Dear Dr. Don,
I’m looking at a particular bank and am wondering if it’s a good place to have a savings account because of the interest rate. I have about $20,000 that I want to place there for the sole purpose of earning the interest rate they offer. I have more savings in a Roth individual retirement account, but the interest rates aren’t as high. Is this savings account a risky place to put my money? I would be very upset if I lost my money. I would not need access to the cash for at least a year.

Thanks,
— Lisa Savings

Dear Lisa,
I tell consumers they should feel free to chase yield and not worry about a financial institution’s safety rating as long as their deposits are insured by the Federal Deposit Insurance Corp. or the National Credit Union Share Insurance Fund, the separate insurance fund for credit unions. Your $20,000 is well below the FDIC deposit insurance limits.

For the very cautious, I suggest they check Bankrate’s Safe & Sound ratings on banks. If two banks offer the same yield, the tiebreaker is the bank’s safety rating.

Depositors have to strike a balance among safety, convenience, liquidity and yield when they decide to put money on deposit with a financial institution. While the interest rate is a priority to you, it can also be good to know the bank’s safety rating as well.

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