What's the Point of Having a Savings Account if Interest Rates Decline?

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page. APY = Annual Percentage Yield. APYs are subject to change at any time without notice.

KEY POINTS

  • By keeping money in a savings account, you can earn interest.
  • Some consumers may feel it's unnecessary to have a savings account when interest rates decline.
  • However, any interest earned is a win and can boost your bank account balance.

Keeping extra cash in your savings account can be a win -- even when interest rates are low.

With today's high living costs, many of us are looking for more ways to stretch our dollars as much as possible. You can earn interest by keeping extra cash in a savings account. But some may wonder if a savings account is worthwhile when interest rates are low. Find out why it's good to have a savings account, even if interest rates decline in the future.

Lower interest rates can still be a win for your wallet

While savings account interest rates are more competitive right now, there are times when rates are much lower. You may wonder if it makes sense to continue using a savings account when interest rates decline. Some people may feel that earning potential is minimal and not worthwhile. But a savings account with a lower interest rate is still a win.

Think of it this way: some interest is better than no interest. If you keep all your money in a checking account that doesn't earn interest, you'll earn $0 on it. But if you have a savings account with a lower interest rate, you're still earning interest, which is like earning free money for keeping your cash in the bank. Even if your earnings are minimal, you're still earning something.

Here's why savings account interest rates can change

Why do savings account interest rates change over time? The Federal Reserve interest rate, the rate at which banks and credit unions lend to each other, can impact consumer interest rates for products like credit cards and savings accounts. When the Federal Reserve interest rate increases, banks tend to increase consumer savings account interest rates. When the rate lowers, consumers may also see their savings account interest rates decline.

Our Picks for the Best High-Yield Savings Accounts of 2024

APY
4.25%
Rate info Circle with letter I in it. 4.25% annual percentage yield as of July 16, 2024
Min. to earn
$1
APY
4.50%
Min. to earn
$0.01
APY
5.10%
Min. to earn
$0

Don't miss out on the opportunity to earn interest

If you don't yet have a savings account, consider opening one. If you're keeping your money in a checking account, you're missing out on the chance to earn interest. Most checking accounts don't pay interest, so it does you no favor to stash all your cash there.

You may want to open a high-yield savings account. They're similar to regular savings accounts but usually have higher interest rates and are often offered by online banks. You can boost your savings by choosing an account with a better interest rate. Check out our best high-yield savings accounts list to learn more.

Switching banks may help you earn more

If you're unhappy with your bank account's current interest rate, or if it decreases in the future, you can shop around to see other banks' savings accounts. You may be able to secure a better interest rate by opening an account with a different bank. Don't forget to explore other options if you're not satisfied. The good news is it's relatively easy to switch banks.

A savings account is a valuable tool

Regardless of current interest rates, you shouldn't keep all your money in a checking account. Don't miss out on the chance to earn free money by keeping extra cash in an interest-earning bank account. Even if you only earn a few dollars each year on your money, it can make a difference and help you improve your personal finance situation.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.

Two of our top online savings account picks:

Rates as of Jul 16, 2024 Ratings Methodology
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American Express® High Yield Savings Citizens Access® Savings
Member FDIC. Member FDIC.
Rating image, 4.00 out of 5 stars.
4.00/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
Rating image, 4.00 out of 5 stars.
4.00/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor

APY: 4.25%

Rate info Circle with letter I in it. 4.25% annual percentage yield as of July 16, 2024

APY: 4.50%

Min. to earn APY: $1

Min. to earn APY: $0.01

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