When a listener wrote in to Suze Orman's "Women & Money" podcast asking whether to keep savings or pay down debt, the answer came fast — and with a dose of financial reality.
The listener, Gloria, believed she was earning 3.75% interest monthly on her $88,000 savings account. Orman was quick to call that out as a misunderstanding — and used it as a teachable moment.
No, You’re Not Earning 3.75% Monthly
During the podcast, Orman responded bluntly: "It is impossible that you are making 3.75% monthly on your $88,000. That would mean that you are being paid 45% a year in interest."
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What Gloria likely meant, Orman explained, was that her account offered a 3.75% annual percentage yield, or APY. That's a key term when it comes to understanding how much your money is actually earning in a savings account.
APY reflects how much interest you'll earn over the course of a full year, factoring in compounding. It's not paid all at once — instead, the interest compounds monthly, quarterly, or even daily, depending on the account. The more often it compounds, the faster your money grows — but 3.75% monthly is not realistic in today's banking world.
Let's Talk About That $43K Debt
Along with the savings account, Gloria mentioned a home equity line of credit she still owed $43,000 on and that she was paying $500 a month in charges.
Orman's response was clear: "You should absolutely take $43,000 out of that savings account and do what with it? Pay off your home equity line of credit."
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Why? Because even if Gloria's account is earning 3.75% APY, it's unlikely that it's offsetting what she's losing in interest and fees on the HELOC. A $500 monthly charge on a $43,000 balance is the equivalent of paying around 14% annually — far more than she's earning by letting that money sit in savings.
Orman emphasized that keeping debt at a high interest rate while earning a lower return on savings is a losing strategy. The money could be working much harder by reducing what she owes.
Understanding Your APY — And Why It Matters
Many consumers confuse interest rates with APY, or assume "monthly" means they're getting a better deal. But APY is what truly reflects an account's annual earning power. It’s required by law to be disclosed by banks and credit unions, so if you're unsure what your account is earning, don't guess — check your statement or ask your bank directly.
The national average APY for a savings account is currently around 0.38%, according to the Federal Deposit Insurance Corp. However, top high-yield savings accounts and CDs may offer closer to 4.40% APY, depending on the provider.
Still, that's a far cry from the cost of carrying high-interest debt.
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The Bottom Line
Orman's advice is rooted in a simple principle: If the interest you’re paying on debt is significantly higher than what you’re earning on savings, pay off the debt. Gloria’s case is a textbook example.
It's easy to get excited about high-yield savings, especially when they offer a low-risk way to earn more on your cash. But as Orman pointed out, knowing the difference between monthly interest and APY can keep your financial expectations — and strategy — grounded in reality.
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