High interest savings accounts

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A reader is disgusted at the painfully low rates his bank is offering.

Question: My bank is a big national one, and I won’t call them out by name. But man, does their savings account rates suck. I’m talking less 1 percent interest! I Googled around for higher rates, but they were mostly the same. I finally saved a couple grand in my new job and don’t want to blow it. I plan to put one grand toward my credit cards and another in the bank. But it doesn’t seem worth it. Any thoughts?

— Jason in Atlanta

Howard Dvorkin CPA answers…

Howard Dvorkin on how to get out of debt fast My first thought is: Forget the savings account. You say elsewhere in your email that you’re carrying just under $5,000 on three credit cards. All of them are charging you around 13 percent interest. The math seems simple: Earn 1 percent in a bank or save 13 percent by paying down those cards.

It gets less simple from there.

Saving for a rainy day

You don’t mention if you have an emergency fund. The concept is simple: You need enough savings to pay your bills for a certain length of time, just in case you lose your job, get sick, or face an unavoidable major expense (like a home or auto repair).

How much you should keep in your emergency fund is a matter of some heated debate among financial experts. U.S. News says 3-6 months, while Dave Ramsey suggests a flat $1,000 until you’re out of debt. Other experts fall somewhere in between.

I see the wisdom in each argument, but here’s mine: Even $500 is better than nothing. So don’t get hung up on amounts, just get into the habit of saving.

Other options

Let’s assume, Jason, that you put $1,000 of your savings toward your highest-rate credit card. Let’s also assume you want to preserve that other $1,000 as an emergency fund, but as you said, you want to earn more than a measly 1 percent.

You have options. Money market accounts offer slightly higher rates and are FDIC-insured, but they have some restrictions, such as high minimum balances. You could also attempt a CD ladder, as explained by my friends at Bankrate, but this limits your access to the money to every six months.

However, my recommendation is to simply not worry about interest rates on $1,000. At 1 percent, you’ll earn $10. Even if you earn 5 percent, that’s only 40 more dollars. Focus instead of keeping that $1,000 for a rainy day and whittling down those credit card balances. If you need help with that, call one of our certified credit counselors for advice at 1-888-503-5563.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

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Meet the Author

Howard Dvorkin, CPA

Howard Dvorkin, CPA

CPA and Chairman

Dvorkin is the author of Credit Hell and Power Up and Chairman of

banking, credit card debt, interest rates, save money

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