PayPal Offers 4.30% APY on Savings. Should I Transfer My Savings From My Bank?

The Fed has raised interest rates at a historic pace since March 2022.

As a result, the best high-yield savings accounts now pay more than 4% in annual interest. Meanwhile, some of the biggest banks are paying less than 0.2% APY, counting on inertia to keep customers in place.

Savvy consumers are comparison shopping their savings accounts. But several high-profile banks failed this year, spawning a new round of fear and mistrust among consumers.

A variety of fintech companies, including digital payment companies, investment companies and robo-advisors, are offering their own brand of interest-bearing accounts. Some even offer much higher effective FDIC limits by spreading deposits across multiple banks.

Should you forego banks and put your savings into, say, PayPal instead? That’s what a listener of the Clark Howard Podcast recently asked.

Should I Stash My Savings in PayPal Instead of a High-Yield Savings Account at a Bank?

Should I move my savings from my bank to PayPal?

That’s what a listener asked on the June 14 podcast episode.

Asked Jeff in Alaska: “Should I transfer money out of my bank account into my PayPal account? PayPal currently offers 4.15% APY [now 4.30%]. Is this too risky? What about FDIC insurance and PayPal?”

Earlier in the podcast, Clark warned that storing large sums of money inside your PayPal account is a bad idea. No one expects PayPal to suddenly go out of business. But there have been plenty of unforeseen “black swan” events with large financial institutions this year. And there are no consumer protections for your regular PayPal balance.

However, if you’re in the official PayPal savings equivalent, your money is protected.

“So long as it’s in the PayPal account that has access to FDIC insurance, you’re fine. And you’ve got the 4.30% interest rate,” Clark says.

Comparison Shop: You May Do Better Than PayPal’s Savings Option

Clark made another point in his answer to Jeff: PayPal’s savings product is competitive. But you can do even better.

There are eight savings accounts on our list of the best that feature higher interest rates than the one PayPal offers.

If you’re stuck earning 0.15% APY at a monster mega bank, and you’d be motivated to switch your savings to PayPal’s 4.30% APY account, by all means, go for it. Especially if you’ll fail to take action otherwise.

The PayPal savings product uses Synchrony Bank, which I’ve frequently included in our list of the best high-yield savings accounts.

But it’s a good idea to compare PayPal savings to the other best options that I’ve researched for Team Clark. Synchrony Bank currently isn’t part of the list.

Final Thoughts

Kudos to you if you’re comparison shopping your savings account. That’s especially true if you’re still earning a paltry rate from a monster mega bank.

For just $10,000 in savings, as an example, the difference between 0.15% and 4.5% APY is $435.

There’s nothing wrong with PayPal’s product. You’ll get a high interest rate and you’ll even get FDIC protection. Just make sure that you’re not leaving your balance in your standard-issue PayPal account if you care about FDIC insurance.