Organic Food Is More Expensive, but Conventional Prices Are Catching Up
Monday, October 18, 2021
Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.
One thing that financial and nutritional health have in common is everyone needs a budget that works for their goals and abilities, whether this is tracking money or calories. Shopping for food requires attention to both financial and eating habits, as well as personal desires or choices like eating organic or skipping meat.
The U.S. Department of Agriculture (USDA) tracks changes in food pricing by looking at snapshot data of prices across various items. To find trends among food pricing and where consumers could be saving, MagnifyMoney researchers analyzed prices for organic and conventional meats, dairy items, fruits and vegetables in 2019 and 2021.
Some findings may not be surprising, like organic foods overwhelmingly costing more than conventional, but the data suggests that could change in the future.
Conventional food prices are rising at a much faster rate than organic costs. Since 2019, prices for select conventional meats, dairy items, fruits and vegetables have risen by an average of 13.9% — 12 percentage points more than the 1.6% growth in costs for organic varieties.
Despite rising conventional prices, organic foods are still more expensive. Of the produce prices examined, sweet onions are the only item for which the conventional price is higher than organic cost — 12 cents more per pound, or 9.8%.
On average, non-organic meat prices are rising faster than costs for conventional fruits and veggies. Prices across the selected non-organic varieties of produce items have increased an average of 13.1% over the past two years, compared with a 15.6% rise across meat product prices in the same period.
Though certain cuts of meat have seen price drops, they haven’t been nearly as significant as cost increases. Among the beef, chicken and pork cuts with the greatest two-year hikes, prices have risen between 43.8% and 110.9%, versus decreases of 17.1% to 41.2% across the meat prices that fell the most in the same period.
Conventional food prices rising faster than organic costs
If you’ve shopped for groceries, you probably have noticed the price differences between foods with an organic label and conventional products. Organic foods generally cost more for consumers due to higher production and labor costs, as well as limited supply. For those organic-preferring shoppers, the good news is the costs of organic produce, dairy and meats are rising slower than conventional foods.
Across 29 items analyzed, conventional foods have increased by an average of 13.9% from 2019 to 2021, while the organic versions of the same products only rose by an average of 1.6%.
Broccoli features the biggest difference in percentage points — 117 — between organic and conventional pricing changes. Organic broccoli increased from $2.10 a pound in 2019 to $2.61 in 2021, a 24.3% jump, while conventional broccoli went from $0.63 to $1.52, a 141.3% increase.
Products with fastest growing conventional and organic prices, 2019 to 2021
Fastest growing conventional prices
Fastest growing organic prices
Boneless, skinless chicken breasts
Granny Smith apples
Granny Smith apples
Chicken breast tenders
Note: The conventional items included are limited to items with an organic version.
By category, conventional dairy items have escalated the fastest since 2019 at an average of 25.6% across cheeses, milk and yogurt. Non-organic produce prices jumped an average of 13.1%, while the average cost across different cuts of regular chicken grew by an average of 4.9%.
Fruits and vegetables represent the only organic group to record average price growth — granted, the number of items sampled is also the largest. Organic produce prices grew at an average of 2.8% since 2019, while organic dairy and chicken prices dropped by 0.9% and 0.4%, respectively, on average.
Despite price increases, conventional foods remain cheaper than organic counterparts
Even though conventional food prices have risen significantly while organic prices remained fairly stagnant, conventional prices still beat organic for nearly every product in the sample. Sweet onions are the only item among the tracked prices where shoppers may save by buying the organic variety. A pound of organic sweet onions costs $1.11, compared with $1.23 per pound for non-organic — a 9.8% difference.
Otherwise, organic items cost an average of 70.7% more than their conventional counterparts. Though the difference in prices is typically less than a dollar per pound/package/etc. for fruits and vegetables, the difference in chicken pricing varies widely between conventional and organic. Chicken thighs have the greatest price disparity by percentage (321.6%), with a pound of conventional thighs costing just $1.16, versus $4.89 for organic. Both varieties of chicken thighs have dropped in price since 2019, but organic prices continue to dwarf conventional.
Regardless of cut — thighs, breasts, drumsticks or whole — conventional chicken costs an average of 188.5% more than organic. Consumers pay as much as $5.86 more a pound for organic chicken.
2021 organic vs. conventional pricing, fresh chicken
Conventional price per pound
Organic price per pound
Boneless, skinless breasts
Whole bagged fryer
Outside of chicken, organic yellow onions outsize conventional by the greatest ratio at a 90.4% increase. Organic fruits and vegetables cost an average of 42.7% more than conventional items.
2021 organic vs. conventional pricing, fruits and vegetables
Conventional price per pound*
Organic price per pound*
Carrots (1-pound bag)
White seedless grapes
Black seedless grapes
Blueberries (1 pint)
Baby spinach (10 ounces)
Red seedless grapes
Granny Smith apples
Romaine hearts (3-count pack)
*Unless otherwise noted
Organic dairy products also run significantly more expensive than their conventional counterparts. A gallon of organic milk, for example, costs 71.3%, or $2.49, more, on average, than regular milk. Across various dairy products, organic prices average 42.8% higher than conventional.
2021 organic vs. conventional pricing, dairy products
Cottage cheese (16 ounces)
Cheese (8-ounce block)
Greek yogurt (32 ounces)
Cream cheese (8 ounces)
Though saving a few dollars to buy conventional food might not seem like a major budgeting win, when you consider MagnifyMoney’s finding that 3 in 10 consumers withdrew money from their retirement funds in the early weeks of the coronavirus pandemic to pay for necessities including groceries, those little extra savings can make a difference in a pinch.
Vegetarians may be saving as meat prices rise faster than produce
It’s not just poultry prices taking flight. Beef and pork prices have risen at a significant rate over the past two years as well. Across various cuts and preparations of chicken, beef and pork, per-pound prices have risen an average of 15.6% since 2019.
While overall that growth isn’t too much more than conventional fruits and vegetable prices (13.1%), cuts of meat that have seen the greatest price gains have increased rapidly. Just one produce item — broccoli — has increased by more than the beef, pork and chicken cuts with the largest average retail price jumps by percentage since 2019.
Conventional fruits and vegetables with the biggest 2-year average retail price jump
2019 price per pound*
2021 price per pound*
Granny Smith apples
Blueberries (1 pint)
Romaine hearts (3-count pack)
Baby spinach (10 ounces)
*Unless otherwise noted
Meat prices across the biggest risers have grown quite remarkably, from 43.8% to 110.9%.
Meat with the biggest 2-year average retail price jump
Bottom round steak
Boneless butt roast
Boneless loin roast
Boneless, skinless breasts, regular pack
Note: Excludes organic and specialty items. 2021 prices are weekly retail averages reported on Sept. 17, while the 2019 prices are from the equivalent week.
Not all meat prices rising, but drops not as dramatic as jumps
All hope is not lost for budget-friendly carnivores, though. Where meat prices have shifted down, the changes haven’t been nearly as significant as the increases. Across the meat cuts with the largest two-year price drops, costs have declined between 17.1% and 41.2%. Beef brisket saw the biggest price reduction.
Meat with the biggest 2-year average retail price drop
Boneless sirloin roast
Assorted bone-in chops
Rotisserie whole (2.1 to 3.0 pounds)
Drumsticks, regular pack
Rotisserie whole (under 2 pounds)
Note: Excludes organic and specialty items. 2021 prices are weekly retail averages reported on Sept. 17, while the 2019 prices are from the equivalent week.
Don’t let your grocery savings spoil
Finding ways to save money at the grocery store can be as simple as switching brands or as involved as changing your diet. However you choose to find savings, make sure you stash that extra cash somewhere it’ll grow.
MagnifyMoney analysts reviewed weekly retail pricing data from the U.S. Department of Agriculture (USDA). 2021 snapshot data is from the week ending Sept. 17, while the 2019 snapshots are from the equivalent week.
To discuss conventional versus organic, researchers analyzed prices for 29 conventional chicken cuts, dairy items, and fruits and vegetables in which there was also an organic version. To discuss the cuts of meat with the largest average retail price jumps and drops, researchers analyzed 46 cuts of beef, 46 cuts of pork and 37 cuts of chicken.
Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It may not have not been reviewed, commissioned or otherwise endorsed by any of our network partners or the Investment company.
Many people dream of the day when they can finally sit back and relax in retirement — and a lot of people want that day to come as soon as possible. If you’d like to plan for early retirement, there are several strategies to help get you there.
You need to first determine how much money you’ll need when you retire and set a target date for retirement, then you’ll have to get to work on saving and investing your money: maxing out retirement savings accounts, living on a leaner budget and investing your nest egg. With years of diligent saving, you can expedite your retirement and exit the workforce sooner.
The first step toward that goal of early retirement is determining how much money you’ll need on an annual basis when you’re done working. You will still have many of the same costs as you did before retirement — including rent or mortgage payments, utilities and transportation.
You also might incur additional costs as you get older: for example, many seniors wind up needing costly long-term care. While it’s difficult to forecast some of those expenses, you should factor in the possibility of those types of long-term costs when making your retirement budget.
Of course, social security, pension payments and retirement savings can help seniors bear the cost of living expenses once they’re out of the workforce. If you have a good idea of how much you’ll be receiving from that type of income, you can incorporate it into your retirement budget forecast.
Planning for health insurance coverage
If you plan on retiring early, you need to consider how you’ll pay for health insurance at the beginning of your retirement. Exiting the workforce usually means losing employer-sponsored health insurance coverage, and Medicare isn’t available to those people under the age of 65.
The Affordable Care Act, popularly known as Obamacare, is an option for bridging the health insurance gap between your retirement and when you become eligible for Medicare. However, health insurance premiums and deductibles can be much higher than they were on an employer-sponsored plan.
2. Set a target savings goal
Once you have an estimate of what your annual expenses in retirement will be, you should set a goal for how much money you will need to save. There are several common ways to set a target savings goal for retirement:
25x rule: A straightforward way to estimate your total retirement savings goal is to multiply your expected annual expenses by 25. That amount of money will last longer than 25 years if your nest egg earns a steady steady rate of return over the course of your retirement.
4% rule: The 4% rule is an inverse of the 25x rule and is based on the idea that you should withdraw no more than 4% of your savings during the first year of retirement. In subsequent years, you should increase that amount based on the rate of inflation.
80% income rule: This rule works differently and restricts the retiree to spending only 80% of their pre-retirement income (they could choose 75%, 85% or another number too). You’ll need to multiply that annual expense estimate by however many years you expect to be retired.
Suppose you estimate that you’ll need $75,000 per year for retirement. According to the 25x rule and 4% rule, you’ll need $1.875 million in savings. It’s a rough approximation for how much money you’ll need, but it’s a way to target a specific number as you decide on your strategy for early retirement.
3. Set a target date for retirement
After coming up with a target savings goal, the next step toward early retirement is deciding when you plan to retire. Of course, that date doesn’t necessarily have to be a commitment; if you fall short of your savings goals, you may want to postpone retirement. But having a set date for when you intend to retire can help motivate you to reach those goals.
Just like your annual retirement expense estimates, you should estimate how much money you’ll be able to save for retirement per year and what kind of rate of return you expect to earn on those savings. People generally pursue aggressive savings strategies when planning for an early retirement — living a leaner lifestyle before retirement can expedite that retirement date.
MagnifyMoney has a retirement calculator that can help you set your goal too. Once you’ve calculated what it will take to retire early, you’ll have to determine how you’ll save enough to do it.
4. Boost your retirement savings
A consistent savings strategy is the most important element to achieving that goal of retiring early. There are a few popular strategies when it comes to saving as pragmatically as possible with the goal of an early retirement in mind.
Max out retirement account contributions
Tax-advantaged retirement accounts, like an employer-sponsored 401(k) and an Individual Retirement Account (IRA), are some of the best ways to save for retirement. With a 401(k), employers often match employee contributions and this money adds to the value of savings, even before factoring in the tax advantages.
Contributions to 401(k) accounts are often made pretax through payroll deductions, grow tax free and are taxed upon withdrawal. IRAs work similarly, though they’re contributions that are made independently from an employer. Investors can choose a Roth structure for their 401(k) or IRA, in which contributions are taxed and withdrawals are tax-free instead. There are contribution limits on all of these types of accounts, but because of those tax advantages, experts recommend making the maximum contributions if you can.
If you retire early, though, beware that you cannot withdraw funds from your 401(k) or IRA without penalty before the age of 59½ — meaning that you’ll need to use your other savings earlier in retirement.
5. Live on leaner budgets
Of course, in order to contribute a significant portion of your income toward saving for retirement, you might need to cut back on your expenses in the short term — or develop some alternative income streams.
There are plenty of ways to cut costs so you can contribute more money to retirement: living with roommates, using public transit, avoiding large purchases and so on. Unless you earn a lot of money, you might need to make some sacrifices in your budget in order to contribute enough to reach that target date for early retirement.
While most people might not want to live the lifestyle of the most fervent FIRE adherents — like having an austere, bare-bones budget while working two or three jobs definitely doesn’t appeal to everyone — this mindset could apply to anyone looking to retire early. For example, paying off debt as quickly as you can is considered a best practice for retiring early.
Each dollar saved is a dollar toward retirement. Everyone wants financial independence, and the FIRE movement gets people there faster.
There are a lot of strategies for investing — and the one you choose will depend on your risk tolerance and target date for retirement. Here are some common investment methods:
Stocks — Investing in the stock market is a common way to grow your net worth, and your retirement savings accounts may be tied into the stock market. Experts tend to recommend index funds that track the broader stock market and an asset allocation strategy including bonds as a hedge against a potential market downturn.
Bonds — The bond market works much like the stock market, though instead of shares of a publicly-traded company, bonds are assets with a guaranteed return at their maturity date, backed by private companies or the federal treasury. Bonds are a comparatively stable investment relative to stocks.
Real estate — If you can afford it, real estate has two benefits: it holds value as a speculative asset for when you’re ready to sell it, and you can collect rents on commercial or residential properties. There are some maintenance costs and taxes, and real estate investments don’t always appreciate in value (though they usually do).
Deposit accounts — Investors targeting an early retirement generally don’t keep much of their money in deposit accounts like savings accounts or certificates of deposit (CD) because the return is lower, but it is the safest strategy and could be a good option as you near that target date.
Investors tend to pursue more aggressive tactics when saving for an early retirement, but it’s important to consider the potential downsides of putting your nest egg into volatile investments. Targeting a high rate of return is an important part of investing with an eye toward retiring early, but avoiding unnecessary risk is just as important.
Staying on track to reach retirement
Once you’ve set your retirement goals, it’s important to regularly check in to see whether you’re hitting your target savings amount each month, assessing whether you have any unexpected changes that cause you to change your goals and revising your target retirement date accordingly. You may not have to check in on the big picture every month, but you should take stock of where you stand at least once per year.
Of course, a financial advisor could help you navigate those dynamics and provide those updates for you — though they do come with a cost for their services. Even if you’re working alone, it’s critical to have a good idea of where you stand when it comes to your goal of retiring early.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.
Online savings accounts are the future of savings, with high yields, little to no fees and convenient 24/7 access. Our team of experts evaluated over 200 banks and credit unions to find the best high yield online savings account. We cross-referenced each of the key traits that customers look for in a high-yield savings account, including APY, minimum balance requirements and monthly fees.
This list is refreshed regularly to ensure it always features the best online savings accounts and we’re constantly adding new ones to our database as they become available.
MagnifyMoney has been covering deposits, investing and personal finance for almost a decade. Our team collectively has over 50 years of experience covering and researching financial topics. Our ranks include former analysts from major banking institutions, financial news reporters who have been featured on major networks like Forbes, CNN and MarketWatch and economists and thought leaders from major media outlets like LendingTree and DepositAccounts.com.
Workers Credit Union offers a unique savings account called SaveUp Savings that offers a higher APY when you deposit $50 or more into the account in a given month. The SaveUp Savings account has various balance tiers, and pays a lower base APY when no deposits are made.
Right now, WCU has great rates for low balances: you can earn 3.61% APY on balances under $1,000 when you complete the deposit requirement. The account has a blended APY for balances above that amount.
WCU is open to everyone. If you’re not eligible through ties to certain areas of Massachusetts, an employer or your family, you can join by becoming a member of the Financial Fitness Association or donating to the United Way of North Central Massachusetts. In either case, WCU will pay for the donation or membership fee.
Affirm’s 0.65% APY on all savings account balances is one of the best available rates for consumers right now, far exceeding the national average. Affirm Savings is a solid, simple savings account with no minimum balance requirement or monthly fees, which also comes with a straightforward mobile app.Affirm is a financial services company known for offering payment plan options at checkout, but it recently expanded into banking services. Affirm’s savings account is held with Cross River Bank, which provides FDIC insurance for the account.
The High Yield Savings account offered by Axos Bank is a solid online savings account, especially if your balance is under $25,000, which earns the top APY of 0.61%. Higher balances have an APY of 0.25% or lower. Plus, interest compounds daily, which offers a marginally higher rate compared to accounts that compound interest monthly or quarterly.Axos Bank doesn’t require a minimum balance to earn interest nor does it charge monthly fees; however, an initial deposit of at least $250 is required to open the High Yield Savings Account. As an online-only bank, Axos boasts a strong online banking platform, and an ATM card is also available upon request.
4. Prime Alliance Bank Personal Savings Account — 0.60% APY
Prime Alliance Bank’s Personal Savings account offers a 0.60% APY on all account balances. Additionally, there are no monthly maintenance fees or minimum balance requirements associated with the account.
Prime Alliance Bank was founded in Utah as a community bank, but expanded into national services in 2004. It offers both a mobile application and online platform for its savings account.
5. Quontic Bank High Yield Savings Account — 0.55% APY
Quontic Bank’s high-yield savings account offers a strong APY of 0.55%, with interest compounded daily. And while there isn’t a minimum balance requirement to maintain an account, at least $100 is needed to open one. Customers have access to a large national network of ATMs, as well as online and mobile app platforms.
Quontic Bank focuses on serving traditionally underbanked communities and offers some unique products, including a Bitcoin rewards checking account.
6. Alliant Credit Union High Rate Savings — 0.55% APY
The Alliant Credit Union High Rate Savings account has a low minimum opening deposit — just $5, and they’ll pay it for you — though a balance of at least $100 is required in order to accrue interest. However, as long as you opt for eStatements, there is no monthly fee for members.
In order to open a savings account with Alliant Credit Union, you’ll first need to become a member, which you can do by meeting one of the following requirements:
Current or retired employee at business or organization that Alliant partners with
Domestic partner or immediate family member of an Alliant member
Live or work in the Chicago metro area
Member of a qualifying organization
If you don’t meet any of the above requirements, you can still join by becoming a member of Foster Care to Success, and Alliant will even pay the $5 membership fee on your behalf.
7. Comenity Direct High-Yield Savings Account — 0.55% APY
Comenity Direct requires a minimum deposit of $100 to open and maintain its High-Yield Savings Account, which offers a 0.55% APY on all balances over that amount. The account has no monthly fees, but there is a $5 fee for paper statements, which are provided upon request.
Comenity Direct started in 1986 offering credit cards, and has since expanded into online banking services. In addition to its High-Yield Savings Account, it offers certificates of deposit (CDs).
Fitness Bank, a division of Affinity Bank, offers perhaps the most unique savings account on the list: Its Fitness Savings Account ties its APY to how active members are.Customers will need to download an app called the Fitness Bank Step Tracker, which links with popular platforms like FitBit, Garmin and Apple Health. Fitness Bank then calculates its members’ APY based on the average of their daily step count over monthly intervals:
0.55% APY: 12,500 or more steps per day
0.45% APY: 10,000 to 12,499 steps per day
0.35% APY: 7,500 to 9,999 steps per day
0.25% APY: 5,000 to 7,499 steps per day
0.25% APY: 0 to 4,999 steps per day
There are also senior rates available, which tie lower step counts to each bracket for members who are at least 65 years of age.
Fitness Bank does require a minimum opening deposit of $100, and members have to maintain a balance of at least $100 to both earn interest and avoid the $10 monthly maintenance fee.
9. Vio Bank High Yield Online Savings Account — 0.51% APY
Vio Bank is an online-only division of MidFirst Bank, the largest privately owned bank in the U.S. It currently offers a competitive 0.51% APY across all balances in its High Yield Online Savings Account.
The account charges no monthly fees, but be sure to look out for the $5 monthly fee associated with requesting paper statements. A minimum of $100 is required to open an account, and no minimum is needed to earn the advertised APY.
10. Live Oak Bank High Yield Online Savings — 0.50% APY
Live Oak Bank’s High Yield Online Savings Account has a solid APY and no monthly maintenance fee or minimum balance requirements. Still, you should watch out for its dormant account fee, which Live Oak Bank charges for accounts with a balance of $10 or less and no activity for two years.
Live Oak Bank is a North Carolina-based bank that specializes in handling small business accounts, but it also offers a few personal banking services, including its online savings accounts and CDs.
Why trust us?
At MagnifyMoney, it is our mission to inform our readers about the best financial opportunities out there. Our insights have been cited by top financial publications including Marketwatch, CNBC and the Wall Street Journal.
Our dedicated team of financial experts spends dozens of hours grading online savings accounts according to their interest rates, fee schedules, extra features, minimum balance requirements and accessibility, adjusting our rankings as banks and their offerings change on a weekly basis.
We distilled our picks from a list that included hundreds of banks, credit unions and online institutions nationwide.
Our methodology for picking the best high-yield savings accounts
To determine the best high-yield online savings accounts, MagnifyMoney looked at over 200 financial institutions, ranging from small community banks and credit unions to traditional brick-and-mortar banks and online banks. We review our list on a weekly basis to ensure we’re providing readers with the most up-to-date information.
Specifically, we looked at the following factors to determine whether an account made our list and what its ranking was:
Savings account rates: We heavily weighted the APYs offered by each bank, selecting the accounts with the highest APYs for our list. We then ranked the accounts from highest to lowest APY.
Minimum balance to earn: To ensure the accounts we selected were accessible to all customers, we only considered accounts with a minimum balance of $100 or less required to earn the account’s APY. When accounts offered the same APY, we determined their ranking based on which account had the lowest minimum balance requirement to earn the advertised APY.
Maximum balance to earn: Customers shouldn’t be limited in their interest-earning potential; as such, we eliminated any accounts that capped the balance at which customers could earn interest at $10,000 or below. Accounts that only allowed customers to earn interest on balances between $0 and $10,000 were not eligible for our list.
Account fees: Because fees can cut into your long-term savings, we prioritized accounts with no or low fees. Only accounts with monthly maintenance fees of $10 or less were eligible for this list.
Nationwide availability: To further ensure the accessibility of the accounts selected, we only considered accounts that are available nationwide.
FDIC insurance: It is crucial for your deposit account to be protected by FDIC insurance in the case your financial institution were to fail. As such, we only included FDIC-insured accounts on our list.
What should I know about high-yield savings accounts?
It’s easy to take your savings account for granted, setting up automatic deposits and forgetting about it. But there’s a lot more to high-yield savings accounts that you should know.
For one, you can find consistently more competitive rates at online banks than with your typical big bank. Online banks are also more fee-friendly — although there are still some legal limitations you should be aware of to avoid extra fees.
What is a high-yield savings account?
A high-yield savings account, also known as a high-interest savings account, is a savings account that earns interest at a higher rate than a traditional savings account. The average savings account interest rate tends to hover around 0.06% APY, but big brick-and-mortar banks often offer interest rates more like 0.01% APY.
High-yield savings accounts raise the bar and offer upwards of 0.50% APY — given the current 2021 rate conditions. High-interest savings accounts are also more likely to come with added benefits like little to no fees, especially when offered by an online bank.
How much interest will I earn with a high-yield savings account?
When you open a high-yield savings account, you’re almost guaranteed to earn more in interest than with a traditional savings account.
For example, let’s say you have $5,000 to deposit into a savings account. If you choose a high-interest savings account with a 0.60% APY, for example, you’ll earn $30 in a year, provided you don’t make any additional contributions to the account in that time (which would boost your savings even more).
If you deposit your $5,000 into an average savings account at 0.06% APY for a year, you’ll earn just $3 in interest. It’s a pretty big difference in earnings, and all it takes is a simple account switch.
Does the APY for high-interest savings accounts change?
Savings accounts are variable-rate accounts, so their rates are subject to change — and they will over the course of an account’s lifetime. This is in contrast to fixed-rate savings vehicles, like CDs, which have set rates for predetermined periods of time.
There is no universal answer for how often interest rates change on high-yield savings accounts, since each institution has its own policies and decisions. However, you can often expect an institution to change its savings account rates about once a month at least. This change typically happens at the beginning of the month.
High-interest savings accounts are also more likely to see changes in their APYs than traditional low-rate savings accounts, because high-interest accounts have more room to change. Traditional savings account rates can only go so low, especially since many of them are already bottomed out at 0.01% APY.
How to choose the best high-yield savings account
Start by finding the highest APY
Check whether the institution is consistent with its high rates
Look for a no-fee account
Confirm any account balance minimums
When you’re looking for the best high-yield savings account, it’s tempting to go straight for the highest APY you can find. That account will certainly offer the highest yield at the moment, but there’s also more to it than that. Unless you’re okay with the possibility of switching accounts periodically to chase the highest rates, it may help to find an account offered by an institution that consistently offers some of the most competitive savings account rates. We’ve started our roundup above with those accounts, offered by consistent industry-leaders over the past two years.
But high yields may mean nothing if you lose your earnings to fees, so the best high-interest savings accounts out there are also the ones with little to no fees. Look for accounts with no monthly service fees, no overdraft fees and/or no excessive transaction fees. This will help you keep your savings intact.
You’ll also want to choose a high-yield savings account that works within your existing finances. Some accounts may impose minimum deposit or balance requirements to open and keep the account. We think the best high-interest accounts are the ones that require low or $0 minimums, which makes the account much more accessible to savers. But, if you have a high balance and find a savings account that offers a higher rate for high balances, then you can go for that account if it better fits your needs.
How do I open a high-yield savings account?
In most cases, opening a high yield savings account is as easy as clicking a button on the institution’s website and completing a short application form. You will likely be approved for the account right away.
A savings account application will likely require your name, home address, email address and Social Security Number. If the account requires a minimum deposit at opening, you’ll also likely have to link an external account at this time. Otherwise, you may make your initial deposit after opening, often within a 30- or 60-day window.
If you have a rocky banking history, like previous negative balances or circumstances where the institution closed your account, your application for a high-interest account may be denied. You can check out your recorded banking history with ChexSystems, a reporting system that many banks use. If there are any errors or points of contention, you may be able to dispute an item in your ChexSystems report.
What should I use a high-yield savings account for?
You can use a high-yield savings account for a variety of reasons and savings goals. You can use it as your emergency fund, where you stash your cash for a rainy day, for example. Perhaps you want to use a high-interest savings account to boost your savings toward your next vacation or your kid’s college education.
Luckily, many institutions allow you to have several savings accounts at a time, meaning you can save toward separate goals simultaneously without ever getting your wires crossed.
Should I get an online savings account?
An online savings account is your best bet for obtaining the highest interest rate available. Online banks lack the costs associated with maintaining brick-and-mortar branches, and they generally pass the savings onto you in the form of better interest payouts. And like we’ve said, if your money is going to sit in an account, you might as well make it worth your while by growing it at a competitive rate.
Online savings accounts generally feature superior accessibility. Online banks are laser-focused on offering the best possible and most user-friendly app experiences. There’s often 24/7 customer service, and they tend to provide very good ATM access. When shopping for the best savings account to suit your needs, make sure you include a good mix of online banks offering high yields, brick-and-mortar banks and credit unions in your search.
What impacts savings rates?
Institutions typically alter their rates in response to changes in market interest rates, which are in turn driven by the federal funds rate set by the Federal Reserve. The federal funds rate influences the rates banks lend money to each other. When the Fed increases the federal funds rate, financial institutions respond by increasing the interest rates they offer on deposit accounts. When the federal funds rate falls, interest rates decrease.
If you’re not keen on tracking the federal funds rate, changes to the APY on your savings account may come as a surprise. Luckily, chances are that if you keep your deposits with an online bank, you’ll still get the most competitive rates regardless of a Fed pause or rate decrease. Online savings accounts outperform most brick-and-mortar rates any day.
What are the best banks for high-yield online savings accounts?
Here’s a summary of our top high interest savings account picks for October 2021:
Up to 3.61% APY – Workers Credit Union SaveUp Savings
0.65% APY – Affirm
0.61% APY on some balances – Axos Bank High Yield Savings
0.60% APY – Prime Alliance Bank Personal Savings Account
0.55% APY – Quontic Bank High Yield Savings Account
0.55% APY – Alliant Credit Union High Rate Savings
0.55% APY – Comenity Direct High-Yield Savings Account
Up to 0.55% APY – Fitness Bank Fitness Savings
0.51% APY – Vio Bank High Yield Online Savings Account
0.50% APY – Live Oak Bank High Yield Online Savings
There is nothing inherently unsafe about a high-yield savings account. As long as you make sure you’re depositing your money into an FDIC-insured bank or NCUA-insured credit union, your money will be insured up to legal amounts in case your institution fails.
You may also want to double check an institution’s security measures before signing up for an account. Check whether their website and information is protected by encryption and firewalls. Reputable institutions will also include anti-virus and anti-fraud measures. Other protections include biometric logins (fingerprints or face match), two-factor verification and security questions.
There is often not much difference between high-interest savings accounts and money market accounts. A money market account is a type of savings account that also tends to have higher rates than traditional savings accounts.
Some money market accounts set themselves apart by offering a debit or ATM card and/or check-writing capabilities. These accounts offer further accessibility to your money. However, money market accounts still fall under the six-limit “convenient” transaction requirement, like regular savings accounts.
High-yield savings accounts are taxed like regular savings accounts. However, your earnings from a high-interest savings account are more likely to be taxed, as you are more likely to be earning more in that account than a traditional low-rate account.
Savings account earnings are taxed if you make $10 or more. Regardless of your earnings, your institution should send you and the IRS a copy of Form 1099-INT, which details the interest you’ve earned in a year. Even if you don’t receive that form, the IRS will, and they will expect you to report your interest income on your tax return.
If you earn $1,500 or more in interest income in a year, you will also need to detail those sources of income on Schedule B of Form 1040.
Thanks to the Federal Reserve’s Regulation D, you can withdraw up to six times per statement cycle from a high-yield savings account, like any other savings account. This includes pre-authorized and automatic withdrawals and transfers, and transfers made by debit card, check or other similar ways. You can get around this limit by performing “less convenient” withdrawals, like those made in person at the bank or ATM. Exceptions to the rule also include withdrawals and transfers requested by mail and those initiated over the phone if you receive the withdrawal as a mailed check.
Online banks don’t incur the costs of maintaining brick-and-mortar branches. These costs include rent, building maintenance, staff salaries and the cost of keeping physical cash safe. Without these expenses weighing them down, online banks reap big savings — savings they then pass on to their customers in the form of high interest rates.
74% of Americans don’t know online-only banks generally offer better savings rates
A new survey by MagnifyMoney has found that Americans largely misunderstand online savings accounts and the financial opportunities they offer.
74% of Americans don’t know online-only banks typically offer higher interest rates than traditional brick-and-mortar banks.
Additionally, 16% believe online-only banks charge more fees than traditional brick-and-mortar banks, which is generally false. To see our picks for the best high-yield online savings accounts, scroll up.
Another 11% believe money deposited in an online bank isn’t insured, which is most often untrue. All the online banks listed above — and more — are FDIC insured. Even many fintechs and neobanks offer FDIC insurance on their cash management accounts, via partner banks.
Just over 143.3 million consumers are likely missing out on higher interest rates for their savings by not banking with online-only financial institutions. Of those without an account, complacency is the primary reason, as 55% are satisfied with their brick-and-mortar bank.
Less than half of Americans (44%) have an account with an online-only bank. Their main reasons for the switch are better interest rates (30%), fewer fees (28%) and recommendation by a financial advisor (27%).
Who’s most likely to have an online-only savings account? Generation Xers (61%), those earning $75,000 or more a year (58%), college graduates (57%) and men (57%).
More than 44% of respondents fear online banking puts them at risk for data breaches, while 40% are concerned hackers will have an easier time accessing their data. Still, of those without an online bank, just 19% said it was because they don’t trust the bank with their money.
MagnifyMoney commissioned Qualtrics to conduct an online survey of 1,029 Americans, with the sample base proportioned to represent the overall population. The survey was fielded on Aug. 25, 2020.
For the purposes of our survey, generations are defined as the following ages in 2020:
Generation Z: 18 to 23
Millennial: 24 to 39
Generation X: 40 to 54
Baby boomer: 55 to 74
Silent generation: 75 and older
While Gen Z and the silent generation were surveyed — and their answers were factored into the overall percentage totals among all respondents — they were omitted from generational comparisons, due to the low sample size among both groups.
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