Find the real yield winner
The higher displayed APY wins only when its extra interest exceeds unavoidable cost and conditions.
| Situation | What to do next |
|---|---|
| Small balance, fixed fee | The fee can consume much of the interest. |
| Fee waived by idle cash | Include interest forgone on the waiver balance. |
| No-fee lower APY | Compare net annual dollars before rejecting it. |
The fee break-even formula
Annual fee divided by the APY advantage gives an approximate break-even balance. If an account costs $120 per year and offers 0.50 percentage point more APY, the rough balance needed to offset the fee is $24,000. Taxes and rate changes can move that threshold.
Annualize every fee that is likely to occur and estimate interest on the expected average balance. Comparing those dollars shows whether a higher APY genuinely pays for the added account cost.
Include linked-account costs
A fee waiver may require a checking balance or direct deposit. Count the interest that linked cash could earn elsewhere and any workflow friction. The account with the highest displayed APY is not automatically the account with the highest household return.
A fee waiver can have an economic cost. If it requires idle checking cash or recurring activity, include the interest or convenience given up to satisfy the condition.
Build a reliable cost comparison
Use a one-page comparison
For each account, list expected average balance, APY tier, annual interest, annual fees and access constraints. Net earnings are expected interest minus unavoidable fees. Recalculate if the institution changes its rate or waiver rules.
Find the balance where extra interest equals the annual fee, then test balances above and below it. Because savings rates can change, treat the break-even as a review point rather than a permanent answer.
Keep these three outcomes separate
Compare net annual dollars, not APY in isolation.
A fixed monthly fee has a larger effect on smaller balances.
Waiver requirements have a cost if they force idle cash into a low-yield account.
Primary sources
- CFPB: Bank account feesOfficial reference ↗
- FDIC: Shopping for accountsOfficial reference ↗
Answers to check before you act
How do I estimate a fee break-even balance?
Divide annual fees by the decimal APY advantage for a rough threshold, then adjust for taxes and rate changes.
Do occasional fees matter?
Include any fee you reasonably expect to pay. A rare fee should not be treated like a guaranteed monthly charge.