Why is there so much variability on interest rate accounts
"In answering your question as it's written: I don't think you're really ""missing"" something. Different banks offer different rates. Online banks, or eBanking solutions, such as CapitalOne, Ally, Barclays, etc., typically offer higher interest rates on basic savings accounts.  There are differences between Money Market accounts and Standard Savings accounts, but primarily it comes down to how you can access your cash. This may vary based on bank, but Ally has a decent blurb about it: Regular savings accounts are easy to open and, when you choose an   online bank like Ally Bank, you tend to get interest rates that are   more competitive than brick-and-mortar counterparts, according to   Bankrate.com. Additionally, as a member of the FDIC, Ally Bank gives   you peace of mind knowing that the money in your Ally Bank Online   Savings Account is insured to the maximum allowed by the law.  Money market accounts are easy to open, too. And again, online banks may   offer better rates than traditional banks. Generally, you have a bit   more flexibility of access with a money market account than you do   with a savings account. You can access funds in your Ally Bank Money   Market Account through electronic fund transfers, checks, debit cards   and ATM withdrawals. With savings accounts, your access is limited to   electronic funds transfers or telephone withdrawals (and in-person   withdrawals at traditional banks). Both types of accounts are subject   to federal transaction limits. Here's a bit more information about a Money Market Account and why the rate might be a little bit higher (from thesimpledollar.com): A money market deposit account is a bit different. The restrictions on   what a bank can do with that money are somewhat looser – they can   often invest that money in things such as treasury notes, certificates   of deposit, municipal bonds, and so on in addition to the tight   restrictions of a normal savings accounts. In other words, the bank   can take your money and invest it in other investments that are very   safe. Now outside of your question, if you have $100K that you want to earn interest on, I'd suggest looking at options with higher rates of return rather than a basic savings account which will top out around 1% or so. What you do with that money is dependent on how quickly you need access to it, and there are a lot of Q&A's on this site that cover suggestions." Generally, if you watch for the detail in the fine print, and stay away from non-FDIC insured investments, there is little difference, so yes, pick the highest you can get. The offered interest rate is influenced by what the banks are trying to accomplish, and how their current and desired customer base thinks. Some banks have customer bases with very conservative behavior, which will stick with them because they trust them no matter what, so a low interest rate is good enough. The disadvantage for the bank is that such customers prefer brick-and-mortar contact, which is expensive for the bank. Or maybe the bank has already more cash than they need, and has no good way to invest it. Other banks might need more cash flow to be able to get stronger in the mortgage market, and their way of getting that is to offer higher interest rates, so new customers come and invest new money (which the bank in turn can then mortgage out). They also may offer higher rates for online handling only. Overall, there are many different ways to make money as a bank, and they diversify into different niches with other focuses, and that comes with offering quite different interest rates. Pay attention to nickel-and-dime charges (atm fees, low balance fees, limit on atm transactions per month, charge for human teller transaction, charge for paper statements or tax records).  Consider that a financial company will spend on the order of $100-500 to sign up a good customer.  Are you getting this in a cash bonus, competitive high interest rate, reasonable other gift, or advertising directed at your eyeballs?  A variation in rates less than 1% easily fits into a marketing cost and there doesn't have to be any other magic to it. I spent some time comparing banks' interest rates until I realized that it didn't actually matter (to me). The only money I keep in checking and savings accounts is money that I'm going to spend shortly or is part of an emergency fund, and in both those cases convenience of liquidity is far more important than small differences in interest (I want to be able to go to a nearby branch, even if traveling, and pull out large sums of money). The majority of our money goes into investment accounts, where it's earning much more than even the best savings account. Most of your 100k would be much better served in a stock/bonds mix. Are standard taxable investment accounts one of those things you can't open? What about if you opened one in your home country?
If your savings account linked to the mortgage account is an 100% offset account then you don't need to put extra funds into the mortgage account apart from the minimum payments which is done automatically. Any funds you have in an 100% offset acount reduces the amount of interest you have to pay on the mortgage.  So if your mortgage is $100,000 and you have $10,000 in the offset account then you only pay interest on $90,000 within the mortgage. Also the funds in the offset account are at call any time as it is simply a savings account. You can have all your pay go into it and have direct debits set up for all your bills. This way you will benefit from maximising the amounts in your offset account and reducing the amount of interest you pay on your mortgage. If your current linked savings account is not an 100% offset account ask your bank if you can change it over to one that is. If they don't have offset accounts for that particular mortgage account ask them if they have a different mortgage account with offset accounts. If they can't help you then shop arround for a bank or lender that does. I am currently with ANZ and they have a product with 100% offset account and about 0.7% below the standard variable rate, and there are plenty more similar products out there. "This answer is to supplement the answers about what CD laddering is and what its benefits are. I'm going to talk about its risks. CD ladders are subject to risk. They are not subject to very much credit risk and investment risk (they're federally insured! Barring the dissolution of the United States government as we know it, you will get all your money back!). However, they are subject to inflation risk and a little bit of interest rate risk. A CD is basically a promise for a certain amount of money after a certain amount of time. Inflation risk happens when there's inflation and the money that you've been promised isn't worth as much anymore, because everything's gotten more expensive. Interest rate risk happens when you buy a CD in a very low interest rate environment (like, oh, the year 2010) and rates subsequently rise. You might have been somewhat better off waiting for rates to rise before buying the CD. (Also, if you were to try and re-sell it, you would get an inferior price - enough to make up for the interest rate difference.) Note that interest rates tend to rise if there is a significant amount of inflation, so these two risks go together. Interest rate risk and inflation risk are higher for longer-term CDs (at least right now) because there's more opportunity for inflation and interest rates to rise. 2010 has been marked by the extraordinarily low interest rate environment which prevails, and the Federal Reserve has announced that it is trying to bring about a higher rate of inflation (you may have heard something about a ""second round of quantitative easing""). A quick look at interest rates show that 2-5 year CDs yield about 1.50% these days. You could, alternatively, get a savings account that yields 1.4%, preserves your liquidity, and will raise the rate it pays you on savings in the event that inflation and interest rates rise (or, if they don't raise it, you can move the account, unlike a CD). In summary, as of right now (October 2010), fixed-income investments like CDs don't pay you very much and have elevated levels of risk, especially for long-term investment. This is one of the worst times possible to invest in a CD ladder." The Reserve Bank of Australia's role in monetary policy has three objectives: currency stability (primarily keeping inflation within a narrow band); full employment; and improved prosperity and welfare. Its primary weapon in this, is its setting of a target for the cash rate - the overnight money-market interest rate charged between financial intermediaries. Short-term market rates closely track this cash rate target, because the Reserve Bank controls the supply of funds that banks use to settle the transactions that use the overnight money-market interest rates. Australian capital markets are liquid, with many deposits / loans being on variable-rate or short-term rates; hence changes to the cash rate quickly propagate throughout the market. NB that the changes propagate, but not all interest rates are at the same level: the absolute values don't propagate. Different interest rates will reflect different loan periods, and different (perceptions of) risks. Banks are profit-maximisers. So they won't loan at a lower rate to one borrower, if they can loan the same money to someone else at a higher interest rate (and the same or lower risk). And they won't lend money out, unless they can cover the cost of their own borrowing, plus overheads, plus a reward for the risk of the loan. Hence the home loan rates of all banks will tend to move in the same direction, by broadly the same amount, at the same time. "You have a few correlated questions here:  Yes you can. There are only a few investment strategies that require a minimum contribution and those aren't ones that would get a blanket recommendation anyway. Investing in bonds or stocks is perfectly possible with limited funds. You're never too young to start. The power of interest means that the more time you give your money to grow, the larger your eventual gains will be (provided your investment is beating inflation). If your financial situation allows it, it makes sense to invest money you don't need immediately, which brings us to: This is the one you have to look at most. You're young but have a nice chunk of cash in a savings account. That money won't grow much and you could be losing purchasing power to inflation but on the other hand that money also isn't at risk. While there are dozens of investment options1 the two main ones to look at are: bonds: these are fixed income, which means they're fairly safe, but the downside is that you need to lock up your money for a long time to get a better interest rate than a savings account index funds that track the market: these are basically another form of stock where each share represents fractions of shares of other companies that are tracked on an index such as the S&P 500 or Nasdaq. These are much riskier and more volatile, which is why you should look at this as a long-term investment as well because given enough time these are expected to trend upwards. Look into index funds further to understand why. But this isn't so much about what you should invest in, but more about the fact that an investment, almost by definition, means putting money away for a long period of time. So the real question remains: how much can you afford to put away? For that you need to look at your individual situation and your plans for the future. Do you need that money to pay for expenses in the coming years? Do you want to save it up for college? Do you want to invest and leave it untouched to inspire you to keep saving? Do you want to save for retirement? (I'm not sure if you can start saving via IRAs and the like at your age but it's worth looking into.) Or do you want to spend it on a dream holiday or a car? There are arguments to be made for every one of those.  Most people will tell you to keep such a ""low"" sum in a savings account as an emergency fund but that also depends on whether you have a safety net (i.e. parents) and how reliable they are. Most people will also tell you that your long-term money should be in the stock market in the form of a balanced portfolio of index funds. But I won't tell you what to do since you need to look at your own options and decide for yourself what makes sense for you. You're off to a great start if you're thinking about this at your age and I'd encourage you to take that interest further and look into educating yourself on the investments options and funds that are available to you and decide on a financial plan. Involving your parents in that is sensible, not in the least because your post-high school plans will be the most important variable in said plan. To recap my first point and answer your main question, if you've decided that you want to invest and you've established a specific budget, the size of that investment budget should not factor into what you invest it in. 1 - For the record: penny stocks are not an investment. They're an expensive form of gambling." Another thing to factor in are deals provided by banks. In general, banks care about new customers more than their existing customers. Hence they explicitly restrict the best deals on credit cards, savings accounts, etc, to new customers only. (Of course, there are occasionally good deals for existing customers, and some banks choose not to discriminate.) If you have many different bank accounts, you are making yourself unavailable for switching bonuses and introductory rates. The Fed is trying to keep the money supply growing at a rate just slightly faster than the increase in the total production in the economy. If this year we produced, say, 3% more goods and services than last year, than they try to make the money supply grow by maybe 4% or 5%. That way there should be a small rate of inflation. They are trying to prevent high inflation rates on one hand or deflation on the other. When the interest rate on T-bills is low, banks will borrow more money. As the Fed creates this money out of thin air when banks buy a T-bill, this adds money to the economy. When the interest rate on T-bills is high, banks will borrow little or nothing. As they'll be repaying older T-bills, this will result in less growth in the money supply or even contraction. So the Feds change the rate when they see that economic growth is accelerating or decelerating, or that the inflation rate is getting too high or too low. Because giving someone a loan and paying them to take it isn't a loan anymore.  I'll grant you, some of the treasury bill auctions did slip below 0% -- people paid in slightly more than what the bill would pay out. In as much as this was done by actual investors (and not afore-mentioned helicopter Ben Bernanke keeping the printing presses running hot all night), it was major accounts fearful of the euro disintegrating and banks crashing, and so on, and needing a safe spot to stick their cash for a couple months.  Where the Fed is concerned, that interest rate he's referring to is lending they do to banks. So, how much would you take if you ran a bank and the Fed offered to pay you to take their money? A billion? A trillion? As much as you could cram in your vaults, shove in your pockets, and stuff down your favorite teller's blouse? Yea, me too. I read Q#4 as  Will $250 in one account earn more interest than $250 in five accounts? in which case Excel says no, assuming a constant interest rate for all accounts. I dunno if the same holds true for banks.