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# How much interest can I earn on a \$1 million savings account?

December 14, 2011

Q: What is the average interest rate on a \$1 million savings account? What would the annual interest be?

A: Your question raises an interesting point about the nature of averages. There are times when an average gives you a good indication of conditions, but there are other times when averages can be deceptive. It really depends on how much variation there is from the average. For example, a planet where daytime temperatures rise to 140 degrees and nighttime temperatures fall to 0 degrees would have an average temperature of 70 degrees. The average makes it sound comfortable, but the reality is much more inhospitable because of the amount of variation.

So, when answering your question, it is worth touching on both the average interest rates for savings accounts, as well as exploring what some of the variations are.

According to the FDIC, as of early December the average rate on U.S. savings accounts was just 0.11 percent. At the same time, MoneyRates.com was listing a number of savings accounts with rates in the 1 percent range - roughly nine times the national average. In dollar terms, on a \$1 million savings account, the national average of 0.11 percent would earn just \$1,100 a year in interest. In contrast, a 1 percent rate would earn \$10,000.

In short, savings accounts are one example where it may not be a good idea to judge things by the average. If you shop carefully for above-average savings accounts, you should earn a good deal more interest. You might well wonder whether an account as large as \$1 million might earn you some extra interest. Normally, this would be the case, but today's conditions are different. The FDIC rate survey shows no interest premium for "jumbo" savings accounts--those in excess of \$100,000. This is for the same reason that deposit rates generally are low.

A weak economy has left banks with few ways of making money through loans or investments, so they are not particularly interested in attracting deposits right now. Indeed, some banks actually view deposits to be a liability under these circumstances, because a large deposit base waters down their rate of return.

Again, the above describes conditions in general, but you might well find exceptions. When you shop around, ask specifically what the bank would be willing to do in exchange for a large deposit. If not a premium interest rate, perhaps the bank will offer some other perks that would be of value to you. However, you may be better off spreading your money around to a few different banks, since \$1 million is well in excess of the FDIC deposit insurance limit of \$250,000.

Got a financial question about saving, investing, or banking? MoneyRates.com invites you to submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.