you both service and rate and gives you the most value for your money.

[J.R. Whalen]

And what's an attractive interest rate if you're not making good use of it? People should be focusing on paying themselves and putting aside funds to make regular payments and regular deposits if they have an account.

[Emily Shalal]

When it comes to paying yourself first, it's funny, there's a whole paradigm shift that really needs to happen in market. People tend to look at their budgets and say what's left over at the end of the month for savings. And really we think it's how much is my income, how much should I be saving out of that income and what should my expenses be from what's left? And we find that a lot of people don't do that. And so it's probably the best and easiest way to start saving is to really shift that way of thinking.

[J.R. Whalen]

And if people do open up an online account or a digital account, sometimes that can be a little intimidating. It's a fairly simple process of moving money from, let's say your checking account to your savings account if you have some extra funds left over that you want to push into savings to put away for a rainy day.

[Emily Shalal]

You know, it's funny because this is a question that we've gotten since we started ally bank in 2009 and it, it takes less than five minutes to open a savings account here. And one of our values has been our customer base. From the get go has been an older, less technology savvy customer base. And if they can do it, anyone can do it. It's a very simple, painless process. And you know, linking an existing checking account takes a matter of seconds for majority of people. You know, worst case, you may have to wait a couple of days, but after that couple of days it's seamless and it's easy breezy.

[J.R. Whalen]

Going forward, there are a few other best practices for people to be mindful of and that is I guess for one thing, to reassess the recurring and auto payments they have set up and to make sure they're actually using those services.

[Emily Shalal]

Absolutely. So in today's world, we live in a subscription society, you know, our Netflixes, our music subscriptions, everything. And we found just in our own research here that a lot of people, even husbands and wives, have their own accounts and don't realize that the other one is also paying. And so I think just doing a regular audit of what are those monthly subscription and recurring charges coming out of your account? One, are they a necessity? Are they just, you know, something that you may thought you need and now don't and to reevaluate those. And a lot of people get caught up in these free trial periods to where you put your credit card number in, you think you're getting 30 days free, you never use the service, but you never go back to stop paying that fee. So just doing a regular audit to understand what is coming out of your account is very helpful for most people.

[J.R. Whalen]

And when you're doing that audit just to make sure you're not really sending money out the window. It's a good idea to take a snapshot of your monthly income and expenses and see if you can add some discipline and put yourself on a budget.

[Emily Shalal]

For us, we believe that there is a pretty strong correlation between fitness tracking and financial fitness tracking. And it's just like when you start a fitness program. If you track the calories that you eat, if you track the steps that you take, you're a lot more likely to stick to that program. And it's the same thing here. If you, if you understand what you're spending and write everything down, you can audit, you know, what your actual spending habit is, to go back and reflect on that and make changes going forward. And we think there's a whole lot of power in just seeing something in writing versus what somebody may believe they are spending to what they're doing. If you can just understand the distinct differences, you're going to make a lot of change in a pretty quick time period because we do find that people do this mental math and they always underestimate how much they're spending on frivolous things.

[J.R. Whalen]

All right, very good advice from Ally Bank's Emily Shellal, joining us via Skype. Emily, thanks for being with us.

[Emily Shalal]

Thanks so much for having me.

[J.R. Whalen]

And that's your money briefing. I'm JR Whalen in New York for the Wall Street Journal.

[Small Business Owner]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Advocate for Durbin Marshall Bill]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See, banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Advocate for Durbin Marshall Bill]

they need while increasing megastore profits. They deserve it, don't they?

[Small Business Owner]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by

[Emily Shalal]

the Electronic Payments Coalition.