Ditch the Savings Account? Why Your Cash Deserves a Better Job

Key Points:

• Traditional savings accounts often offer very low yields, while other cash options may provide significantly more interest.
  

• There are cash options that can offer competitive yields while still providing stability, liquidity, and appropriate protections.
  

• Moving your cash to a better-yielding option can be straightforward and may help you earn more without sacrificing accessibility.

I haven't owned a savings account in well over a decade.

That may sound strange coming from a financial advisor. After all, savings accounts are supposed to be one of the simplest and safest places to keep your money.

But here's the thing: not all cash is created equal, and not all places to hold cash are equally attractive.

If you have a significant amount of money sitting in a traditional bank savings account, there's a good chance your cash isn't earning much at all.

As of January 20, 2026, the FDIC reported the national average savings account rate at just 0.39%. And some of the largest traditional banks continue to pay as little as 0.01% on savings deposits. At 0.01%, $100,000 in savings earns just $10 in interest over an entire year.

That's a pretty poor return for a six-figure cash balance.

The good news is that you don't have to accept it.

Where Your Cash Lives Matters

I'm not suggesting that you shouldn't have cash. Quite the opposite. Maintaining an appropriate cash reserve is an important part of a sound financial plan.

The question is where you keep that cash and why.

You may need cash for everyday spending, emergencies, taxes, a future home purchase or simply for peace of mind. But if you're keeping substantially more than you need for those purposes in a traditional savings account, it's worth asking whether the account is still serving you well.

I've previously written about six different options for short-term cash reserves in Maximizing Yield and Minimizing Risk: Smart Cash Savings Options.

One option many of our clients use is the Altruist High-Yield Cash Account, which currently offers a 3.20% APY and up to $3 million in FDIC insurance through its participating bank network, with an application that can be completed in minutes.

"But Isn't It Hard to Move Money?"

It used to be more of a hassle.

Today, electronic transfers between financial institutions are easier than ever. Depending on the institutions and type of transfer, money can often move within a business day or two.

That means there's less reason to tolerate an extremely low savings rate simply because your money is already sitting there.

Will Closing My Savings Account Hurt My Credit?

Generally, no.

Closing a savings account by itself typically doesn't affect your credit score. Checking and savings account histories generally aren't included in the credit histories maintained by the major credit bureaus.

There are, however, a few practical things to take care of before you close the account.

How to Close Your Savings Account

1. Redirect incoming deposits.

Review the account's transaction history from the past year. Look for recurring deposits or transfers that may still be going into the account, and redirect them to your checking account or wherever the money should go instead.

2. Move the remaining balance.

Transfer the cash to your checking account or wherever you've decided it should be held.

3. Formally close the account.

Contact your bank through its secure online messaging system, by phone or at a branch and request that the account be closed.

One thing to check first: If your savings account is linked to your checking account for overdraft protection, closing it could eliminate that backup. Make sure you understand how your bank handles overdrafts and have an alternative in place if needed.

So, Should You Ditch Your Savings Account?

Maybe.

You might ask yourself: What purpose is my savings account serving? And can another account conveniently offer the same benefits with a better yield?

If you've accumulated a significant cash balance in a traditional savings account simply because it's where you've always kept your money, it's worth asking whether that convenience is really worth giving up potentially thousands of dollars in interest each year.

Wherever you keep your cash, it should be doing its job—working to make you more money. And if your savings account isn't doing that, it may be time to ditch it.