I Have a Savings Account That Pays Just 0.01% APY. Here's Why I'm Keeping It

Thanks to multiple successive rate hikes by the Federal Reserve last year and this year, it is a great time to have cash in the bank. A higher federal funds rate doesn't directly mean higher rates on savings accounts, money market accounts, and certificates of deposit. However, consumer rates are impacted by it, and this goes in both directions -- it's more expensive to have variable-rate debt (such as that on credit cards), and it's more lucrative to have a deposit account.

Consequently, we've found ourselves in a veritable golden age of high-yield savings accounts -- while the average annual percentage yield (APY) on a savings account lingers at 0.46%, per the FDIC's data, you can find accounts offered by online-only banks that pay 10 times that, or even more. Under these circumstances, why would a personal finance writer who follows the economy pretty closely hang onto an account paying a measly 0.01% APY? Well, let me tell you.

I also have a high-yield savings account

Lest you wonder why I would leave all my savings in an account with such a low yield, I should clarify -- it's not my only savings account. The bulk of my savings is in a high-yield savings account with an online-only bank, and that's to take advantage of those higher rates. Online banks don't have the overhead costs associated with a traditional brick-and-mortar bank, so they can offer higher APYs on deposit accounts. In exchange for those rates (and often fewer fees), you're giving up easy access to your money in many cases, as well as the ability to deposit cash in a straightforward manner.

If I want to deposit cash in my online savings account, I'd have to deposit it with the brick-and-mortar bank I also use, wait for it to clear, then transfer it over. Getting access to cash is slightly easier, but it also involves a workaround. I opened a checking account linked to my online savings so I could have an ATM/debit card. My online bank has a network of ATMs, and thankfully, there is one in a drugstore in my neighborhood, so if I need cash from my savings, I can transfer it to the checking and take it out via that ATM.

All of this rigamarole is worth it, though -- I've earned over $1,000 in free money on my savings this year, thanks to that high APY. That low-yield traditional savings account is still worth having, though.

Overdraft protection is important

I spent a lot of years living paycheck to paycheck, and often worrying about overdrafting my checking account -- overdraft fees aren't cheap. So the brick-and-mortar savings account's main purpose these days is just that. I keep the minimum amount deposited to avoid incurring a monthly maintenance fee (I was lax about this last year and lost $50 as a result), and it's nice to have that little bit of extra cash that could get me out of a checking account overdraft jam.

It's also not a bad idea to diversify your savings

Another reason I've kept my old savings account is because I like the idea of having money available with different financial institutions. My old brick-and-mortar bank has a lot of branches, and if I ever couldn't access cash from my online savings account, having a little in this account could also be helpful. In fact, I'm considering opening accounts with a third bank in 2024; I'm strongly leaning toward getting a mortgage loan from a local bank in my area, and if I'm also a banking customer, I should be able to pay my mortgage online, rather than having to mail a check.

Yes, we are in something of a high-yield savings account renaissance, but this doesn't necessarily mean you should rush to close your old low-yield savings account, especially if it offers banking benefits that you rely on. Consider keeping it, and moving some of your savings to an account where you'll earn more interest -- it'll be the best of both worlds.