Some
savings accounts help your money grow. Others can barely keep up with inflation.
If you want to find the most profitable place to house your hard-earned cash, you’ve already taken a strong first step by doing a bit of digging. We’re here to help with your homework by exploring which savings accounts will earn you the least money — so you can opt for one that earns you more.
The different types of savings accounts
Before diving into the least lucrative ways to save, let’s look at how different types of savings accounts compare when it comes to
making your money grow:
Traditional savings account
The savings accounts offered by most brick-and-mortar banks are easy to open but often have low annual percentage yields (APYs). They prioritize security over growth, making them accessible but may not ideal for maximizing interest earnings.
High-yield savings account
Most
high-yield savings accounts (HYSAs) are offered by online banks or credit unions. They have higher APYs than most traditional savings accounts, which means your money could grow faster. But some have minimum balance requirements, so a HYSA might not be an option if you’re starting small.
Money market account
Money market accounts (MMAs) combine the features of savings and checking accounts. They often offer good interest rates, but may have a higher minimum balance requirement than you can swing. Some MMAs also limit the number of transactions you can make in a month.
Certificate of deposit
A certificate of deposit (CD) is a type of high-interest savings account that locks your money for a fixed term in exchange for a higher APY. That means taking money out before the term is up — usually anywhere from three months to five years — leaves you stuck paying penalties.
Fixed annuity
Like CDs, fixed annuities are long-term savings products with a higher rate of return than most other savings accounts. You’ll usually earn a little more interest with an annuity, but the term lengths tend to be higher than with CDs — sometimes 10 years or more.
While a fixed annuity isn’t a good choice if you need flexibility, going this route can pay off if you’re saving for retirement or other long-term financial goals.
The savings accounts with the smallest bang for your buck
Here are some savings accounts that will leave you with minimal returns:
A traditional savings account with a brick-and-mortar bank
Lots of banks with physical branches offer APYs of 0.10% or less, which is extremely low. These banks usually focus on accessible services instead of competitive rates. If long-term savings growth is your goal, a traditional savings account typically isn’t the way to go.
Basic savings accounts with maintenance fees
Using a savings account that charges monthly maintenance fees could cancel out any interest you earn, especially if your balance is low. Say you earned $3 in interest this month, but the bank charged you $5 in fees. In a situation like that, you’re basically paying the bank to hold onto your money.
Low-balance savings accounts
We mentioned minimum balance requirements, and that’s something you need to watch out for. If your balance on a low-balance account falls below the threshold set by the bank, you might earn close to zero in interest. In some cases, you could even face penalties.
Savings accounts with restrictive terms or withdrawal limits
Some accounts penalize you for going over the transaction limit or withdrawing funds early. Read the fine print carefully to see if there’s a limit to what you can do without affecting your earnings.
Passbook savings accounts
With passbook savings accounts, a bank teller records every transaction — deposits, withdrawals, and interest earned — in a physical booklet called a “passbook.”
While this method is great for someone who likes tangible records and in-person service, passbook account interest rates typically range from 0.01% to 0.05%, making them a poor choice if you’re trying to grow your savings. And since you have to visit a branch to perform transactions, accessing the money in your savings account can be tough.
Why do people choose low-interest savings accounts?
When you compare the different types of savings, it’s easy to assume that something like a HYSA or CD is the obvious choice. But that’s not the case for everyone. Let’s explore some of the reasons people choose low-interest savings accounts over options with higher interest rates:
Convenience
Traditional banks often make opening and
managing savings accounts simple, with in-person assistance and user-friendly mobile apps. That might not be an issue if you’re tech-savvy, but for some people, convenience outweighs the benefits of higher returns.
Trust in traditional banks
There’s comfort in knowing that the local institution handling your savings account has spent decades proving that it’s a safe and reliable place to leave your money.
Accessibility
Banks that require a minimum balance, limit the number of monthly transactions you can make, or require you to leave your money untouched for long stretches aren’t always a realistic option for people who need quick access to their funds.
A lack of financial knowledge
Some people choose to open their first savings and checking accounts at the bank their family uses and often remain customers for many years. When you're not aware of options like HYSAs, you might not realize there's something better available.
The disadvantages of using a low-interest savings account
Selecting the wrong savings account can sometimes lead to:
Low interest rates. The primary disadvantage of a
low-interest savings account is obvious: a minimal return on investment. With rates often hovering near 0.01%, you’ll find it next to impossible to grow your money in a meaningful way.
Inflation risk. Savings accounts with low APYs struggle to keep pace with inflation, reducing your money’s purchasing power over time.
Limited growth. These accounts lack the compounding potential of high-yield savings accounts or investment options, stalling your progress toward financial goals.
Opportunity costs. By sticking with a low-interest savings account, reaching your financial goals is much harder. You miss out on the higher returns available through better savings options or investments.
How to choose the right savings account: 5 tips
Selecting a higher-interest savings account today could mean the difference between struggling long term or meeting your financial goals. These tips can help:
1. Compare interest rates
Look for competitive interest rates. A higher rate means your money will grow faster, especially with compound interest. Since online banks have lower overhead costs, it’s often easier for them to provide a better interest rate.
2. Check for FDIC insurance
Always confirm that your savings account is insured by the Federal Deposit Insurance Corporation (FDIC). When a financial institution is FDIC-insured, it means that even if the bank fails, deposits are protected up to $250,000 per depositor, per bank.
3. Watch for hidden fees
Some savings accounts come with maintenance fees, low-balance penalties, or withdrawal restrictions. These costs can erode your savings, so choose an account that keeps
unnecessary fees to a minimum.
4. Look for accessibility options that work for you
Depending on your financial goals and needs, you’ll want to choose a savings account with reasonable withdrawal limits or even unlimited access to funds. A CD could be a great option for long-term goals, but you can keep a chunk of your money in a more accessible account to make sure you can act quickly
if an emergency happens.
5. Let your financial goals guide you
Think about your financial goals. If you’re building an emergency fund, your funds need to be liquid so you can withdraw them quickly without a penalty. If long-term growth is what you’re after, look for high-interest savings accounts with automatic transfers and other features that make it easy to grow your wealth.
Take control of your savings with EarnIn
If you have a deposit ready to go, taking advantage of the higher interest rates offered by high-yield savings accounts, money market accounts, or certificates of deposit could be a smart move. But if you’re just getting started — or if you want to build a rainy day fund you can tap into guilt-free — EarnIn is here to help.
Ready to start saving smarter?
Download EarnIn to take your financial future into your own hands.
