In this question I am using Wells Fargo as an example.


You will see that the interest rate for a checking account is the same as for a savings account for amounts under 250,000$ (most people). Disregarding the fact that both interest rates are paltry and significantly less than inflation, what would be the point of having a savings account instead of a checking account given that savings accounts have additional limitations, like 6 withdrawals per month, and fines if you go over?

If you got fined even once it would offset any gains you would have made through out the year, (the interest rate is 0.01%). Am I misunderstanding something, or is it clearly a bad idea to put your money into Savings in this kind of scenario?

  • 3
    Yep, crappy banks offer crappy products. The lone benefit would be that it creates separation between accounts, ie nobody can clear out your savings via check fraud (this is just a short-term issue with insurance, but can be a problem to have no funds available for a stretch of time while things get resolved). – Hart CO Jul 30 '18 at 20:37
  • With my credit union, at least, it's because you have to have a savings account (and keep a nominal minimum balance of $5 in it) in order to have the checking account. – jamesqf Jul 31 '18 at 16:49

There really isn't a specific point to it, and I don't think you're misunderstanding anything. Most people that still maintain savings accounts with such a low interest rate do so because they just don't realize there are other options out there, they only trust the bank they have always used, or they don't think it's worth the hassle to switch banks. Keep in mind that most Americans don't have very much in savings anyways, with the median being around $5,000. Many people have less than that.

Savings accounts with major banks, like Wells Fargo, weren't always so low. Prior to the bubble bursting, savings accounts and CDs had rates around 5 or 6% for amounts in the average savings range. Eventually (hopefully), interest rates will continue to increase, and those accounts like what you're seeing at Wells Fargo will slowly start to increase their rates. I'd guess that banks like WF have a good number of account holders who opened accounts during those higher rate years, and have just left those accounts in place. If you want an account with a bank that has a physical presence in your area, your options are very limited and many of them only offer rates like what you're seeing. Banks that are offering the higher interest rates (1.5% - 2%) on sub-$20K savings accounts are pretty much online-only.

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    I think you are right in that many people opened these accounts when savings was worthwhile, and now leave them in place either through neglect, or haven't realized that it is no longer worthwhile, or some similar reason. Thank you for your excellent answer. – Tyler . Jul 31 '18 at 13:28

To segregate money you want to save from money you need to have easy access to. For example, if all your money is in your checking account, woo hoo let's buy the fanciest gaming rig and gaming chair and 65" TV, etc, etc, etc. But if you've just got enough for the current month's expenses, and the rest of your money is in a separate account not accessible by your debit card, then... you aren't as likely to go hog wild.

All that being said... as @BobbyScon mentioned, there are online savings accounts that pay noticeable interest rates. Ally, Capital One 360 and Synchrony are three examples.

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