3 Signs You've Got the Wrong Savings Account

You've likely heard for years about how important it is to have a savings account. Everyone needs some cash in reserve for an emergency expense, an upcoming vacation, or even a major purchase, like a house. And opening a new savings account couldn't be easier these days -- you can even do it fully online.

But not all accounts are created equal, and some just aren't worth your time or money. Here's how to tell your savings account isn't the best one out there -- and what to do about it.

1. You're paying fees for the account

In 2024, there is absolutely no reason whatsoever to pay a monthly maintenance fee on your savings account. There are so many banks and credit unions out there, and whether you realize it or not, they are all competing for your precious business. Some of the best have done away with maintenance fees on their accounts -- this is more likely to be the case for online-only banks, as they have lower overhead costs than traditional banks.

That said, some bank accounts with monthly fees have ways to get said fee waived. But you need to read all the details about a prospective account to be sure you understand -- you might need to make a certain number of deposits every month, or maintain a minimum balance.

I was burned by a maintenance fee in 2022 on my big-bank savings account, despite how easy it ended up being for me to avoid said fee. This just goes to show you that even people who write about money for a living can fall prey to bank fees -- so they're best avoided whenever possible.

2. The APY is nonexistent

Did you know you can earn upward of 5% APY (annual percentage yield) on your saved cash right now? Thanks to a much higher federal funds rate than we've seen in years, you can make real money (actual passive income) on a savings account balance.

So if your savings account is earning a pathetically low APY (like 0.01%, which is the actual APY you'll see on some big bank savings accounts), consider switching. As of this writing, the average APY on a savings account is 0.46%, according to the FDIC -- which means some bigger numbers are bringing up that average.

Savings account APYs are variable, and if the Federal Reserve cuts the federal funds rate this year, your APY will fall (the two are linked, though not directly). So there's no reason not to take advantage of a high rate now and switch accounts.

3. Taking money out is a huge pain

While the act of putting money into a savings account is easily one of the best things you can do for your personal finances, it stands to reason that eventually you'll need that money for something. And when you do, getting it out of the account ideally shouldn't involve jumping through major hoops.

Unfortunately, cash access is one potential pitfall of an online-only bank, so if you're considering a savings account with one, be sure to read the fine print to see if you'll be able to use an ATM either for free or with fee reimbursement.

Another issue is that many savings accounts don't come with an ATM or debit card, period. And this makes sense -- after all, ideally you shouldn't be spending out of a savings account super often. My high-yield savings account didn't come with an ATM card, but there was a fairly easy workaround for me -- I opened a linked checking account. Now I can easily transfer cash to it from savings and then use the debit card that came with it to make purchases. I can also visit an ATM in the bank's network that's in my neighborhood.

If you need to take a larger amount out of your online savings account than you're allowed to withdraw at an ATM, you'll likely need to transfer the money to an account with a traditional brick-and-mortar bank, probably wait a few days, and then visit that bank. It's not ideal, and if you think this would seriously cramp your lifestyle, think twice about opening an account with an online-only bank -- especially if you don't also have a traditional bank account that can serve as your pipeline to your money. That said, with a little planning and time, this hurdle doesn't need to be a deal breaker for an online savings account.

You have options for savings accounts

Along with video phone calls, app-based food delivery services, and electric cars, having so many choices for bank accounts is definitely a perk of living in 2024. If your current savings account charges you fees, pays you little or no interest, and makes it hard to access your cash, find a new one. Check out our list of the best high-yield savings accounts to get started with your search.