You can stop interest from accruing by closing the account, moving money to a non-interest-bearing account, or requesting that your bank stop crediting interest — though the third option is rare and most banks will not do it
Banks pay interest on savings accounts because federal rules require them to pass along a portion of what they earn. You cannot prevent interest from being calculated and credited; that is how savings accounts work. What you can do is move your money somewhere that does not earn interest, close the account entirely, or in uncommon cases, ask your bank to stop the practice — though most will decline.
The reason you might want to stop interest is usually tax-related. Interest counts as taxable income on your federal return, and if you are receiving means-tested benefits — Supplemental Security Income (SSI), Medicaid, certain housing programs — interest can push your asset total over the limit and disqualify you. If that is your situation, the solutions are different from someone who simply does not want the interest.
Key Takeaways
- Interest on savings accounts is taxable income and counts toward asset limits for SSI, Medicaid, and some housing programs.
- Moving money to a non-interest-bearing checking account or money market account with zero interest is the most straightforward way to stop interest from accruing.
- Closing the savings account entirely stops interest but does not erase the interest already credited — you will owe tax on it for the year it was earned.
- Some banks offer savings accounts with zero interest rates, though these are uncommon; ask your bank directly whether such an account exists.
- If you are on SSI or Medicaid, contact your local benefits office before moving money, because the timing and structure of the move can affect your case.
Move money to a non-interest-bearing account
The simplest way to stop interest is to transfer your savings to an account that does not pay interest. Most banks offer non-interest-bearing checking accounts, which function like savings accounts but credit no interest. Some also offer money market accounts with a zero interest rate, though you will need to ask — these are not advertised heavily because banks make no money on them.
Call your bank and ask whether they offer a checking account with no interest. If they do, you can move the money in one transaction. The account will work exactly like your savings account — you can deposit and withdraw — but no interest will accrue. You will still receive a 1099-INT form at tax time if there was any interest earned before the transfer, but going forward, there will be nothing to report.
If your bank does not offer a zero-interest account, ask whether they have a savings account with the lowest possible interest rate. Some banks offer tiered rates based on balance, and the lowest tier may be close to zero. This is not a perfect solution, but it reduces the amount of taxable income you generate.
Close the savings account
Closing the account stops future interest from accruing, but it does not erase interest that has already been credited. Any interest earned through the date you close the account will still be reported to the IRS on a 1099-INT form, and you will owe tax on it.
Before you close, check your account statement to see how much interest has been credited so far this year. That amount will appear on your tax return. If you close in January, you may have earned very little; if you close in November, you will owe tax on nearly a full year of interest.
To close, contact your bank by phone, in person, or through their online banking portal. Ask them to close the savings account and confirm that any remaining balance will be transferred to a checking account or mailed to you as a check. Some banks charge a fee to close an account early, though this is uncommon for savings accounts — ask before you proceed.
Request that your bank stop crediting interest
A small number of banks will stop crediting interest to an account if you request it in writing, but most will refuse. The reason is that federal banking rules require banks to credit interest on savings accounts; stopping it creates a compliance headache for the bank and offers them no benefit.
If you want to try, send a written request to your bank's customer service department. Include your account number, state that you request the bank stop crediting interest to the account, and explain why if you think it will help — for example, "I receive SSI and interest pushes me over the asset limit." Keep a copy of the letter and any response.
Expect a denial. If the bank agrees, ask them to confirm in writing that interest will no longer be credited, and ask whether any interest already earned will still be reported on a 1099-INT. Do not assume the request has been granted unless you receive written confirmation.
If you receive SSI or Medicaid, talk to your benefits office first
If you are on Supplemental Security Income or Medicaid and interest is pushing you over the asset limit, do not move or close the account without contacting your local benefits office first. The way you move the money and when you move it can affect whether it counts as income or a transfer.
SSI has a resource limit of $2,000 for an individual and $3,000 for a couple (these amounts do not change year to year). Interest earned counts as income in the month it is credited, which can reduce your SSI payment that month. If your total resources exceed the limit, you lose SSI entirely until the balance drops below the threshold.
Call your local SSI office and describe your situation. Ask whether moving the money to a non-interest-bearing account will be treated as a transfer (which does not count as income) or whether there are other options. The office may have guidance specific to your state or situation. Do the same if you receive Medicaid through a program with asset limits.
Understand what happens to interest already earned
Interest that has already been credited to your account is yours, and you cannot undo it. Your bank will report it to the IRS on a 1099-INT form, and you will owe federal income tax on it (and state income tax in most states). This is true even if you close the account or move the money before the year ends.
The 1099-INT is mailed in January and covers all interest earned from January 1 through December 31 of the previous year. If you close the account in June, you will still receive a 1099-INT in January covering the interest earned from January through June. You will report that interest on your tax return for that year.
If you are concerned about the tax bill, talk to a tax professional or your local tax assistance center. Some people in low-income situations may not owe tax on the interest, depending on their total income and filing status.
Compare your options
| Option | Stops Future Interest | Erases Past Interest | Effort Required | Best For |
|---|---|---|---|---|
| Move to non-interest-bearing checking account | Yes | No | One phone call and transfer | People who want to keep the money accessible but stop earning interest |
| Close the account | Yes | No | One phone call | People who no longer need a savings account |
| Request bank stop crediting interest | Unlikely to work | No | Written request, likely denial | Last resort if other options are not available |
| Keep the account and accept interest | No | No | None | People whose interest is minimal or who do not have asset limits |
Frequently Asked Questions
Will closing my savings account hurt my credit score?
No. Closing a savings account does not affect your credit score because savings accounts do not report to credit bureaus. Only credit accounts — credit cards, loans, lines of credit — appear on your credit report. You can close a savings account without any impact on your creditworthiness.
If I move money to a checking account, will I still get a 1099-INT?
You will receive a 1099-INT for the year in which you made the transfer, covering all interest earned from January 1 through the date you moved the money. Going forward, if the checking account earns no interest, you will receive no 1099-INT. Some checking accounts do earn interest, so confirm with your bank that the account you are moving to has zero interest.
Can I put my money in a savings account under someone else's name to avoid interest?
No. If you are on SSI or Medicaid, money in an account with your name on it counts toward your resource limit, regardless of whose name else is on the account. Putting money in someone else's account to hide it from benefits programs is considered fraud and can result in overpayment demands and criminal charges. Talk to your benefits office about legitimate options instead.
What if my bank will not let me close the account because I have a negative balance?
You will need to deposit money to bring the balance to zero or positive before closing. Some banks allow you to close with a small negative balance and will deduct it from a linked checking account. Call your bank and ask what their policy is.
Does interest stop accruing immediately when I close the account?
Yes. Interest stops accruing on the day the account is closed. Any interest earned up to that day will be credited to your account and reported on your tax return. Interest earned after the account is closed will not be credited.