4 signs your savings account isn't good enough

Tanza Loudenback

Feb 28, 2020, 00:13 IST

4 signs your savings account isn't good enough

Jose Luis Pelaez Inc/DigitalVision/Getty

The best savings accounts won't cost you a dime.

You don't have to settle for the savings account you've always had. There are too many great options out there.
If your savings account earns an average interest rate, charges fees, requires a certain balance, or simply isn't convenient to access, it may be time to switch.
See Business Insider's picks for the best high-yield savings accounts »

Your choice of bank account may be as important as the goal you're saving for.

The same savings account won't work for everyone, but in this day and age, there are some standards we should all adhere to. Above all, your savings account should help boost your savings rather than squander it.

Here are four signs your current savings account isn't good enough.

1. It earns an average interest rate

Interest rates may be down overall compared to last year, but dozens of high-yield savings accounts still earn well above the average 0.09%. You'll find some of the best rates at online banks and brokerages, including Ally, Capital One 360, CIT Bank, Wealthfront, Betterment, and Marcus by Goldman Sachs.

You may not think about earning potential when you consider where to park your savings, but it could make a noticeable difference in your balance. Most often, interest is compounded daily and deposited into your account monthly. With a 1.70% APY and a $5,000 balance, you could see about $85 added to your account over the course of a year - and even more if you make additional contributions.

However, interest rates aren't set in stone. The Federal Reserve Board meets several times a year to determine whether rates need adjusting, which ultimately affects how much you earn in your savings account. Even then, the best high-yield savings accounts still earn up to 20 times more than your average savings account.

2. It has too many fees

If you get charged fees regularly from your bank, you already know the frustration of watching them eat into your savings.

Don't settle for an account that makes you pay to store your money there - these are often called "service" or "maintenance" fees - unless the fees are waivable under conditions you won't have an issue meeting. Also, if your bank charges additional fees for transfers, withdrawals, or checks and you use these features frequently, it may be time to switch to a fee-free account.

3. It has a high balance requirement

This goes hand-in-hand with the last point: If your bank charges fees when you fall below a certain balance, it might be time to leave.

A $500 minimum balance requirement, for example, may sound easy to maintain, but you're saving money you'll probably need to spend one day, whether unexpectedly or as planned, like for a down payment on a house. You should be able to withdraw your money freely without fear of falling below a seemingly arbitrary threshold.

4. It's inconvenient

Everyone has a different idea of convenience, whether it's being able to manage your account from your phone, send and receive money quickly, make multiple transfers per month, or get cash from an ATM or bank branch.

You shouldn't have to jump through hoops, or pay a fee, to complete simple tasks.

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