By Don Gould

Whenever someone asks me whether it’s worth it to make a small extra effort to earn some additional money on their savings, I often apply what I call the “sidewalk” test. I ask, if that amount were sitting on the sidewalk right in front of you, would you bend over to pick it up? The answer is usually yes.[1]

Today there’s as much as $75 billion per year left sitting on American sidewalks, thanks to a combination of inertia and a lack of awareness that it’s there. In a moment I’ll discuss how you can pick up your share, but first let’s look at how all that cash got there in the first place.

In the throes of the 2008 financial crisis that accompanied the Great Recession, the Federal Reserve slashed short-term interest rates to near zero in an attempt to stimulate the economy. The ensuing economic recovery was a slow one by historical standards, causing the Fed to leave its benchmark rate near zero for nearly eight years.

The five largest US banks ranked by domestic deposits[2] (the “Big 5”) together hold close to $5 trillion in deposits. Understandably, the rates they paid depositors on savings and checking accounts followed market rates down to zero back in 2008 and 2009. Over time, “0.01%” started to look like a permanent fixture on bank statements.

With the recovery seemingly on firmer ground mid-decade, the Fed began raising interest rates in early 2016, a process that continued into the end of 2018 when the fed funds rate exceeded 2.25%. Not a flashy number, to be sure, but much better than zero from the saver’s perspective. In 2019, concerns over economic slowing led the Fed to drop the rate back to about 1.50%, where it now stands.

Curiously, the Big 5 did not follow the Fed in raising the rates they pay their customers. To take one example, in January 2020, Chase is paying 0.01% (or less) on close to $900 billion in deposits! If those depositors simply moved their cash into a US Treasury money market fund (an investment with comparable liquidity and safety), at today’s rates they could pick up as much as $13.5 billion in extra interest income annually.[3] Looking at the Big 5 altogether, the foregone interest could be as much as $75 billion per year.

To put this in more relatable terms, someone who regularly leaves a $25,000 excess balance in their bank could be leaving over $400 per year on the sidewalk. How to avoid this? There are several ways; here are a few.

  • Money Market Funds—These funds have been around since the 1970s. They function like bank accounts (daily liquidity, checkwriting, etc.) and also offer tax-free versions, which are often a better deal for investors in higher tax brackets. All major brokerage and mutual fund firms offer these. Fidelity Investments sweeps customer cash into a US Treasury money market fund paying well over 1%. Over $3.6 trillion are currently in money market funds.
  • Treasury Bills – These are direct debt obligations of the US government carrying maturities ranging from 1 to 12 months. T-bills can be purchased through any brokerage firm (usually without charge) or directly at the US Treasury’s website ( Currently there is about $2.5 trillion in outstanding Treasury bills.
  • Online Banks – Many online banks have sprouted up in recent years. Ally and Synchrony are two of the larger players in this space. Customers can link their online bank account to their bricks-and-mortar (Big 5) bank account and move money between the two with a few mouse clicks.

In view of this, why do Americans continue to leave billions of dollars on the sidewalk every year? Part of it is inertia—it takes some effort to move the money from the local bank to a higher paying vehicle. Some is simply a lack of awareness; many savers have been lulled into thinking that 0% is normal, not realizing that rates have been higher for the past three years. And, of course, part of it is the comfort that some savers have when parking their money with a familiar bank having a branch nearby. Still, $75 billion is an awful lot to pay for whatever benefits these represent.

[1] For reasons that can only be described as superstitious, I still pick up pennies. I’m not advising it.

[2] Bank of America, Chase, Wells Fargo, Citibank, and U.S. Bank

[3] In addition, Treasury interest is exempt from California income tax, while bank interest is not.