Greg McBride, CFA, is Senior Vice President, Chief Financial Analyst, for Bankrate.com. He leads a team responsible for researching financial products, providing analysis, and…
Best available rates across different account types for Sunday, October 17, 2021
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Savings account research methodology
Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. Bankrate’s editorial and research teams analyzed more than 100 widely available financial institutions, made up of the biggest banks and credit unions, as well as a number of popular online banks.
To find the best savings accounts, our editorial team analyzed annual percentage yield (APY), minimum balance requirements, monthly fees and requirements to avoid monthly fees. All of the accounts listed below are insured by the Federal Deposit Insurance Corp. (FDIC) at banks or by the National Credit Union Share Insurance Fund (NCUSIF) at National Credit Union Administration (NCUA) credit unions.
APYs (interest rates), account minimums and whether you’d have to pay a monthly service fee are some of the most important things to look at before choosing a savings account. A savings account that charges fees likely isn’t the right account for you. But many online banks offer high-yield savings accounts that don’t require you maintain a minimum balance. Savings accounts that offer a competitive yield and don’t require a minimum balance or charge a maintenance fee are a good fit for any type of saver.
Finally, the bank needs to be an FDIC-insured bank or at an NCUA credit union that’s insured by the NCUSIF so your money is safe. Always follow FDIC and NCUA limits and guidelines.
Bankrate’s editorial team chose the criteria and developed a scoring system to determine the best savings accounts. Bankrate’s editorial team used its knowledge of financial services and banking experience to choose the best ways to rate savings accounts.
Here are the best online savings account interest rates
If you are looking for a low-risk way to save money over a long period of time, high yield savings accounts may be a good option for you. Banks that offer online savings accounts tend to have higher rates for a better return on your deposited funds, as long as you can follow any minimum balance and monthly fee rules. Keep in mind that savings rates are subject to change over time.
Comenity Direct - APY: 0.55%, min. opening balance: $100, Member FDIC
Vio Bank - APY: 0.51%, min. opening balance: $100, Member FDIC
Ally Bank - APY: 0.50%, min. opening balance: $0, Member FDIC
Citibank - APY: 0.50%, min. opening balance: $0, Member FDIC
Barclays Bank - APY: 0.40%, min. opening balance: $0, Member FDIC
Capital One - APY: 0.40%, min. opening balance: $0, Member FDIC
Discover Bank - APY: 0.40%, min. opening balance: $0, Member FDIC
Citizens Access - APY: 0.40%, min. opening balance: $5,000, Member FDIC
PurePoint Financial - APY: 0.40%, min. opening balance: $10,000, Member FDIC
CIT Bank - APY: up to 0.40%, min. opening balance: $100, Member FDIC
Show me:
The following accounts can be found at most banks and credit unions. They’re federally insured for up to $250,000 and offer a safe place to put your money while earning interest.
Certificate of Deposit (CD)
CDs are best for individuals looking for a guaranteed rate of return that’s typically higher than a savings account. In exchange for a higher rate, funds are tied up for a set period of time and early withdrawal penalties may apply.
Checking account
Checking accounts are best for individuals who want to keep their money safe while still having easy, day-to-day access to their funds. ATM and other transactional fees may apply.
Savings / Money Market Accounts (MMA)
Savings and MMAs are good options for individuals looking to save for shorter-term goals. They’re a safe way to separate your savings from everyday cash, but may require larger minimum balances and have transfer limitations.
Bankrate's guide to choosing the right savings rate
Online banks tend to offer higher rates than brick-and-mortar banks. They are able to do this because they usually have fewer overhead costs. Online banks also need a way to attract your money, so they tend to offer higher yields than banks with branches.
Banking with an online bank that’s a member of the FDIC, can be a great way to earn a higher rate and ensure your money stays protected. Just make sure you’re within the FDIC’s limits and guidelines.
Guide to choosing the best savings account table of contents:
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Best online savings accounts and rates of October 2021
Here are Bankrate's selections for the best widely available savings account rates from top online banks:
*Minimum balance of $25,000 or a monthly deposit of $100 required for APY.
Note: The APYs (annual percentage yields) shown are as of Sept. 30, 2021. Bankrate's editorial team updates this information regularly, typically biweekly. APYs may have changed since they were last updated and Bankrate's editorial team may occasionally update these APYs after that update. The APYs for some products may vary by region.
1. Best Overall Rate: Comenity Direct - 0.55% APY, $100 minimum to open account (no ATM access)
Overview: Comenity Direct was created in 2018 and launched its High-Yield Savings Account in April 2019. Comenity Direct is a brand of Comenity Capital Bank. Comenity Bank is best known for its co-branded, private label and business credit card programs. Comenity Bank and Comenity Capital Bank partner with more than 160 retailers worldwide on those credit cards.
Perks: Comenity Direct has one of the highest APYs available. Comenity Direct also has customer service representatives available on the phone Monday through Friday from 7 a.m. to 11 p.m. Central. On weekends and most holidays, the phone hours are 9 a.m. to 5 p.m. Central. Comenity Direct also has the Comenity Direct mobile app, which allows you to make deposits and withdrawals, contact customer service and check your balance.
What to watch for: The account doesn’t offer an ATM card or a debit card for ATM access. But you are able to initiate free ACH transfers.
2. High Rate: Vio Bank - 0.51% APY, $100 minimum balance to open (no ATM access)
Overview: Vio Bank, established in 2018, is the national online division of MidFirst Bank. MidFirst Bank has been an FDIC-insured bank since 1934 and was established in 1911, according to the FDIC. Vio Bank offers both a High Yield Online Savings account and CDs.
Perks: Vio Bank’s High Yield Online Savings account has one of the top yields around, and all balances receive this APY. It also has a low minimum requirement of $100 to open the account. The account has no monthly fee. There is no charge for incoming domestic or international wire transfers. There also aren't any fees for outgoing or incoming external transfers. But the cost of sending a domestic wire transfer is $30.
What to watch for: You’ll be charged $5 each month for opting to receive paper statements for your account. After you make six withdrawals during your monthly statement cycle, you’ll incur a $10 fee for every withdrawal after that.
3. High Rate: Ally Bank - 0.50% APY, no minimum balance needed for APY and a free checking account (no ATM access)
Overview: Ally Bank started in 2004 and is headquartered in Sandy, Utah. In 2009, GMAC Bank was transformed into Ally Bank. It has 2.3 million deposit-account customers, according to its 2020 annual report.
Perks: You can deposit checks remotely with Ally eCheck Deposit. The Online Savings Account also has no monthly maintenance fees. Ally Bank also has 24/7 live customer care.
What to watch for: Like many online banks, you won’t be able to deposit cash into this account. If you only have the Online Savings Account you won’t be able to get an ATM or debit card. You’re only able to deposit $50,000 in a day and up to $250,000 every 30 calendar days via eCheck Deposit.
4. High Rate: Citibank - 0.50% APY, $0 minimum opening deposit/$1 minimum for APY (ATM access)
Overview: Citibank, the retail banking arm of Citigroup, launched a high-yield savings account called Citi Accelerate in 2019. The account pays well above the national average as well as higher than many of the savings rates offered by some of the nation’s largest banks. There’s no minimum balance requirement to earn the APY and no minimum to open an account. But the APY is only available in select markets.
Perks: If you’re already a Citi customer or you’re looking for an account at a bank that has a large national presence, this high-yield savings account may be worth considering. The APY is among the top yields you’ll find at a big bank, and the no minimum balance required to earn the APY makes it easy for anyone to start saving.
What to watch for: The account carries a monthly service charge fee of $4.50 if you open the Citi Accelerate Savings account in a Basic or Access Account package. If you choose one of those packages, the fee can be waived by keeping at least a $500 average monthly balance.
5. High Rate: Marcus by Goldman Sachs - 0.50% APY, no minimum balance to earn APY (no ATM access)
Overview: The well-known investment firm Goldman Sachs opened Marcus as its consumer banking arm. Marcus has built a reputation for having a competitive APY. In addition, Marcus has an easy account opening process and it’s also simple to transfer money to accounts at other banks.
The savings account option from Marcus requires no minimum deposit to open and no minimum to earn the APY. In addition to savings products, Marcus also offers a range of personal loan options, from debt consolidation to home improvement.
Perks: Along with a high interest rate, the savings account product from Marcus comes with easy-to-meet requirements and the benefits of an online bank. You can access your account at any time, and you'll pay no fees for transactions. Marcus’ contact center is open seven days a week.
Marcus' savings account doesn’t have a minimum deposit amount, so it’s easy for anyone to open this account. Marcus by Goldman Sachs now has an app available on iOS and Google Play, where you can schedule recurring deposits into your account.
What to watch for: You won't find any branches at Marcus. There's also no checking account option at Marcus, limiting your liquidity options.
6. High Rate: Synchrony Bank - 0.50% APY, no minimum balance needed for APY (ATM access)
Overview: Synchrony Bank provides a range of depository products for consumers, including savings and money market accounts and a number of CDs. As an online bank, it has limited overhead cost, which means it can return those savings to customers in the form of higher rates. Indeed, its savings account and other depository products are consistently among the top-paying accounts. Synchrony also has a highly rated customer service department available by online chat or by phone seven days a week.
Perks: Customers get a lot of perks, including complimentary identity theft resolution as well as travel and leisure discounts. You'll even get a dedicated customer service number as a "Diamond" customer. You also have three free wire transfers per statement cycle and unlimited ATM reimbursements.
What to watch for: Synchrony Bank doesn't offer a checking account. It's not a full-service bank. So, if you're looking for liquidity, you might want to stash your cash elsewhere.
7. High Rate: Popular Direct - 0.45% APY, $5,000 minimum balance needed for APY (no ATM access)
Overview: A Popular Direct Ultimate Savings account is opened through Popular Bank. Popular Bank is an FDIC-insured bank that was established in 1999, according to the FDIC.
Perks: Popular Direct offers a competitive APY on its Popular Direct Ultimate Savings account, which debuted in July 2019. You can deposit a check into your Popular Direct Plus Savings account using your mobile device.
What to watch for: Popular Direct has a higher minimum balance requirement than some other banks. But there are also banks that have higher deposit requirements as well. ATM cards are not available for a Popular Direct savings account, but you can make an external transfer via ACH.
There are some fees to be aware of. There’s a $25 fee if you close your account within the first 180 days. Also, if your balance goes below $500 for any day during your statement cycle, there’s a $4 fee.
Overview: American Express is best known for its credit cards. But it also offers a competitive savings account. The account also has no fees and lets you link your external bank account. The company also offers a variety of CDs.
Perks: The online high yield savings account from American Express provides a competitive rate. It doesn't charge any monthly fees, and it doesn't require a minimum balance. The ability to link current bank accounts offers an easy solution if you have outside accounts that you'd like to view on one platform.
What to watch for: American Express doesn’t have a checking account, so you’ll need to bank elsewhere to get one. Similar to other online banks, American Express does not have any branch locations. And there's no mobile check deposit option — American Express reserves mobile apps for its credit card customers.
9. High Rate: Barclays Bank - 0.40% APY, no minimum balance needed for APY (no ATM access)
Overview: Barclays is often known for its credit cards, but it also offers a consistent high yield on its savings products. Products from Barclays are only available online in the U.S. Barclays offers a competitive, high yield on its savings account.
Perks: Among the perks of an online savings account at Barclays, you'll find a very competitive interest rate, no minimum to open, 24/7 access to funds, online transfers to and from other banks and direct deposit. Additionally, Barclays has a mobile savings app that also allows you to deposit/transfer funds.
What to watch for: If you're looking for a full-service banking institution, Barclays isn't a great option. The bank doesn't offer a checking account option, an ATM network, or branch locations. It's best for those who like to bank online and want an outside institution for its savings options.
10. High Rate: Capital One - 0.40% APY, no minimum balance needed for APY
Overview: In addition to its credit cards, Capital One also provides a range of banking and lending products. Besides the 360 Performance Savings account, which made its debut in September 2019, Capital One also offers CDs, a savings IRA and a checking account.
Perks: The 360 Performance Savings account at Capital One doesn't have a monthly fee and doesn't require a minimum balance when you open the account. Also, you don't have to maintain a minimum in this account and all balances earn the same APY.
What to watch for: There are some accounts at online banks that offer higher yields on savings accounts.
11. High Rate: Discover Bank - 0.40% APY, no minimum balance needed for APY (no ATM access)
Overview: Discover Bank has been offering deposit products online since 2007. Discover is best known for its credit cards. But it also offers a savings account, money market account, checking account and CDs.
The Discover Online Savings Account isn’t the highest-yielding account. But it offers a very competitive APY and it has no minimum opening deposit and no monthly fee.
Perks: Discover Bank is a good option for an online bank that offers the most popular types of deposit products.
Not many online banks offer checking, money market accounts, savings and CDs. But Discover Bank offers all four and has competitive products in each category. It also offers a competitive yield on its savings account. Discover Bank might be for you if you want your checking and savings at the same online bank.
What to watch for: The Discover Bank Online Savings Account has a consistent APY. But there are higher-yielding accounts available.
12. High Rate: Citizens Access - 0.40% APY, $5,000 minimum balance to earn APY (no ATM access)
Overview: Citizens Access is the online bank division of Citizens Bank. It offers a high-yield online savings account and CDs with terms between six months and five years. The online savings account doesn’t have a maintenance fee.
Perks: Citizens Access has a competitive savings account yield near the top of the available offers from Bankrate. Additionally, there are no sign-up or monthly fees.
What to watch for: There is a $5,000 minimum balance to get the highest APY. Citizens Access doesn’t have a mobile app, but you can deposit a check by signing into your account on your phone. Also, balances under $5,000 earn only 0.1 percent APY.
13. High Rate: PurePoint Financial - 0.40% APY, $10,000 minimum balance to earn APY (no ATM access)
Overview: PurePoint is a division of MUFG Union Bank NA. PurePoint Financial is consistently among the top-APY savings accounts. The Online Savings account isn’t meant for those who are just starting to save, since it has a higher minimum balance requirement compared with other savings accounts.
Perks: The PurePoint Online Savings account doesn’t have a monthly service charge. Interest is paid monthly with this account. The PurePoint savings account offers one of the most competitive savings APYs around.
What to watch for: If your balance drops below $10,000, the account only earns 0.1 percent APY. ATM cards aren’t available for PurePoint’s Online Savings account. PurePoint doesn’t have a mobile app. But it does have mobile banking through your phone’s web browser — which has mobile check deposit abilities..
14. High Rate: CIT Bank - up to 0.40% APY, $25,000 minimum balance or $100/month deposit to earn APY (no ATM access)
Overview: CIT Bank is a nationwide direct bank and is a division of CIT Bank NA, which is a subsidiary of CIT Group Inc., a financial holding company founded in 1908.
Perks: CIT offers competitive yields on its accounts and has a couple of options for savers. The Savings Builder – as long as you open it with at least $100 and keep making at least $100 in monthly deposits – earns a competitive APY.
What to watch for: There are two ways to earn the top APY. You need to either maintain a $25,000 balance, or you can open an account with at least $100 and make deposits of at least $100 each month. You’ll earn a much lower variable rate if your balance goes below $25,000 or if you don’t make monthly deposits of at least $100.
You’d earn that APY if you opened your account on the 15th of the month and didn’t make a qualifying deposit of $100 after opening the account. Your actual APY may be higher or lower, depending on the day of the month that you open your account.
How to find the best savings account
Even before you look at the APY offered on a savings account, make sure you have enough money to open the account and can maintain the minimum balance requirement (if there is one). Also, check to see if the bank charges account fees. Even if it’s a high-yielding account, monthly maintenance fees can cause you to lose interest earnings or even some of your principal.
The good news? It’s easy to find an account that will help you earn a high APY without getting hit with costly fees. Here are some other items to look at in your next high-yield savings account:
High APY: Aim for the best APY that will generate the most payout on your savings. But if that account isn’t a good fit for you, there are plenty of competitive yields at other banks to consider. Usually, the best rates are offered by online banks, which have lower overhead costs than brick-and-mortar banks.
Low fees: Find an account that doesn’t charge fees. Or if it charges fees, make sure that you’ll be able to meet the requirements to avoid paying them and getting them waived.
Easy withdrawals and deposits: A savings account is meant for growing your money. But your money needs to be accessible when you need it. Banks will let you access your savings in different ways. For example, some banks offer Zelle, which lets you send money to people you know through an app. Some banks provide ATM cards to access your money.
FDIC-insured: Your money should be in an FDIC-insured account. Always make sure your bank is insured by the FDIC and confirm you’re within FDIC insurance limits and guidelines.
Bank account bonus: Some banks offer new customers a cash bonus if they open a new account. Those offers may require you to fund the account with “new money,” which means the money comes from outside of the bank.
Important online savings account terminology
Compound interest: Method of calculating interest where interest earned over time is added to the principal. Compounding is usually done on a daily or monthly basis. The more often the compounding, the faster your savings will grow.
Interest: Money that you earn for having your funds deposited with a bank.
Interest rate: A number that doesn't take into account the effects of compounding.
Annual percentage yield (APY): Takes into account the effects of compounding during the year. The best way to compare yields is to use this number, rather than comparing interest rates. The higher the APY, the more income you’ll earn on your cash.
Minimum balance requirement: The amount you have to keep in a savings account in order to avoid a monthly maintenance fee.
Money market account: A type of savings account that may offer an ATM card for ATM withdrawals and/or checks. Here is more information on the best money market accounts.
What is a savings account?
A savings account is a type of financial account found at both banks and credit unions. These federally insured accounts typically pay interest, but often at lower rates than other interest-bearing financial products insured by the government, like certificates of deposit (CD).
In exchange for lower rates, savings accounts offer more liquidity, allowing for up to six types of withdrawals or transfers per statement cycle (and potentially more). That makes savings accounts ideal for stashing money you may need access to if unexpected costs arise.
Savings accounts can play a crucial role in your financial health. Unlike a CD, which forces you to lock up your money for a specified period of time, there’s no set term for maturity with a savings account. So, it’s a good spot to park your emergency fund.
And safety — and preservation of your principal — is the name of the game with these savings products. Savings accounts are insured up to at least $250,000 at banks by the FDIC and at (National Credit Union Administration) NCUA credit unions, which operate and manage the National Credit Union Share Insurance Fund (NCUSIF).
Is money safe in a savings account?
The money in a savings account is safe if it’s deposited at either an FDIC bank or at an NCUA credit union and your balance doesn’t exceed the deposit insurance amount. The standard FDIC deposit insurance amount is $250,000 per depositor, per FDIC-insured bank, per ownership category. At NCUA credit unions, the standard share insurance amount is $250,000 per share owner, per insured credit union, for each account ownership category.
What are the different types of savings accounts?
Generally speaking, there is only one type of savings account. Some savings accounts may be called high-yield savings accounts; however, that doesn’t necessarily mean that they offer a higher APY. Money market accounts also fall under the official definition of savings deposit accounts.
Some banks may also offer special savings accounts for children. Other institutions may have one account for everyone, but may allow the account to be titled so that it can be a custodial savings account.
Here are some possible titling options to designate the owner(s) of a savings account. Some banks don’t allow all of these types. Potential titling options include:
Individual account: An account owned by a single person. No one else is allowed to access this account. (An exception can be if someone has a power of attorney for the individual account holder.)
Joint account with rights of survivorship: If two people have a joint savings account — with no other beneficiaries on the account — and one of the joint owners dies, the account is paid to the living account holder.
Payable on death (POD): If an individual savings account has one or more beneficiaries listed and the account owner passes away, these beneficiaries will receive the balance of the account. Appropriate proof, generally a death certificate, is needed. A beneficiary on a joint account, listed as POD, wouldn’t obtain a right to this account until the last account owner passes away.
Uniform Transfers to Minors Act/Uniform Gifts to Minors Act (UTMA/UGMA): Typically, these types of accounts will have one custodian and one minor. The custodian manages the account for the minor until the child reaches age 18 or age 21, depending on the state. Availability of UTMA/UGMAs will depend on the state.
Not all savings accounts are created equal. If you pay close attention to the yields and fees associated with different accounts, you’ll notice that many online banks pay higher yields than their brick-and-mortar counterparts, for example.
When choosing a savings account, consider APY, minimum deposit requirements and your financial goals. The best savings accounts will provide a competitive APY, but also give you the flexibility to securely withdraw or transfer money each statement period.
How do savings accounts work?
Savings accounts are liquid bank accounts that usually offer a higher APY than checking accounts. Savings accounts are referred to as liquid because they let you access your money at any time. This feature separates savings accounts from certificates of deposit. A CD requires you to keep your savings in it for a certain term, such as one year or five years, and usually charges you with an early withdrawal penalty if you take your money out early.
Keep in mind that while it's possible to withdraw cash from a savings account, doing so diminishes the amount of interest you earn. The longer you're able to keep from touching your savings, the more the power of compound interest will work in your favor. Compound interest — or earning interest on interest — allows even small deposits to add up to bigger amounts over time.
That feature makes it crucial to compare APYs when choosing a savings account (because APYs include compound interest you earn during the year). APYs are the best way to compare how much interest you're currently earning or could be earning.
Online savings accounts vs. traditional savings accounts
One big difference between online and traditional savings accounts is the APY offered. Online banks usually offer a much more competitive yield. Brick-and-mortar banks tend to offer something closer to the national average, which is currently 0.06 percent APY, or they offer something that’s nearly nothing — at 0.01 percent APY.
Another difference is physical branch access. Online banks offer savings accounts that give customers the opportunity to bank from anywhere at any time. But these online institutions typically don’t have any branches — so you can’t visit them in person.
That differs from traditional savings accounts offered by large and local brick-and-mortar banks and credit unions — or traditional financial institutions that operate physical branches with set hours of operation.
Savings account pros & cons: Online bank vs. brick-and-mortar bank
Online Banks
Brick-and-Mortar Banks
Pros
These banks tend to offer higher yields than the national average.
Since these banks usually don’t operate their own ATMs, they might be more likely to be a part of a large network of ATMs. Online banks might also be more likely to have a policy for reimbursing out-of-network ATM fees.
Online banks tend to not have minimum balance requirements or charge monthly service fees.
Choosing a local bank means you’ll be able to visit that location for in-person customer service.
Withdrawals from your savings account can be made in person.
There might be quite a few ATM locations in your neighborhood and when you travel.
Cons
Usually an online bank won’t operate a branch that you can visit to solve problems or make an in-person withdrawal.
Deposits and withdrawals often require digital or mobile access.
It’s rare for a brick-and-mortar bank to offer a competitive APY.
In-person hours might not work for your schedule.
What to know before opening an account online
Banks will likely have some slightly different requirements for opening a bank account online. It’s good to know ahead of time what’s needed to open one so you can have this information ready.
For instance, U.S. citizens will likely need to provide their social security number to open a bank account.
You’ll need to either enter this information on the website or take a photo of your ID to submit this information.
Maybe. You might need to visit a Wells Fargo branch.
Yes. A deposit of at least $25 is required.
How to make deposits and withdrawals from an online savings account
For the most part, online banks don't maintain branch locations where you can deposit or withdraw money. But these institutions still provide a number of ways to perform these basic banking tasks. Here are some of the ways you can make deposits into an online savings account:
Direct deposit
Mobile check deposits
ATM deposits
Mailing in checks
Electronic funds transfers
Wire transfers
Often, you’re able to withdraw money from a savings account whenever you’d like because these accounts are liquid – unlike CDs, which are time-deposit accounts and may have early withdrawal penalties. Check with your bank to see the methods for withdrawing funds or if there are any restrictions.
Some banks may give you an ATM card and others may provide a debit card for ATM access. Depending on the bank, you may be able to electronically transfer the money to an account that you hold at another bank. Other possible options are accessing your money via a cashier’s check or official bank check or by initiating a wire transfer, which generally is the most expensive option of those previously listed.
Here are some of the ways banks typically allow you to make withdrawals from an online savings account:
ATM withdrawals
Debit cards
Checks
Electronic funds transfers
Wire transfers
Requesting a mailed check
Savings accounts are limited by Regulation D, a rule that prevents you from performing more than six transfers or withdrawals from the account per calendar month or statement cycle of at least four weeks.
Transfers, which are similar to withdrawals, made online, made via check, debit card (though most savings accounts won’t have a debit card) or by way of other similar order made by the depositor and payable to third parties apply toward your six-transaction limit.
There are some unlimited transactions that don’t apply toward your six-transaction limit. Withdrawing money from an ATM is one of the unlimited transactions, for instance. Many banks offer some sort of ATM accessibility for savings accounts.
In late April 2020, the Federal Reserve Board announced an interim final rule to amend Reg D so that consumers can make an unlimited amount of withdrawals or deposits from savings accounts. Banks aren’t required to suspend these rules, however. Check with your bank to see if it’s allowing unlimited transactions on your savings account and whether there are any fees for excessive withdrawals.
How frequently do savings account rates change?
The Federal Reserve sets rates, and its decision to cut rates to near zero percent in March 2020 to support the economy during the coronavirus crisis is part of the reason why savings yields are at these low levels. Competition for deposits and banks’ business needs also play into where a bank might set its savings rates.
Savings rates are usually variable, which means banks can change them whenever they want. Usually, a change doesn’t warrant switching banks. However, if your bank is no longer consistently offering a competitive yield, it might be time to shop around for one that does.
“It’s the only place in the investing universe where you’re going to get additional return, without having to take on risk to do it. Put your money in a federally insured financial institution and you have no risk of loss.”
You may be able to get a higher APY in a CD or a money market account. Typically, you’re rewarded with a higher APY in a CD because you’re agreeing to keep your money in the CD for a certain period of time. You’ll typically incur a penalty if you withdraw from the CD before its term matures.
Another disadvantage to a savings account is its APY is variable, so it could go up or down. Savings accounts with an introductory rate are an exception to this. After that introductory period ends, the bank tends to lower the APY to its standard rate, however. A good practice is to check and see what the bank’s standard or ongoing APY is before signing up for a savings account just because it has a high introductory rate.
How the Fed impacts online savings account rates
Savings account yields closely follow the federal funds rate, which is the interest rate banks charge each other for overnight loans. So, When you hear that the Federal Reserve has either lowered rates, kept them the same or raised them, that means the Fed changed the federal funds rate. Changes to the federal funds rate usually affect savings yields.
Savings rates have been on the decline since the summer of 2019. The Fed cut rates three times in 2019, and then made two emergency rate cuts in March 2020 to try and bolster the economy due to the coronavirus. These reductions sent the federal funds rate down to a range of zero to 0.25 percent, prompting banks to lower APYs on savings accounts.
National average interest rates
The national average interest rate for savings accounts is currently 0.06 percent. While it’s good to know the national average, you can easily earn more than this national average. Shop around for savings accounts that offer low or no minimum balance requirements and a more competitive APY.
Should you open a new savings account in 2021?
Savings accounts are a great way to separate your money, no matter what the yield is. Right now, rates are much lower than they were in early 2020 and 2019 at online banks and they are expected to remain that way for a while.
You can’t control that we’re in a low-rate environment. But you can try to seek out a competitive yield. Even when the difference seems minuscule, it will still help you. For instance, $10,000 for a year in a savings account at 0.6 percent APY would earn around $59 more than it would at 0.01 percent APY. Note that since savings yields are usually variable, the high-yield savings account probably won’t be the same APY for the whole year. This also assumes that you never withdraw money from the account.
What are typical fees associated with a savings account?
Savings accounts may have a maintenance fee if you don’t keep the minimum balance required in the account. If your balance stays above the minimum required, however, you should be able to avoid fees. There are some savings accounts that don’t require a minimum balance or only require a $1 minimum balance; some of these accounts also offer a competitive APY.
Keeping a certain balance in the savings account is the most common way to avoid a monthly fee. If the minimum balance requirement is too high, consider finding a bank offering a similar APY with no minimum balance requirement — or a lower one. Finding a savings account that doesn’t charge a monthly fee is the best way to avoid these fees that eat into your interest earnings or principal.
You could also incur fees if you withdraw cash from a foreign ATM (an ATM outside of your bank’s network or an ATM abroad). Banks may charge a fee for sending a wire transfer or purchasing a cashier’s check or official bank check. Some banks may charge you a fee if you close the savings account and withdraw your money before a certain time period. These periods tend to be between three and six months. Check with the bank to see if it charges this fee before opening your account. But if you think you’ll be closing out the account within six months of opening it, try to find a savings account that requires a low-minimum balance. That way you can keep your savings account open and continue to save, no matter how low your balance is.
When should you use a savings account?
A savings account is an ideal place for an emergency fund, but you can use it to save for any financial goal. This may include saving money for a down payment on a house, a vacation or cash for retirement.
Here are some instances when you may want to consider opening a new savings account:
You need a place to stash cash for your emergency fund.
You’re saving for a specific financial goal.
You’d like to earn a higher APY on your savings.
You’re seeking an account with some liquidity.
You’re currently earning no or low interest on your current savings account.
Nearly everyone should have some sort of emergency fund and additional savings. You may even want to open separate savings accounts for your different goals. This way you know that money meant for one goal isn’t being used on something else.
Of course, it’s smart to deposit some of your excess money into a savings account, but not necessarily all of it. Reserving some cash for other types of investments and accounts is a wise move.
Your savings account should be a part of a diverse portfolio that also includes CDs for longer-term funds needed in five years or less, as well as investments like stocks to build your retirement nest egg. As a general rule, savings accounts are for money that you may need in the short term and that you don’t want to expose to any risk that could cause you to lose any principal. CDs are generally better-suited for money that you don’t need to touch for one, three or five years. That’s because CDs generally have early withdrawal penalties if you need to access your funds before the CD term ends.
Some of the best investments — those that offer the highest returns like stocks — are more volatile and don’t have the low-risk profile that a savings account at a bank or credit union offers. But you may earn a higher return on your investment for taking on more risk. But keep in mind that investing in dividend-paying stocks or below-investment grade bonds, for example, is not as safe and stable as a savings account. Most savings accounts have variable APYs, but these yields usually don’t fluctuate much.
You should also keep a little extra money in your checking account, so that you don’t accidentally overdraft your account. But after creating that cushion, put the rest of your cash earmarked for safety in a savings account.
Savings accounts aren’t for everyone. For example, a savings account is not worth it for someone who can’t keep the minimum balance in the account – especially if that means incurring a fee. Fortunately, it’s possible to find savings accounts without a minimum balance, making it easy to find a savings account that fits your circumstances.
Uses for a savings account
For more information, Bankrate's experts have compiled the following reasons for opening a savings account.
Saving for a child's future education: Saving for college is one of the biggest expenses a parent faces. Saving for students should be a marathon, not a sprint.
Saving for retirement: A savings account is one of the vehicles that should be used to prepare for retirement. It should be a part of your retirement plan.
Build emergency savings: It’s critical to have an emergency savings account. This account should be able to cover at least six months’ worth of expenses.
Bankrate's experts have compiled the following articles to help you save, customized to your age.
Saving in your 20s: This is a time to develop good saving habits and set a solid foundation for the future.
Saving in your 30s: This is an important age where many will have important life events.
Saving in your 40s: At this age, it’s time to assess how you’ve done previously and whether you need to alter your savings plan moving forward.
Saving in your 50s: Saving to cover health care costs is one thing to save for at this age.
Other high-yield saving options
Money market accounts:Money market accounts are savings deposit accounts that may allow limited check-writing privileges or access to a debit card.
Checking accounts:Checking accounts usually don’t offer competitive yields. There are some high-yield checking accounts, but they usually require you to meet certain requirements other than balance. These can include having a direct deposit, a minimum number of debit card transactions and the high yield may be limited to a certain amount of money.
Certificates of deposit: A fixed-APY CD gives you the same yield for the term of the CD. Most savings accounts have variable yields, so a CD is a way to earn a fixed APY during a term. However, CDs usually have an early withdrawal penalty if you take your money out too soon.
No-penalty CDs: These CDs might have a lower APY than a regular CD. But they usually don’t have penalties when you withdraw the money before the term concludes.
Money market mutual fund:Money market mutual funds pay interest and may allow you to write checks. Money market funds aren't FDIC insured.
The difference between a checking and savings account
Checking and savings accounts serve different roles.
Generally, checking accounts are used for your ongoing cash flow needs, as they allow you to make as many transactions as you would like. A checking account is typically where your paycheck is deposited and where your money to pay bills is kept. However, they often come with a low APY, if they carry an APY at all.
Savings accounts, on the other hand, are meant for stashing cash. Their liquidity is more limited, but they typically carry a higher APY.
There are, of course, exceptions to those generalities. Some checking accounts offer higher APYs than high-yield savings accounts. But checking accounts that offer higher APYs usually come with stricter rules to earn the interest rate, such as balance caps or transaction minimums.
Here are some of the biggest differences between checking and savings accounts:
Purpose: Checking accounts are meant to be transactional — you can frequently take out money with few restrictions. Savings accounts aren’t as liquid — they are meant to house your cash for longer periods of time.
Fees: Though there are exceptions, checking accounts often carry fees for services and slip-ups, such as maintaining too low of a balance or spending more than what’s in the account. Savings accounts typically charge very few fees, if any.
Interest: Many traditional checking accounts don't pay interest. Savings accounts do pay interest, but the yields might not be as robust as those found on CDs or in the bond market or returns you might enjoy by investing in riskier assets like stocks
It’s a good idea to have both a checking account and a savings account.
Checking accounts and savings accounts both play an important role in your financial life. Remember, a checking account is a transactional account mainly for writing checks, accessing your money and paying bills. A savings account is more for accumulating money and earning interest.
Should I have a savings account at the same bank I have a checking account?
Whether you maintain a savings account at the same bank where you have a checking account depends on your goals.
One upside to keeping both accounts at the same bank is that it's convenient: Generally, banks make transferring and managing money between your accounts fairly easy. You may also find that it's cheaper to keep multiple accounts at one financial institution — some banks will waive fees if you connect your accounts.
The disadvantage of keeping your savings and checking at the same institution is that you may miss out on higher yields. Not all banks offer both checking and savings products, and some banks that offer higher yields on savings may not provide a checking option.
How much money should I have in my savings account?
To start, you should have at least enough in your savings account to cover three to six months’ worth of living expenses. Ideally, that amount should be the minimum stashed away in your emergency fund. After that, you should start to save for more specific goals. These goals could range from saving for a home down payment, buying a car, going on a vacation or any other item or thing you’re saving for.
Consider keeping your emergency savings in a separate savings account; this way, you won’t accidentally spend the money on non-emergency purchases. And always try to have more than you might need in an emergency savings account.
Keep in mind that if your emergency savings is earning a competitive APY, there’s little downside to having an overfunded emergency savings account. In an emergency, you’ll be glad you have a cushion.
Benefits and risks of a savings account
Savings accounts, like all financial tools, come with benefits and risks. It's wise to weigh the pros and cons to see if one of these accounts is ideal for your financial situation.
Here are some of the benefits of a savings account:
Security: Savings accounts at an FDIC-insured bank are federally insured up to at least $250,000, making them great places to stash cash.
Liquidity: You can access your savings in your account when needed. Savings accounts only allow for up to six withdrawals or transfers per statement cycle, but you won't have to sell investments in order to get your money out.
Earnings: The money you keep in a savings account earns interest over time and compounds, offering a return on the principal.
Higher interest: The best savings accounts usually earn more interest than a checking account – and some even have a higher yield than money market accounts.
Low-fee options: There are many savings account options that either have a $1 minimum balance or no minimum. With these options, it’s easy to avoid a maintenance fee.
Access: Many savings accounts allow you to access your savings at ATMs with an ATM card. Just make sure the ATM is in the network to avoid any fees. Also, ATM withdrawals don’t count toward your monthly/statement cycle limit of six.
Here are some of the risks associated with savings accounts:
Low interest: Savings accounts do pay interest, but it's often much lower than can be earned with other savings vehicles like certificates of deposit or even some money market accounts. That can lead to a big opportunity cost — you may find higher returns elsewhere.
Accessibility: Unlike checking accounts, savings accounts have a limit on the number of withdrawals and transfers you can make each month. Withdraw more than six times during a month, and you could get hit with a withdrawal penalty.
Fees: Some banks charge minimum balance fees. Those maintenance fees can eat up any interest earned and your principal very fast, especially with low interest earnings.
Savings account vs. money market account vs. mutual fund
Here's a quick comparison of the three:
Savings Account
Money Market Account
Mutual Fund
Liquidity
You can take your money from a savings account at any time. But you’re restricted to
six transfers or withdrawals per calendar month/ statement cycle. ATM withdrawals don’t count toward this limit.
You may withdraw from this account at any time. But you’re limited to six transfers or withdrawals per calendar month/ statement cycle. ATM withdrawals don’t count toward the limit.
Allows you to redeem shares at any time for the current net asset value.
Access
Some banks allow you to use an ATM card to access the account or have it on a debit card for withdrawal purposes.
Your bank may allow you to have your money market account on an ATM card or a debit card. You also may have limited check-writing ability.
You’re allowed to redeem shares at any time for the current net asset value.
Earnings
Usually more than a checking account, but rates may be lower than some money market accounts.
On average, money market accounts have higher rates than savings accounts.
Pay less than the best-yielding money market and savings accounts.
Security
Accounts at FDIC-insured banks are federally insured by the government up to at least $250,000.
Accounts at FDIC-insured banks are federally insured by the government up to at least $250,000.
These are not FDIC-insured.
Fees
There are accounts with no minimum balance required to avoid a maintenance fee.
These traditionally have higher minimum balance requirements than savings accounts.
There may be fees, called expense ratios, on these funds.
FDIC
The best savings accounts are federally insured. Your money is safe and insured for up to at least $250,000 if it’s in a savings account at an FDIC-insured bank. It’s imperative to choose an account with FDIC insurance, since it is backed by the U.S. government.
Savings accounts, money market accounts and mutual funds often get lumped into the same broader "savings" category. But they have some differences. Between the three, savings accounts and money market accounts are most alike. They are both insured by the government at banks and credit unions up to $250,000.
However, money market accounts typically pay a higher interest rate than savings accounts. Money market accounts also offer check-writing and debit card capabilities, a degree of liquidity not often found with savings accounts.
What to consider when applying:
Safety:
Savings and money market accounts at an FDIC-insured bank are insured up to at least $250,000, while money market mutual funds are not FDIC insured. Since savings accounts and money market accounts have this protection, these are safe places for your money. Money market mutual funds are still considered low-risk investments.
Liquidity:
Savings accounts and money market accounts are liquid accounts, so you can withdraw from them at any time – there are no early withdrawal penalties. Savings and money market accounts offer up to six withdrawals or transfers per month. Some banks will allow you to make ATM withdrawals from these accounts. And money market accounts may have limited check-writing authority. Money market mutual funds allow you to redeem shares at any time for the current net asset value.
Earnings:
Money market mutual fund accounts typically pay less than the best-yielding money market and savings accounts.
Fees:
All of these savings vehicles may come with some fees. But thanks to low or no minimum balances on some savings and money market accounts, you should be able to find a solution that makes the maintenance fee a non-factor.
Rather than letting money stagnate in a no- or low-interest savings account, consider Bankrate’s best online savings accounts to prepare for your future financially.
What are the limits on a savings account?
Some banks may limit how much you can deposit into a savings account. There may be limits on your initial deposit, how much you can deposit at one time or how much money you can keep in the account. These are limits that your bank dictates.
Insurance coverage limits are also important. The standard FDIC insurance amount is $250,000 per depositor, per insured bank, for each account ownership category at an FDIC bank. If your money is kept at an NCUA credit union, the standard share insurance amount is $250,000 per share owner, per insured credit union, for each account ownership category.
Savings account FAQs
Why do online banks pay more interest?
In some cases, the biggest banks still pay their savings customers less than the national average of 0.06 percent APY.
Online banks typically don’t have physical branches and have fewer expenses to cover, giving them the opportunity to pay customers with deposit accounts more interest.
Do I have to pay taxes on my savings account?
Generally, any interest you earn on a savings account is considered taxable income. Even if you don’t receive a 1099-INT tax form because the amount of interest you’ve earned for the year is small (less than $10), you’re still expected to include the earned interest on your tax return. The IRS considers any interest earned on a savings account to be taxable. If you earn interest from your savings account, you'll be required to submit a 1099-INT form to the IRS.
If you’re concerned about your tax liability and you’re saving for a long-term goal, consider keeping your extra funds in a different type of savings or investment vehicle. Money you’re setting aside for your kids’ college fund, for example, can be saved in a 529 plan where it grows tax-free. The savings in that account won’t be taxable either when your child’s ready to withdraw them to pay for tuition. Qualified withdrawals for education expenses from a 529 account are not taxable.
"If they’re saving so much that the interest is impacting their taxes, they should consider tax-free bonds or tax-free money markets versus the money in the bank. They can typically get higher yields than the banks and have tax-free returns which wouldn’t show up on their taxes."
- Tatyana Bunich, president and founder of Financial 1 Wealth Management Group.
How many savings accounts should you have?
How many accounts you should have will vary. Some savers may be better off keeping everything lumped into one account. For others, multiple savings accounts for different goals can be a more effective strategy. It could help prevent you from spending money set aside for an emergency on other non-emergency expenses, for example. It could also help keep you from spending money that’s meant for a down payment on a home.
The biggest thing to consider is making sure you choose savings accounts with either no minimum balance requirement or an account minimum you can maintain so you won’t incur monthly fees. Maintenance fees would negate the benefit of having these multiple accounts.
"If you prefer simple, safe and secure, you likely will prefer just one account. Less statements to review, less login credentials to remember, less risk for fraudulent behavior, etc."
- Ronald Guay, President and founder of Rivermark Wealth Management.
Is it bad to have multiple savings accounts?
Having specific accounts earmarked for the car you’re saving up for or your next family vacation can give you a better sense of whether you’re on track to achieve your goal. It can also help you be more disciplined when it comes to saving.
It can be bad if you are either going to be charged maintenance fees or if you have so many accounts that you’re not able to keep track of them. You’ll also want to keep a close eye on these accounts in case there is fraudulent activity or a bank error. Logging into your account on a regular basis is important to address any of these potential issues.
Many banks allow customers to have multiple savings accounts. Some online banks don’t limit the number of savings accounts you can open, either.
Deposit accounts, such as savings accounts, aren’t reported to the three credit bureaus, so they won’t appear on your credit report under accounts. Some banks run a soft credit inquiry when you open a deposit account. An inquiry may appear on your credit report and won’t affect your credit, according to Experian.
Can I make payments and purchases from my savings account?
Generally, payments can be made from a savings account. But some banks may restrict these transactions and, if permitted, may be subject to Regulation D.
Again, Regulation D restricts you from making more than six transfers or withdrawals from a savings account per calendar month or statement cycle of at least four weeks. Check with your bank to find out its policy. With a 2020 Fed ruling, these rules have been relaxed at some banks.
Making purchases or withdrawals from your savings account isn’t as easy as doing it from your checking account. Unlike checking accounts, savings accounts typically won't come with a debit card for you to make point-of-sale transactions in person or online, for example.
Can I write a check from my savings account?
Savings accounts typically don’t have check-writing abilities. Generally, checks can only be written on some money market accounts, but not savings accounts. Money market accounts are a type of savings deposit account. Typically, money market accounts are the only savings deposit account that provides check-writing privileges.
You may, however, be able to withdraw money and have your bank issue an official bank check, which is similar to being able to write out a check. But your bank may charge a fee for this service, if it’s an option.
Some alternative methods may include: using an ATM to withdraw cash; sending a wire transfer or a person-to-person transfer; transferring the money to a checking account or a money market account that has check-writing ability; or requesting a cashier’s check or an official bank check. Depending on your bank, the wire transfer will probably be the most expensive option, and there may be a fee for the official check.
How much money does the average person have in savings?
The Federal Reserve's 2019 survey of consumer finances found that the median value of the American family's transaction accounts (savings, checking, money market, prepaid debit cards, call accounts) is $5,300.
A savings account is very important for unexpected events. This could be anything from a job loss, an illness that results in health care bills, or an unexpected home or automobile repair. These things aren’t predictable, so your savings will help you if an unforeseen event like this happens.
Savings also helps you achieve your future goals. For instance, you could be happily renting now. But in a few years, you may want to purchase a home. If you start saving now — or adding to your existing savings — you’ll be in a better position to reach your financial goals as they change.
Recap: Bankrate's best online savings accounts and rates for October 2021
To recap, here are top online banks offering the best online savings accounts for October 2021:
These financial institutions are featured in our savings rate research: Alliant Credit Union, Ally Bank, Amerant Bank, America First Credit Union, American Express National Bank, Axos Bank, Bank 5 Connect, Bank of America, Bank of the West, Barclays, BB&T, BBVA, BECU (Boeing Employees Credit Union), Bethpage Federal Credit Union, BMO Harris Bank, BrioDirect, Capital One Bank, Chase Bank, CIBC USA, CIT Bank, Citibank, Citizens Access, Citizens Bank (Rhode Island), Comenity Direct, Comerica Bank, Customers Bank, Delta Community Credit Union, Discover Bank, E-Trade Bank, Emigrant Direct, Fifth Third Bank, First Citizens Bank, First Internet Bank, First Technology Federal Credit Union, FNBO Direct, Golden 1 Credit Union, Marcus by Goldman Sachs, HSBC, Huntington National Bank, Investors Bank, Investors eAccess, KeyBank, LendingClub Bank, Limelight Bank, Live Oak Bank, M&T Bank, MySavingsDirect, Navy Federal Credit Union, PenFed Credit Union, PNC Bank, Popular Direct, Purepoint Financial, Quontic Bank, Randolph-Brooks Federal Credit Union, Regions Bank, Salem Five Direct, Sallie Mae Bank, Santander Bank, SchoolsFirst Federal Credit Union, Security Service Federal Credit Union, State Employees' Credit Union, Suncoast Credit Union, Suntrust Bank, Synchrony Bank, TD Bank, TIAA Bank, UFB Direct, Union Bank (California), U.S. Bank, USAA Bank, Vio Bank, VyStar Credit Union, Wells Fargo and Zions Bank.
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