How to know when it’s time to close your savings account and open a new one
Is your current savings account just not working for you? You may not be satisfied with the savings account rates, account conditions, or minimum balance requirements of your existing savings account. If so, maybe it’s time to quit … 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 purchase a savings account online. Confused about where to start buying a new savings account? Visit Credible to explore multiple high yield savings options, all in one place.
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When to close your savings account
The best time to close a savings account is different for everyone. Here are four ways to know when it’s time to close a savings account and open a new one:
- 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 so, check to see if your current bank offers a high yield account with higher savings rates, or bring your money and run to another financial institution.
- You want to switch from a variable rate account to a fixed rate account. Many financial institutions offer savings accounts with variable rate or fixed rate savings accounts. When you opened your account, you may have been entitled to a variable rate, which goes up and down with the market. When savings account rates are low, you may decide that a fixed rate account will give you better stability and value for money.
- Your bank is too small to provide what you need. To eliminate the costs and overhead of offering multiple savings accounts, some rural or smaller banks cannot provide all of the options you want or need. This may be the only reason you need to change banks.
- You want the convenience of working with a bank that offers online or mobile banking. It can be much cheaper for financial institutions to have a website or mobile banking presence than to maintain physical locations and employ staff. These savings often allow online banking providers to offer benefits such as higher interest rates. They may charge no fees and you can access your account 24/7 through a mobile app.
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How to open a new savings account online
It is relatively quick and easy to open a savings account online. Follow these steps to find the savings account that’s right for you.
- Research all your options. Many high yield online savings accounts examine your credit score to determine savings rates. Some online banks require you to maintain minimum balances to avoid fees or offer a hook rate that expires shortly after you make your first deposit.
- Find out the minimum deposit requirements. If you’re changing your savings account to earn higher interest or from a traditional bank to an online bank, you’ll want to consider whether the new account requires a minimum opening deposit. You may not have the money to open an account.
- Look for fees or hidden charges. Before opening your new online savings account, check if the online bank charges withdrawal fees or monthly maintenance fees. The monthly fees add up and can negate the money you would save by earning higher interest.
Opening a high yield online savings account is easy. Credible’s high yield savings accounts online marketplace allows you to compare the interest rate and minimum required balance between multiple banks, all in one place.
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Can I close a savings account without penalty?
Most banks don’t charge any fees for closing a savings account. However, you’ll want to make sure you cancel any deposits or automatic payments before you close the account. To close your current savings account for free, follow these steps.
- Any recurring transaction linked to your current savings account must be canceled. This can include automatic deposits or withdrawals. To avoid insufficient funds or overdraft fees, make sure all recent transactions have also cleared before closing your account.
- If you are banking at a local branch, make an appointment 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 send a letter to start the process, but it will take a lot longer.
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Does opening a new savings account affect your credit score?
If you’ve improved your credit score, changing banks won’t affect all of your efforts. This is because neither savings accounts nor checking accounts are listed on credit reports because they do not involve borrowing money, such as a personal loan or credit card. Since your credit isn’t affected, switching accounts to get a better interest rate on the savings account can be a great financial measure.
Do you want to know where you are? Credible offers credit scores and credit monitoring services through Experian, so you can make an informed financial decision.
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