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How to tell it’s time to close your savings account and open a new one

By Kathryn Pomroy
Updated  May 19, 2021 3:00pm CDT
Personal Finance
Sponsored by Credible, which is majority owned by our parent, Fox Corporation. Credible is solely responsible for its services.
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Thinking about closing your savings account? Here are a few good reasons to close your current account and open a new one. (iStock)

Is your current savings account just not working for you? Maybe you’re not happy with the savings account rates, account terms or minimum balance requirements on your existing savings account. If so, it may be time to call it quits...and open a new (and better) savings account.

You have options. You can stay put with your current bank or credit union, switch to another bank or shop for a savings account online. Not sure where to start shopping for a new savings account? Visit Credible to explore multiple high-yield savings options, all in one place.

5 MYTHS ABOUT HIGH-YIELD SAVINGS ACCOUNTS

When you should close your savings account

The best time to close a savings account is different for everyone. Here are four ways to tell it's time to close a savings account and open a new one:

  1. You can earn a higher savings account interest rate elsewhere. Right now, when interest rates are low, you may be earning very little on your savings. If this is the case, check to see if your current bank offers a high-yield account with higher savings rates, or take your money and run to another financial institution.
  2. You want to switch from a variable-rate interest account to a fixed-rate interest account. Many financial institutions offer savings accounts with either variable-rate or fixed-rate savings accounts. When you opened your account, you may have qualified for a variable rate, which rises and falls with the market. When savings account rates are low, you may decide that a fixed-rate account will offer you better stability and more bang for your buck.
  3. Your bank is too small to offer what you need. To eliminate the costs and overhead that comes with offering multiple savings accounts, some rural or smaller banks can’t provide all the options you want or need. This may be the only reason you need to switch to another bank.
  4. You want the convenience of working with a bank that offers online or mobile banking. It can be much less expensive for financial institutions to have a website or mobile banking presence than maintain physical locations and employ staff. These savings often allow online banking providers to offer perks like higher interest rates. They may charge no fees, and you can access your account 24/7 via a mobile app.

WHY IT'S A GOOD IDEA TO PUT SOME MONEY IN A HIGH-YIELD SAVINGS ACCOUNT

How to open a new savings account online

It’s relatively fast and easy to open an online savings account. Take these steps to find a savings account that works best for you.

  • Research all your options. Many high-yield online savings accounts look at your credit score when determining savings rates. Some online banks require you to maintain minimum balances to avoid fees or offer a teaser rate that expires soon after making your first deposit.
  • Find out the minimum deposit requirements. If you’re switching savings accounts to earn higher interest or from a traditional bank to an online bank, you’ll want to inquire if the new account requires a minimum opening deposit. You may not have the money you need to open an account.
  • Look for fees or hidden charges. Before opening your new online savings account, find out if the online bank charges withdrawal fees or monthly maintenance fees. Monthly fees add up and can cancel out any money you’d save by earning higher interest.

Opening a high-yield online savings account is simple. Credible's online high-yield savings account marketplace lets you compare the interest rate and minimum balance requirement across multiple banks, all in one place.

HERE'S HOW MUCH A HIGH YIELD SAVINGS ACCOUNT PAYS

Can I close a savings account without penalty?

Most banks charge no fees to close a savings account. However, you’ll want to make sure to cancel any automatic deposits or payments before closing the account. To close your current savings account for free, take these steps.

  • Any recurring transactions linked to your current savings account must be canceled. This might include any automatic deposits or withdrawals. To avoid insufficient fund or overdraft fees, make sure any recent transactions have also cleared before closing your account.
  • If you bank at a local branch, visit or call to speak with a personal banker who can help you close your savings account or switch to a high-interest savings account. You can also mail a letter to initiate the process, but this will take much longer.

4 FACTORS TO CONSIDER WHEN CHOOSING A HIGH-YIELD SAVINGS ACCOUNT

Does opening a new savings account affect your credit score?

If you’ve improved your credit score, switching banks won’t affect all your hard work. That’s because neither savings nor checking accounts are listed on credit reports, as they don’t involve borrowing money, like a personal loan or credit card. Since your credit isn’t impacted, switching accounts for a better savings account interest rate may be an excellent financial move.

Want to know where you stand? Credible offers credit scores and credit monitoring services through Experian, so you can make an informed financial decision.

TRYING TO SAVE $25,000 IN A YEAR? CONSIDER THESE STRATEGIES

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.

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