List of best available rates across different account types. | Friday, February 28, 2020
Here are the best online savings accounts from Bankrate for 2020:
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.
Be sure to read the information below that the Bankrate team has provided on savings accounts. We are here to guide you to the best financial decision for your goals.
Highest Rate: Comenity Direct Bank - 1.90% APY, $1 Minimum Balance deposit for APY. Great customer experience. High APY and low minimum balance to open an account.
Runner-up Rate: Popular Direct - 1.90% APY, $5,000 Minimum Balance for APY. High APY for established savers.
High Rate: WebBank - 1.86% APY, $0.01 minimum balance needed for APY, but balances are required to stay above $1,000. Best APY with no-monthly fee.
High Rate: Citibank - 1.85% APY, $0 Minimum Balance for APY. Best Rate at a big bank.
High Rate: Vio Bank - 1.85% APY, $100 Minimum Balance deposit for APY. Best for a low minimum to open and competitive APY.
High Rate: HSBC Direct Savings - 1.85% APY, $1 Minimum Balance for APY. Best for competitive APY/no maintenance fee combo.
High Rate: CIBC Bank USA - 1.85% APY, $1 Minimum Balance for APY. Best for consistent APY.
High Rate: Citizens Access - 1.85% APY, $5,000 Minimum Balance for APY. Best for balances over $5,000.
High Rate: MySavingsDirect - 1.80% APY, $0 Minimum Balance for APY. Best for low balances.
High Rate: CIT Bank - 1.75% APY, $25k Minimum Balance or $100/mo deposit for APY. Best for recurring savings.
High Rate: American Express National Bank - 1.70% APY, $1 Minimum Balance for APY. Best for 24/7 phone support.
High Rate: Barclays Bank - 1.70% APY, $0 Minimum Balance for APY. Best for no minimum balances to open.
High Rate: FNBO Direct - 1.70% APY, $1 Minimum Balance for APY. Best for opening an account with $1.
High Rate: Marcus by Goldman Sachs - 1.70% APY, $0 Minimum Balance for APY. Best for easy external transfers.
High Rate: Synchrony Bank - 1.70% APY, $0 Minimum Balance for APY. Best for high rate and ATM Access.
High Rate: PurePoint Financial - 1.80% APY, $10,000 Minimum Balance for APY. Best for balances over $10,000.
High Rate: Ally Bank - 1.60% APY, $0 Minimum Balance for APY. Best for customer experience.
High Rate: Discover Bank - 1.60% APY, $0 Minimum Balance for APY. Best variety of banking options.
Best savings accounts & rates of February 2020
Here are Bankrate's selections for the best savings account rates from top online banks:
Bankrate has more than four decades of experience in financial publishing, so you know you’re getting information you can trust. Bankrate was born in 1976 as “Bank Rate Monitor,” a print publisher for the banking industry and has been online since 1996. Hundreds of top publications rely on Bankrate. Outlets such as The Wall Street Journal, USA Today, The New York Times, CNBC and Bloomberg depend on Bankrate as the trusted source of financial rates and information.
At Bankrate, we strive to help you make smarter financial decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. The top banks listed below are based on factors such as APY, minimum balance requirements and broad availability.
Bankrate's picks: Best savings accounts in February 2020
Bankrate's best available online savings accounts with top high yield rates:
1. Highest Rate: Comenity Direct - 1.90% 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 care 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. This allows you to make deposits and withdrawals. The app, which is available for iOS and Android, also lets you 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. Runner-up Rate: Popular Direct - 1.90% 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 very competitive APY on its Popular Direct Ultimate Savings account, which debuted on 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.
3. High Rate: WebBank - 1.86% APY, $0.01 minimum balance needed for APY, but balances are required to stay above $1,000 (no ATM access)
Overview: WebBank was established in 1997 and is headquartered in Salt Lake City. It’s an FDIC-insured bank.
Perks: The WebBank savings account doesn’t have a monthly fee and requires a minimum balance of only $1,000. It has one of the highest APYs available. Interest on the WebBank savings account compounds daily and is paid to you on the last business day of the month.
What to watch for: There is a $25 fee for an outgoing wire transfer. There isn’t a maintenance fee on this account. But if your savings account falls below $1,000, the account will be closed and your money will be returned to you according to the WebBank Terms and Conditions for your account. The savings account doesn’t have an app or an ATM card available. WebBank also doesn’t let you deposit a check into any of its accounts. So, all deposits have to be made via ACH or wire transfer. You also can’t receive a withdrawal via check from your WebBank account.
4. High Rate: Citibank - 1.85% APY, $0 minimum balance to earn 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 1.85 percent APY, well above the national average as well as 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 1.85 percent APY is among the top yields you’ll find at a big bank, and the $0 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: Vio Bank - 1.85% 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 and interest is compounded daily on this savings account. There is no charge for incoming domestic or international wire transfers. There also isn’t any fees for outgoing or incoming external transfers. But the cost of sending a domestic wire transfer is going up to $30, from $18, starting on March 1.
What to watch for: There’s a $5 dormant account fee per month if you go 12 months without initiating a transaction. This is why it’s so important to watch your account because fees can add up and cut into the interest you earned. You need to initiate a transaction at least once during the preceding 12-month period to keep your account from going dormant. This transaction can be a deposit or a withdrawal.
6. High Rate: HSBC Direct Savings - 1.85% APY, $1 minimum balance needed for APY (no ATM access)
Overview: HSBC is a recognized name that serves 38 million customers worldwide. The HSBC Direct Savings account is through HSBC Bank, USA, N.A. The HSBC Direct Savings account is available online in all 48 states.
Perks: The HSBC Direct Savings account has a competitive APY with a low minimum balance of $1 required at account opening. This APY is currently available on all balance tiers. There is no monthly maintenance fee. If you have an HSBC Direct Savings account, you can make a deposit or withdrawal at one of the HSBC retail locations in the U.S.
What to watch for: Treat the HSBC Direct Savings account like a six-month CD, since if you close it within 180 days there’s a $25 fee. The money deposited into your HSBC Direct Savings account must be new money – from outside HSBC. The account doesn’t have an ATM or debit card available for it.
7. High Rate: CIBC Bank USA - 1.85% APY, $1 minimum balance to earn APY, $1,000 minimum required to open the account (no ATM access)
Overview: CIBC Bank USA, formerly The PrivateBank and Trust Company, was founded in 1991 and is based in Chicago. It was rebranded as CIBC Bank USA and offers one of the most competitive APYs on a savings account.
Perks: If you don’t like maintenance fees, the CIBC Bank USA Agility Online Savings Account might be for you. The account has no maintenance fee. CIBC Bank USA also has a mobile app for both Apple and Android devices.
CIBC Bank USA has a great combination of competitive savings APYs with one of the lowest minimum balances.
What to watch for: During the first 30 days with this account, you won’t be able to initiate external transfers via CIBC NetBanking. If you need to transfer money, you’ll need to call CIBC Bank during that time. Your opening deposit can’t exceed $250,000 and you can’t exceed a $1,000,000 balance in this account.
8. High Rate: Citizens Access - 1.85% 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 obtain the high 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 0.25 percent APY.
9. High Rate: MySavingsDirect - 1.80% APY, $0 minimum balance to earn APY (no ATM access)
Overview: MySavingsDirect is a direct bank that is an online banking division of Emigrant Bank. Emigrant Bank was founded in 1850.
Perks: It doesn't matter how much money you keep in your MySavings Account because all balances earn the same APY. Interest is compounded daily and credited on a monthly basis. There are no minimum balance fees or service charges on the MySavings Account. The MySavings Account has a great combination of a competitive APY on all balances and no minimum balance.
What to watch for: ATM access isn't available for this account. So you'll need to transfer money to a linked account that has ATM access or to a checking account with ATM access to withdraw funds from an ATM. The MySavings Account also doesn't have a mobile app.
10. High Rate: CIT Bank - 1.75% 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, N.A. CIT Bank, N.A. 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. Both the Savings Builder and the Premier High Yield Savings accounts have daily compounding. But 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.
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 personal 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.
12. High Rate: Barclays Bank - 1.70% 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.
13. High Rate: FNBO Direct - 1.70% APY, $1 minimum balance needed for APY (ATM card is available)
Overview: FNBO Direct bank is a division of First National Bank of Omaha (FNBO). FNBO Direct bank accounts are offered by First National Bank of Omaha. FNBO Direct’s holding company, First National of Nebraska, is more than 160 years old. FNBO Direct launched in 2007.
Perks: FNBO Direct’s Online Savings Account is a competitive account thanks to its high APY and low minimum opening balance and minimum balance requirement to earn APY. The account has Popmoney, which can be used to send and receive money.
What to watch for: There is an overdraft item fee of $33 on the Online Savings account. You also may not withdraw $100,000 from your Online Savings Account in a single transaction or in a business day. You’re also restricted from withdrawing more than $500,000 in a month. You also can’t make a deposit that brings your principal balance over $1 million. There’s a $15 fee to send a domestic wire transfer.
14. High Rate: Marcus by Goldman Sachs - 1.70% APY, $0 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 just a $1 minimum to earn the APY. But Marcus provides more than just savings products to consumers. It also has 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
What to watch for: You won't find any branches at Marcus. And it also doesn't have a mobile app. That means you'll need to call customer service on weekdays or look at the FAQ section to get answers about your account. There's also no checking account option at Marcus, limiting your liquidity options.
15. High Rate: Synchrony Bank - 1.70% APY, no minimum balance needed for APY (ATM access)
Overview: Synchrony Bank provides a range of depository products for consumers. That includes a savings account, money market account 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 per week. And customers get a lot of perks, including complimentary identity theft resolution and travel and leisure discounts. You'll even get a dedicated customer service number as a "Diamond" customer. That's in addition to access to webinars, three free wire transfers per statement cycle and unlimited ATM reimbursements.
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.
16. High Rate: PurePoint Financial - 1.80% APY, $10,000 minimum balance to earn APY (no ATM access)
Overview: PurePoint is a division of MUFG Union Bank, N.A.
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 compounded daily and paid monthly with this account. The PurePoint savings account offers one of the most competitive savings APYs around.
What to watch for: If you drop below a $10,000 balance, balances between $0.01 and $9,999.99 only earn 0.25 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.
17. High Rate: Ally Bank - 1.60% 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. Ally Bank exceeded 1 million Ally Bank customer accounts in 2012 and currently has 1.5 million customers.
Perks: You can deposit checks remotely with Ally eCheck Deposit. This account compounds interest daily. 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 in 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.
18. High Rate: Discover Bank: 1.60% 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.
What to consider before opening a savings account
What is a savings account?
A savings account is a type of bank 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.
In exchange for lower rates, they offer more liquidity, allowing for up to six types of withdrawals or transfers per statement cycle.
That makes savings accounts ideal for stashing money you may need access to if unexpected costs arise.
Indeed, savings accounts can play a crucial part in your financial health. Because there's no set term for maturity with a savings account, they provide a good spot to park your emergency fund.
And safety 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 credit unions by NCUA.
If you are applying for a savings account, consider interest rates (APY), minimum deposits, and your financial goals when choosing a savings account. The best savings accounts will provide a high-yield APY but also give you the flexibility to securely withdraw or transfer money each statement period.
"This is still a good time for savers as long as they’re getting the best returns on their cash. Yields on online savings accounts are still well ahead of inflation. And that is a rare circumstance in recent years."
Savings accounts are liquid bank accounts that usually offer a higher annual percentage yield (APY) than a checking account. They are referred to as liquid because you should be able to access most savings accounts at any time. This differs from a CD, which usually has an early withdrawal penalty and requires you to keep your savings in it for a certain term.
Savings accounts aren’t meant to be active transaction accounts. They 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. 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. Many banks offer some sort of ATM accessibility for savings accounts.
Why get an online savings account?
Online savings accounts have a few distinct benefits over savings vehicles found at brick-and-mortar institutions.
Most notably, online savings accounts tend to offer higher interest rates and lower fees. That's because online banks don't carry the same overhead costs compared with walk-in branches, and can pass on that savings to customers.
In exchange for being able to visit a branch and talk to a teller, online banks often offer round-the-clock customer service. And cutting-edge technology is also a big perk, which typically allows for things like online bill payment, mobile check deposit and often a larger ATM network.
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 you stay above the minimum balance required, you should be able to avoid fees in your savings account. There are some savings accounts that have no minimum balance or a $1 minimum balance. Some of these low minimum balance accounts also have a competitive APY.
You could incur fees if you withdraw from a foreign ATM (an ATM outside of your bank’s network or an ATM abroad). Others may charge a fee for sending a wire transfer or purchasing a cashier’s check or official bank check. Some banks may have an early closeout fee, if you close the savings account and withdraw your money before a certain time. These periods tend to be between three and six months. Check with the bank to see if it has this fee before opening your account. But if you think you’ll be closing out the account in the first six months, try to find a savings account with little or no minimum balance. That way you can keep your savings account open and continue to save, no matter what your balance is.
Is a savings account worth it? Who should get one? Who shouldn’t?
If you’re not earning interest on your current savings account or if you have a low interest rate, you should consider opening a savings account. Everyone should have some sort of emergency fund and additional savings to achieve their financial goals. Anyone who has money that they intend to grow for some amount of time should have a savings account.
A savings account is not worth it for someone who can’t keep the minimum balance – especially if that means incurring a fee. But with saving accounts without a minimum balance requirement or others with a $1 minimum, you should be able to find a savings account that fits your circumstances.
Is money safe in a savings account?
The money in a savings account is safe if it’s 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.
Can I have 2 savings accounts at the same bank?
Many banks allow customers to have multiple savings accounts. In fact, some online banks don’t limit the number of savings accounts you can open.
Depending on the bank you choose, you may have the opportunity to name your accounts differently to highlight the fact that you’re saving for a particular goal, like a new house or a washing machine.
Does having multiple savings accounts hurt your credit?
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. But it’s a good practice to confirm the type of credit inquiry that will be done with your bank before applying. You could have many soft inquiries and they won’t affect your credit score, according to Experian.
Is a savings account necessary?
A savings account isn’t usually a bank requirement. But it is necessary if you want your excess money to potentially keep pace with or exceed inflation.
Generally, a checking account won’t earn the amount of interest that you can earn in a savings account. If your money is sitting in a non-interest-bearing account or a low-interest account, you’re leaving money on the table. A savings account is a great way to maximize the amount of interest that your cash is earning.
Some banks, mainly brick-and-mortar institutions, may require a checking account or other stipulations to earn the highest rate on a tiered savings account. Generally, online banks don’t have these types of requirements. For the most part, banks don’t require you to have a savings account. But having at least one savings account, and possibly multiple savings accounts, can be a good way to save money and realize how much more your money can grow with a high APY.
Is it good to have a checking and savings account?
It’s a good idea to have both a checking and a savings account. Low minimum balance savings accounts make it possible for nearly anyone to take advantage of high-yield savings. Some top-yielding accounts might not even have a minimum balance.
Checking accounts and savings accounts both have an important role in your financial life. 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. But if needed, this money is accessible for a limited number of withdrawals or transfers per month.
When should you use a savings account?
It’s smart to deposit some of your excess money into a savings account, but not necessarily all of it. That way this money, which you may want to use as an emergency fund, can grow thanks to compound interest. Also consider investing some of these after-tax dollars.
Some of the best investments are risky and others, such as CDs, usually have fixed, guaranteed rates. Investments in the stock market, for instance, don’t have the guarantees that an FDIC or NCUA savings account has. But you may earn a higher return on your investment than you would with even the highest savings account rate. But depending on the investment type you choose, you could lose your principal in an investment if it’s 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 that account. But after that cushion, put the rest of your cash earmarked for safety growing in a savings account.
A savings account is an ideal place for an emergency fund or to save for any financial goal. This may include saving money for a down payment on a house, a vacation or cash for retirement. You may even want separate savings accounts for different goals. This way you know that money meant for one goal isn’t being used on something else.
A savings account should be a part of a diverse portfolio, which includes CDs for longer-term funds and investments. Savings accounts are for money that you may need in the short term, while CDs are generally for longer-term money. CDs generally have early withdrawal penalties if you need to access your funds before the CD term ends.
What are some disadvantages of keeping money in a savings account?
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 completes.
Another disadvantage to a savings account is that those APYs are usually variable, so they could go up or down. One of the exceptions is if the savings account has an introductory rate that is fixed for a certain period of time. After that introductory period is over, then the APY will usually be based on the bank’s standard or ongoing APY. A good practice is to check and see what the bank’s standard or ongoing APY is before signing up for an introductory rate savings account. That could help you determine if the rate will be competitive when your introductory period ends.
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.
How the Fed impacts online savings rates
Savings account yields closely follow the federal funds rate. When you hear that the Federal Reserve has either lowered rates, kept them the same or raised them the federal funds rate is likely what they’re referring to.
When the Fed raised rates nine times from 2015 to 2018, savings yields generally increased -- especially at online banks. In 2019, the Fed lowered rates three times, and savers took a hit with cuts to saving account APYs.
With the Fed expected to stay on the sidelines in 2020, savings account APYs are projected to stay relatively steady. However if that stance changes, savings account yields will likely follow the Fed’s movement.
Survey: Some Americans weren’t earning any interest on their short-term savings
Almost a quarter of Americans weren’t earning any interest on their short-term savings, according to a survey published in May 2019.
Since that survey was released, there have been three Fed rate cuts making the federal funds rate 75 basis points lower. That took away some of the higher APYs savers enjoyed when the Fed raised rates nine times from 2015 to 2018, for a total increase of 225 basis points during that period.
But if you were in a no-interest account back then and are still not in a high-yield savings account, you have room to earn interest.
Compare rates on savings accounts to find the right one for you. Look at both minimum balance requirements and the APY. Looking at the former will help you avoid fees. And the latter will help you take advantage of compounding -- assuming you don’t withdraw the interest earned.
Keep an eye on rates
There have been nine Federal Reserve rate hikes since late 2015. This dramatically improved savings rates at the top-yielding banks. So far in 2019, the Federal Reserve has left its benchmark interest rate unchanged. This has helped borrowers with variable annual percentage rates (APRs) on credit cards, auto loans and home equity lines of credit, and potentially hurt savers. But savings yields are still very competitive, with very few top banks lowering yields in the past couple of months.
What are the different types of savings accounts?
Generally there is only one type of savings account. Some savings accounts may be called high-yield savings accounts. But that doesn’t necessarily mean that they actually have a higher APY. Some banks may have special savings accounts for children. Others may have one account for everyone, but may allow it to be titled so that it can be a custodial savings account. Money market accounts also fall under the official definition of savings deposit accounts. So these could be thought of as a different type of savings account.
Here are some possible titling options for a savings account. But some banks don’t allow all of these types. Potential titling options are:
Individual account: An account only owned by one 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 passes away, 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 you pass away, these beneficiaries will receive the balance of this 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 transfer to minors act/uniform gifts to minors act (UTMA/UGMA): Typically these will have one custodian and one minor. The custodian manages this account for the minor until the child reaches 18 or age 21, depending on the state. Availability of UTMA/UGMAs will depend on the state.
Watch for changing savings account rates
There have been many rate decreases on high-yielding accounts leading up to the most recent Federal Reserve meeting on Sept. 18. Savings account decreases are bound to happen, but usually aren’t enough of a reason to switch banks.
“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.”
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.
Annual Percentage Yield (APY): takes into account the effects of compounding during the year. The best way to compare interest, using an apples-to-apples approach.
Minimum balance requirement: How much you have to keep in a savings account in order to avoid a monthly maintenance fee.
Money market account: Is a type of savings account that may offer check writing and may offer an ATM card for ATM withdrawals. Here is more information on the best money market accounts.
What is the average interest rate on a savings account?
Over the past several years, since the financial crisis, interest rates on savings accounts have been historically low. But they have been inching up lately after nine Federal Reserve rate increases since the end of 2015.
The average interest rate on a savings account is 0.1 percent APY.
Fortunately, many banks and online institutions offer high interest savings account rates well above that average. That makes it crucial to shop around for the best deal when you're in the market for a savings vehicle.
"The top-paying savings accounts and money market accounts are perfectly suited for that emergency fund that we all need or as a temporary parking place for that bonus check or proceeds from a home sale."
Savings accounts are liquid bank accounts that allow withdrawals. 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 a debit card for ATM access. Depending on the bank, you may be able to electronically transfer the money to an account that you own at another bank. Other possible withdrawal options are via a cashier’s or official bank check or by initiating a wire transfer, which generally is the most expensive option of those previously listed.
Can I make payments from my savings account?
Generally, payments can be made from a savings account. But some banks may restrict this activity and if these are allowed, they may be subject to Regulation D.
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. Some banks may have a transaction limit less than Regulation D standards. You may make no more than six “convenient” transfers and withdrawals, according to Regulation D. These “convenient” transfers and withdrawals include preauthorized, automatic transfers or transfers for direct bill payments. Transfers for savings overdraft protection, when a savings account backs up an overdrawn checking account, also count toward your limit of six transactions.
How many times can I withdraw from my savings account?
Some banks will allow you six “convenient” transfers and withdrawals, according to Regulation D. Others may have a lower limit or may restrict your withdrawal options.
Savings accounts are subject to Regulation D, which allows you a maximum of six “convenient” transfers or withdrawals each month. 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.
Exceeding the six transfers and withdrawals may result in the savings account being converted to a non-interest bearing transaction account. Surpassing the limit of six transfers and withdrawals may also result in a fee at some institutions.
ATM withdrawals are unlimited. So are transfer or withdrawal requests initiated by phone when a check is mailed to you. Some banks that don’t allow ATM withdrawals may allow a check to be mailed to you, so this can be another withdrawal option. Wire transfers are also an option at some banks, but they will count toward your limit of six transactions.
Can I write a check from my savings account?
Savings accounts typically don’t have check-writing abilities. Generally, checks can only be written out of some money market accounts, and not savings accounts. Money market accounts are a type of savings deposit account. But typically money market accounts are the only savings deposit account that allows check-writing privileges.
You may be able to withdraw money and have your bank issue an official bank check. This 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 be using an ATM to withdraw cash, sending a wire transfer or a person-to-person transfer, using bank services such as Zelle to transfer the money, 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.
Can I make purchases from a savings account?
Generally, savings accounts won’t have a debit card for you to make point of sale transactions in person or online. However, you may be able to have your savings account debited via an ACH (automated clearing house) transfer or a wire transfer. For instance, an outgoing wire transfer can be a way to pay when purchasing a home.
What is considered a high-yield savings account/rate?
High-yield savings accounts traditionally have the highest APYs. Direct banks – banks that have only an online presence and don’t have brick-and-mortar locations – typically pay the highest yields. A high-yield savings account may have a low minimum balance.
Do savings accounts have compound interest?
When choosing a savings account, it's important to consider how often the account compounds interest. Generally, all savings accounts compound, but some do it more often than others — on a daily, monthly, quarterly or even annual basis.
Daily compounding is ideal. The more frequently interest is compounded, the faster your savings will grow.
Keep in mind that because of compound interest, even small deposits can add up to big amounts over time.
Is a savings account safer than a checking account?
Savings accounts and checking accounts are equally safe as long as the accounts are either insured at an FDIC bank or at an NCUA credit union. Always make sure that 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.
A checking account is a transaction account that is meant to have more monthly activity. The number of checking account transactions is typically not limited. Paying bills, transferring money to savings or a money market account and using a debit or ATM card are all common checking account activities.
A savings account, on the other hand, is limited by Regulation D to six “convenient” transfers. It likely won’t have a debit card – unless the debit card is linked to a checking account as well – and it may not have an ATM card available.
Can you lose money in a high yield savings account?
If your money is held at an FDIC-insured bank or at an NCUA credit union – in an eligible account – and within insurance guidelines, then your account should be safe.
FDIC insurance is backed by the full faith and credit of the U.S. government. The NCUA administers the National Credit Union Share Insurance Fund (NCUSIF), which is a federal insurance fund also backed by the full faith and credit of the U.S. government.
Accounts may lose money if the amount of fees you incur outnumbers the amount of interest you’re earning. To avoid this, make sure you’re aware of minimum balance requirements and other fees before opening a savings account.
How much money does the average person have in savings?
A savings account is very important for unexpected events. This could be anything from unemployment, an illness or an unexpected home or automobile repair. These things aren’t predictable, so your savings will help you if an event like this happens.
Savings also helps you achieve 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.
How much should I have in savings?
To start, you should have at least enough to cover three to six months’ worth of expenses. That amount should be the minimum for your emergency fund. After that, you should have additional savings and start to save for specific goals. These goals could range from buying a home, buying a car, going on a vacation or any other item or thing you’re saving for.
Always try to have more than you need in an emergency savings account. If an emergency happens, you don’t want to need to borrow money.
Once you start budgeting, see if you can find items that you don’t need to spend money on. Recurring monthly subscriptions can be a great way to find money to save. A streaming service you don’t use enough or a gym that you don’t go to can be a great way to start saving more. Making meals instead of eating out at restaurants, or at least eating out less often, can really make a difference.
How much should you have in emergency savings?
At the very least, you should be able to cover three to six months of expenses in your emergency fund. 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 and planned for the unexpected expense.
You may want to put this emergency savings in a separate account; this way, it isn’t accidentally used for non-emergency purchases.
Are you able to withdraw money from a savings account?
Generally, 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.
Some banks may restrict the amount of money that you can withdraw during a certain time period. Plus, under Regulation D, you’ll be limited to six convenient withdrawals per statement cycle.
Is it better to bank with a credit union?
It’s smart to compare banks and credit unions when looking for a new financial institution. But banks aren’t necessarily better than credit unions, and vice versa. Just make sure the bank is insured by the FDIC and the credit union is insured by the NCUA.
Generally, anyone can be a customer at a traditional bank. But a credit union may have certain stipulations for membership. Some credit unions may have more competitive APYs than banks. And some online banks may have higher APYs than credit unions. A credit union may have lower fees. However, many online banks have low or no minimum balance requirements to avoid fees. Or they may not have any maintenance fees at all.
Do I have to pay taxes on my savings account?
Generally, any interest you’re earning from 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 product, you'll be required to submit at 1099-INT form to the IRS.
If you’re concerned about your tax bite 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 when your child’s ready to withdraw them. Fortunately, you don't have to pay interest on your savings account's balance, only on the interest earned. So, if your savings account has $1,000 and you earn $10 in interest for the year, you only pay taxes on that $10 gain.
"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.
Is a high-yield savings account worth it?
A Bankrate survey in May found that nearly a quarter of Americans aren’t earning any interest at all and 20 percent were earning less than 1 percent.
While the average savings account pays 0.1 percent APY, a couple dozen online accounts give savers the chance to earn much more than that. Choosing a high-yield savings account is worth it.
Even though there have been a couple of rate decreases in 2019, there were nine rate increases from 2015 to 2018. These past increases are part of the reason why some savings yields are pacing higher than inflation. Over time, if your money isn’t keeping up with inflation it’s losing purchasing power. The inflation rate was around 1.6 percent in September.
Having a high-yield savings account will give you the chance to earn more interest in a shorter amount of time, allowing you to reach your savings goals much faster.
Why do online banks pay more interest?
In some cases, the biggest banks still pay their customers with savings accounts less than 1 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.
No matter where your savings account is, you should be earning at least 2 percent APY.
“Online banks pay higher yields than the standard brick and mortar because they have less overhead costs,” Bunich says. “It’s similar to Amazon.”
Though online banks offer higher savings rates and fewer fees than traditional banks, consumers should consider their individual financial needs. Having access to bank branches, for example, might be worth it, depending on your personal situation.
Is it bad to have multiple savings accounts?
Having more than one savings account isn’t a bad idea if you have multiple savings goals. 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 money.
“Our default for our financial lives should be to streamline, whether accounts or decisions. However, we tend to apply mental accounting to our physical accounts,” says Beth Agnello, a financial planner and founder of Fair Winds Financial Advice. “If I have a savings account that I think of as my emergency fund, I'll be reluctant to spend it for anything that isn't an emergency.”
Whether you should have more than one account will also depend on your situation, experts say. Gordon Achtermann, founder of Your Best Path Financial Planning, says it makes sense to have several savings accounts if you’re a couple who want separate accounts and another account for joint expenses. You may also need to open a savings account at a different bank if you have more than $250,000 in savings, Achtermann says, which would surpass the limit set by the FDIC for insuring deposits for each depositor at a member bank, for each ownership category.
How many savings accounts should you have?
Some savers may be better off keeping everything lumped into one account.
"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.
How many accounts you should have will vary. You’ll have to consider multiple factors, including how many children you have and whether you want separate buckets for different purposes.
“You definitely don't want to open accounts frequently or without a specific goal in mind, but beauty is in the eye of the beholder here,” Guay says.
What types of savings accounts should I have?
Savings accounts may vary slightly depending on the bank you choose. Most by now have standard features like mobile check deposit and electronic transfers from an external account. But that doesn’t mean 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. They also charge fewer fees. Though you have some options, it’s best to opt for a low-fee, high-yield savings account that’s paying a competitive rate. Otherwise, you’ll miss out on the chance to earn more interest that can help you reach your savings goals in less time.
Anytime you’re choosing a savings account, make sure it’s insured by the FDIC or a National Credit Union Administration credit union, which operates and manages the National Credit Union Share Insurance Fund (NCUSIF).
How much is too much to put in a savings account?
Savers should keep in mind that savings accounts are designed to hold short-term savings, like money you want to put away for a crisis or emergency. They’re not the best option to hold funds that you’ll use years from now when you’re ready to retire.
Beyond the amount you’re setting aside for a specific goal or a rainy day, you’re better off parking your extra long-term funds in an account that will allow you to earn more interest.
“Funds you won't be using in the next several years should be part of your long-term investment plan and not left sitting in a savings account earning a minimal return,” Agnello says. “If you keep your savings in a bank, don't exceed the FDIC insurance limit of $250,000 per depositor.”
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 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
Money Market Accounts
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.
Allow 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.
Often pay more than both 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.
Another big difference between the two is what can be done with your deposited savings. Banks and credit unions can use the money you deposit into a money market account to make low-risk investments in financial products like CDs. But with a savings accounts, institutions can only use your savings to make loans to other customers.
Online vs. brick-and-mortar banks
It usually doesn’t matter where you live in the United States in order to bank with a direct or online bank. Some online banks may limit its customers to certain states or the continental United States. But generally, location isn’t a factor for online banks, as long as you reside in the U.S.
Location is everything a lot of the time with brick-and-mortar banks. Most of the time if you don’t live near a brick-and-mortar bank, it wouldn’t make sense to bank with that institution. A potential exception to that rule may be if that bank offers reimbursement on foreign ATM fees – ATM withdrawals at a different bank which usually would incur a fee. But if you have a brick-and-mortar bank account, you should at least be near one of its locations.
Online Bank
Brick-and-mortar bank
Hours of operation
24 hours a day, 7 days a week.
(Though actual customer service hours may vary, generally you should be able to bank 24/7 – an online bank should never be closed.)
Potentially bankers hours. And likely limited at night and on Saturdays and likely closed on Sundays and on holidays. Customer service may be available 24 hours a day, 7 days a week at some banks.
ATM networks
Some may reimburse ATM fees and some won’t charge ATM fees for using foreign ATMs. (All ATMs will be foreign since an online bank is unlikely to have its own. Though it might be a part of an ATM network.) If they do, then it’s like every ATM is your bank. Some of these banks don’t allow ATM access.
Generally, these banks have their own ATMs. But certain accounts may waive foreign ATM fees, depending on the account type that you have.
Interest rates
Generally, online banks offer higher APYs than traditional banks.
Generally, these banks have lower APYs on their savings products than direct, or online, banks.
Customer service
Customer service available via telephone support and potentially via secured message on an app. Website may also contain customer service information.
Customer service in the bank during banking hours, via telephone number, and potentially via secured message on an app. Website may also have customer service information.
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 more than traditional savings accounts. But there are some savings accounts these days that have both a very competitive APY and low minimum balances. But money market mutual funds often pay more than both money market and savings accounts.
Fees:
All of these types of savings vehicles may come with some fees. But thanks to minimal 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.
Uses for a savings account
Tips to save for the future
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.
Best interest rates for online savings accounts
Bank Savings Accounts
APY
Minimum Balance for APY
Best for
Comenity Direct High-Yield Savings
1.90%
$1
Best Rate (tie)
Popular Direct Ultimate Savings account
1.90%
$5,000
Best rate (tie)
WebBank Savings
1.86%
$0.01
Runner-up Rate
Citi Accelerate Savings
1.85%
$0.01
Best Rate at a Big Bank
Vio Bank High Yield Online Savings
1.85%
$0.01
Best for Low Minimum to Open and Competitive APY
HSBC Direct Savings
1.85%
$1
Best for Competitive APY/no maintenance fee combo
CIBC Agility Online Savings Account
1.85%
$1
Best for Consistent APY
Citizens Access Online Savings Account
1.85%
$5,000
Best for Balances over $5,000
MySavingsDirect High Interest Savings Account
1.80%
$0
Best for Low Balances
CIT Bank Savings Builder
1.75%
$25,000 or $100 deposited monthly
Best for Recurring Savings
American Express High-Yield Savings Account
1.70%
$1
Best for 24/7 phone support
Barclays Online Savings Account
1.70%
$0.01
Best for No Minimum Balances to Open
FNBO Direct Savings account
1.70%
$1
Best for Opening an Account with $1
Marcus by Goldman Sachs High-Yield Savings
1.70%
$0
Best for Easy External Transfers
Synchrony High Yield Savings
1.70%
$1
Best Rate with ATM Access
PurePoint Financial Online Savings
1.70%
$10,000
Best for Balances over $10,000
Ally Bank Online Savings Account
1.60%
$0.01
Best for Customer Experience
Discover Online Savings Account
1.60%
$0
Best Variety of Banking Options
*Accounts are required to stay above $1,000
Bankrate regularly surveys approximately 4,800 banks and credit unions in all 50 states to provide you with one of the most comprehensive comparisons of interest rates. All of the savings accounts below are insured by the FDIC at banks or the NCUA at credit unions. When selecting the best savings account for you, look for the highest yield while also considering introductory rates, minimum balances and accessibility.
Savings rates news
From 2015 to 2018, there were nine total rate increases. But on July 31, and most recently Sept. 18, the Fed lowered rates for the first time in a decade.
Savings rates started declining in late June, in anticipation of the July rate cut.
Nearly all high-yielding banks have decreased their savings accounts since that Fed meeting. Savings accounts have variable rates, so the Fed’s actions usually affect those APYs.
If you’re concerned about this rate cut or future decreases, consider a CD. CDs usually have fixed APYs for their term.
The best and worst metros for savers in 2019
The ability to save for financial emergencies varies widely based on your zip code.
Typical households in and around Memphis, Tennessee, could gather enough cash to cover six months’ of expenses in about a year if they scrimped and saved, while those in California could find it impossible to build a recommended savings fund even after a decade, according to the 2019 Bankrate Study of the Best Metros for Savers.
The study found the four largest metro areas in California fared the worst for typical households trying to save out the 50 largest metro areas. If households earned the median income for their areas, made mortgage and other necessary payments toward the median price home and spent reasonable amounts on other essentials — like transportation, groceries and healthcare — they’d finish each month in the red.
Using the same guidelines, a penny-pinching family in the Memphis metro area would be able to build their emergency budget in about 12 months. The birthplace of rock ‘n roll claims the top spot for savers, according to the study.
The worst metros for savers
San Jose-Sunnyvale-Santa Clara, California
San Francisco-Oakland-Hayward, California
Los Angeles-Long Beach-Anaheim, California
San Diego-Carlsbad, California
New York-Newark-Jersey City, New York-New Jersey-Pennsylvania
The top metros for savers
Memphis, Tennessee-Mississippi-Arkansas
Cincinnati, Ohio-Kentucky-Indiana
Cleveland-Elyria, Ohio
Pittsburgh, Pennsylvania
Detroit-Warren-Dearborn, Michigan
The full 2019 Bankrate Study of the Best Metros for Savers can be found here.
Bankrate survey reveals that many savers are not earning the highest APY available
One simple change could put hundreds of extra dollars in the pockets of the average American.
Data from 60 federally insured savings and money market accounts included in Bankrate’s Online Savings Survey reveals that most online institutions pay at least 2 percent APY. Based on the average savings account balance (and assuming interest is compounded daily), a typical American should be earning close to $200 in interest per year.
But most Americans end up with a lot less interest than that, according to Bankrate’s latest Financial Security Index. Nearly one in four aren’t earning any interest at all on their savings.
The solution is simple: Sign up for an online savings account. These accounts typically reward savers with a higher yield than the ones offered by traditional brick-and-mortar banks.
Best of all, you don’t have to be wealthy or have a lot of money stashed away to open an online savings account. More than half of the accounts in the survey can be opened with a low minimum deposit and most have no ongoing balance requirements.
You’ll save money on fees, too, by making the switch to an account at a digital bank. Few come with a monthly service charge.
Accessibility and convenience are also hallmarks of an online savings account. Most come with an app that allows customers to access their accounts around the clock from any location.
The full 2019 Bankrate Online Savings Survey can be found here.
