Loyalty Doesn’t Always Pay

Sometimes it’s better to shop around to save money

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Donna Fuscaldo,

AARP

En español

Published April 12, 2023

It seems counterintuitive. The longer you’re with a company, the better deal you’ll get, right? Perhaps that’s true for a favorite retailer or restaurant, but by and large, it pays to shop around for everything else — financial products, debt instruments, insurance and a whole lot more.

“It’s always a good idea not to put any expenses on autopilot,” says Emily Irwin, senior director of advice and planning for Wells Fargo Wealth & Investment Management. “You may be overpaying and not realize it, or you might be able to get a better deal and better service.”

There isn’t a hard-and-fast rule as to when you should comparison shop for your everyday expenses, but Christopher Manske, a certified financial planner and president of Manske Wealth Management, says to time it around your birthday, when you’re less inclined to forget. Even if it’s not your birthday, there’s nothing stopping you from switching providers. With that in mind, here’s a look at five areas where loyalty doesn’t always pay.

1. Bank accounts and CDs

Interest rates were at record lows for years, but things are changing. The Federal Reserve has raised rates nine times since March 2022, and it may not be done. For borrowers, that’s bad news, but for savers, it’s music to their ears. Finally they can earn a return on their money, whether they are socking it away in a savings account or in CDs. How much depends on whether they stick to the same-old or try to get a better rate. As of April, the national average is 0.32 percent at banks, 0.82 percent at credit unions and 5.02 percent at top-yielding, nationally available online banks, according to Bankrate. A one-year CD on average will yield 1.64 percent at banks, 3.01 percent at credit unions and 5.15 percent at top-yielding, nationally available online banks.

“Interest rates have gone up at the fastest pace in 40 years, and some banks have kept pace while many others have not,” says Greg McBride, chief financial analyst at Bankrate. “Don’t let your money sit at a bank that is still paying next to nothing when the top-yielding, federally insured, nationally available savings accounts, money market deposit accounts and CDs are above 5 percent and still climbing.”

2. Credit cards

You may have had the same credit card for years, but if you don’t like the interest rate you’re paying or the service leaves you frustrated, it may be time to seek a better deal elsewhere. That’s particularly true of variable debt on a credit card. Your rate will increase as the Fed raises rates. In November 2022, the average credit card rate hovered around 20 percent. In March of this year, it was about 23.65 percent.

The credit card industry is competitive, with issuers clamoring for your business. Credit card companies are eager to lure you in with low introductory rates, generous rewards points and other perks to land you as a customer. You can use that to your advantage to get a better deal from your provider. Reach out first to see if it can do better, or at the very least match competing offers, before you shop around. “There’s a lot of flexibility,” Manske says. “Companies will work with a person if they are given an opportunity. It’s easier for these institutions to make a tweak and keep you than lose you and replace you.”

3. Auto and homeowners insurance

Studies have shown you can save money by switching carriers, but most Americans stick with what they have come renewal time. That’s even in the face of rising rates.

“Auto and homeowners insurance are driven by what the claims have been, what your deductible is, and what limits and coverage you want,” Irwin says. “It seems to go up every year because of inflation or some other force of nature.” Unlike health insurance, which you may only be able to change annually, you can get new auto and homeowners insurance coverage at any time. There’s nothing stopping you from switching.

When shopping around for home and auto coverage, Irwin says, consider whether anything has changed. Do you have more money in savings, and as a result, can you afford a higher deductible? Or can you lower your coverage because the car or property has aged? Changing both can reduce your expense beyond just seeking a cheaper rate for the same policy. Bundling your insurance may be another money saver. You won’t know unless you shop around.

4. Prescription drugs

Loyalty tends to be strong when it comes to where older adults fill their prescriptions. But reexamining how you get your meds can reduce your outlays. There are online and specialty pharmacies and delivery services that might be cheaper than national chains or local pharmacies. There are membership clubs and discount cards, including the one offered by AARP, that can save you money on prescriptions. If you’ve been on the same medicine for years, it may be worth talking to your doctor about generic alternatives. “Medicine is really a commodity,” Manske says. “A blood thinner is a blood thinner. There are probably 30 generic brands that are going to be suitable.”

5. Subscriptions

The idea of switching your cable provider, streaming services, mobile phone service or gym membership may conjure up feelings of dread. Who wants to go through the process of returning a cable box or signing up with a new mobile provider? But if it saves you money, it’s worthwhile. Competition in all three areas is fierce, which means it’s easy to get a deal from a rival provider. Just like with your credit card and savings account, reach out to your vendor first to see if your loyalty really matters. If not, don’t hesitate to get a better deal or service somewhere else. “You want to make sure that if you are extending your loyalty, you are receiving loyalty back,” Irwin says. “The best way to do that is by making sure you are getting the best investment for your dollars.”

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Donna Fuscaldo is a contributing writer and editor focusing on personal finance and health. She has spent over two decades writing and covering news for several national publications including The Wall Street Journal, Forbes, Investopedia and HerMoney.