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The Best IRA Savings Accounts

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Saving enough for retirement remains a daunting goal for many Americans. A 2018 survey by financial services company Northwestern Mutual found 41% of respondents worried about their retirement savings. Individual retirement accounts (IRAs) can help keep your blood pressure down by providing you with a powerful savings tool for retirement with significant tax advantages.

While you may associate IRAs with investing in stocks and bonds, one of the safest places to open an IRA is with a bank or credit union in the form of a savings or money market account. The list of IRA savings accounts below are the best for earning a high interest rate on your savings while keeping your future nest egg secure.

Top 10 IRA savings accounts of May 2019

Account

Minimum balance to earn APY

APY

Ally Bank IRA Online Savings Account (Traditional, Roth, SEP)

$0

2.20%

Self-Help Federal Credit Union IRA Account (Traditional, Roth)

$100

2.12%

Alliant Credit Union IRA Savings (Traditional, Roth, SEP)

$100

2.00%

Latino Community Credit Union IRA Share Account (Traditional, Roth, SEP)

$25

2.02%

First Internet Bank Money Market IRA (Traditional, Roth)

$100

2.02%

Bethpage Federal Credit Union IRA Money Market (Traditional, Roth)

$1

2.00%

Spectrum Credit Union MarketEdge IRA (Traditional and Roth)

$2,500

1.85%

Digital Federal Credit Union Money Market IRA Account (Traditional, Roth, CESA, SEP, SIMPLE)

$25,000

1.66%

Northpointe Bank IRA Ultimate Money Market

$25,000

1.50%

Wings Financial Credit Union High Yield IRA (Traditional, Roth, CESA)

$10,000

1.26%

Ally Bank IRA Online Savings Account— APY 2.20%, minimum deposit $0

Ally may be an online-only bank, but its history stretches back to the beginning of the 20th century as a financial institution that helped automaker General Motors finance sales. In its current iteration, Ally offers a wide range of competitive savings products, including an IRA account that earns an APY of 2.20%. Ally offers three different types of plans: Traditional, Roth and SEP, covering a variety of retirement needs while offering a high rate of return.

Learn more Secured

on Ally Bank’s secure website

Member FDIC

Self-Help Federal Credit Union IRA Account— APY 2.12%, minimum deposit $100

A credit union with more than 27 branches and $1 billion in assets, Self-Help’s physical locations are scattered throughout California, Wisconsin, North Carolina and Florida. However, anyone in the country can sign up to bank with them online by joining the Center for Community Self-Help, which involves paying a one-time $5 fee.

The IRA account offered by Self-Help comes with an option to choose either a Traditional or Roth plan. You’ll need to maintain a balance of at least $100 to earn the APY, but considering this is for your retirement, that shouldn’t be too tough.

Learn more Secured

on Self-Help Federal Credit Union’s secure website

NCUA Insured

Alliant Credit Union IRA Savings— APY 2.00%, minimum deposit $100

Although based in Illinois, it’s a simple matter for anyone in the country to join this credit union. A $10 donation to Foster Care to Success qualifies you for membership and the ability to take advantage of Alliant’s personal banking products, including their IRA Savings account.

Alliant offers three different plans for its IRA savings: Traditional, Roth and SEP. The APY is 2.00% no matter what plan you choose so long as you maintain the account’s minimum balance of $100.

Learn more Secured

on Alliant Credit Union’s secure website

NCUA Insured

Latino Community Credit Union IRA Share Account— APY 2.02%, minimum deposit $25

This North Carolina credit union offers its banking products to anyone in the nation so long as they make a one-time $10 donation to the Latino Community Development Center, a nonprofit promoting financial literacy and general economic development “for low-income Latino and other immigrant communities in North Carolina,” according to its mission statement.

The credit union offers an IRA share account — their version of a savings account — with either a Traditional, Roth or SEP plan. The account requires a minimum deposit of $25 and currently earns an APY of 2.02%.

Learn more Secured

on Latino Credit Union’s secure website

NCUA Insured

First Internet Bank Money Market IRA— APY 2.02%, minimum deposit $100

It may not literally be the first internet bank ever, but this Indiana-based financial institution does offer a great IRA product with a wide variety of plans. Customers can choose from the standard Traditional and Roth options, as well as SEP and CESA plans.

You need to deposit a minimum of $100 to open the account and — more importantly — maintain an average daily balance of at least $4,000 to avoid paying a monthly $5 fee. However, there’s no minimum balance needed to earn the 2.02% APY on the funds placed in the IRA account.

Learn more Secured

on First Internet Bank’s secure website

Member FDIC

Bethpage Federal Credit Union IRA Money Market Account— APY2.00%, minimum deposit $1

A staple of the Northeast’s credit union industry, Bethpage opens its arms to anyone in the country who wants to become a member. All it requires is for you to open a $5 savings account with Bethpage and you’re in the club, meaning you’re also able to open an IRA money market account should you choose.

Bethpage FCU offers Traditional and Roth IRA plans with the account, which requires a minimum deposit of $1 to earn the full 2.00% APY. There’s no monthly fee associated with the account.

Learn more Secured

on Bethpage Federal Credit Union’s secure website

NCUA Insured

Spectrum Credit Union MarketEdge IRA— APY 1.85%, minimum deposit $2,500

Based in California, this credit union accepts members throughout the country so long as they make a $15 donation to join the Contra Costa County Historical Society. You can also sign up to pay a $25 annual fee to the Navy League of the United States.

The IRA offered by Spectrum earns a minimal APY of 0.50% if you have a balance up to $2,500, but for balances $2,500 and up, you can expect to earn a nice rate of 1.85%. Spectrum currently offers Traditional and Roth IRA plans.

Learn more Secured

on Spectrum Credit Union’s secure website

NCUA Insured

Digital Federal Credit Union Money Market IRA— APY 1.66%, minimum deposit $25,000

The name of this credit union may sound like it was frantically created by a guy in the marketing department running ten minutes late to a pitch meeting, but what it lacks in pizazz it makes up for with great rates. Before you can open a money market IRA account with this credit union, you have to become a member, a matter of making a $10 donation to Reach Out for Schools.

This money market IRA account offers Traditional and Roth plans, as well as CESA, SEP and SIMPLE. It requires a minimum balance of $1,000 to begin earning interest, and the APY works on a tiered system. The sweet spot for most savers will be the 1.66% earned on balances between $25,000 and $99,999.99. Accounts with balances $100,000 and over enjoy a 1.77% APY while those falling short of $25,000 make do with 1.56%.

Learn more Secured

on Digital Federal Credit Union (DCU)’s secure website

NCUA Insured

Northpointe Bank IRA Ultimate Money Market— APY 1.50%, minimum deposit $25,000

This bank, headquartered in Michigan, provides an IRA money market best reserved for big savers. The bank’s Ultimate Money Market earns APY on a tiered system, and balances up to $24,999.99 only earn 0.25% APY. However, if you can break the $25,000 threshold, you’ll earn an APY of 1.50% on balances all the way up to $1,000,000 (after which your money earns 0.50%).

Learn more Secured

on Northpointe Bank’s secure website

Member FDIC

Wings Financial Credit Union High Yield IRA— APY 1.26%, Minimum deposit $10,000

Maybe you’ll be amazed by the competitive rates offered by this credit union with a focus on workers in the airline industry, but once you make a $5 donation to the Wings Financial Foundation, you’ll find plenty of opportunities to test the reality of the products offered to you.

The high-yield IRA savings account offered by Wings Financial Credit Union includes Traditional, Roth and CESA plans and earns an APY of 1.26% on balances from $10,000 up to $49,999.99. Balances less than $10,000 earn 0.10% while those $50,000+ earn 1.36%.

Learn more Secured

on Wings Financial Credit Union’s secure website

NCUA Insured

What’s the benefit of an IRA savings account?

Like any IRA account, an IRA savings account provides tax advantages to the saver. The exact benefits depend on the type of IRA plan or type you choose. While the two most common types of IRA offered are Traditional and Roth, more specialized versions of the account are also available, including:

  • Simplified Employee Pension (SEP): A type of IRA that can be used by either small business owners on behalf of their employees, or by self-employed individuals, the SEP IRA functions similar to a Traditional IRA — except it has a much higher annual contribution limit. You can contribute 25% of your annual compensation to the plan or $56,000 (whichever is the lesser), and like a Traditional IRA, those contributions are tax-deductible.
  • Savings Incentive Match Plan for Employees (SIMPLE): Another IRA tailored for small-business owners or those who are self-employed, SIMPLE plans allow you to put up to $13,000 of your business net earnings into the account, where the money remains tax-deferred until your start taking your withdrawals.
  • Coverdell Education Savings Account (CESA): This account aids with saving for education costs for those 18 years old or younger, but functions similar to a Roth IRA with more limits. For example, the beneficiary must be 18 years or younger when the account is set up (or be a special needs beneficiary), and you can make a maximum contribution of $2,000 per year. Only those with modified adjusted gross incomes of up to $110,000 ($220,000 if filing a joint return) may make a contribution to the account, and the contributions are not tax-deductible. The beneficiary can use the funds from the CESA for qualifying expenses toward their education.

How does an IRA savings account work?

You can contribute money to your IRA savings account any time you like, just as you would with an ordinary savings account. However, because this is an IRA product, it’s still subject a 2019 contribution amount limit of $6,000 (or $7,000 if you’re aged 50 or older), the same as an IRA account at a brokerage firm.

In that same vein, the penalties for withdrawing money early from your IRA remain in effect for the IRA savings account. Taking money from your Traditional IRA savings account incurs a 10% penalty if you’re younger than 59 1/2 years old (and assuming you don’t qualify for one of the special circumstances allowing a penalty-free withdrawal, such as a first-time home purchase).

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James Ellis
James Ellis |

James Ellis is a writer at MagnifyMoney. You can email James here

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Banking

When Do You Need an International Bank Account?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Whether you are planning to go abroad for a week or a year, international travel will challenge your assumptions about everyday life in ways you could never imagine. A journey abroad requires exhaustive research before you even leave your home, most importantly understanding how to handle banking tasks and access to money.

The good news for most casual travelers is that you probably won’t need to learn how to say “I’d like to open a bank account” in Mandarin. For a vacation abroad, you need to think carefully about how you intend to use your credit and debit cards to avoid paying high fees for normal transactions, both purchases and ATM withdrawals. And if you plan on staying in one place and putting down roots, renting an apartment, getting a job or engaging in even simple financial transactions, then you might look into banking with a local institution.

Whichever sort of journey you anticipate, we’ve assembled a basic primer on what you need to know about international bank accounts and international bank fees.

Consider your international payment options

Your banking needs when traveling beyond America’s shores will likely be minimal, as you’ll have more interesting things to do in Rome or Delhi than apply for a home loan. What you will require is a widely accepted payment method and convenient access to local currency to pay for your fantastic meals and buy replicas of the Great Pyramids.

Just like at home, you can cover almost any cost with credit cards, debit cards or cold, hard cash. But while paying for a pumpkin spice latte at your local Starbucks may happen with a simple swipe, things can get a little hairy when you whip out that Mastercard to pay for a bowl of street pad thai.

You can’t rely on everyone accepting plastic when abroad. Keep in mind that because credit card acceptance depends on individual merchants, there’s no guarantee the Parisian cafe where you had coffee and a croissant will accept your credit card, even if the boutique down the street does.

How much are international bank transaction fees?

Using your card — whether credit or debit — when traveling abroad will almost certainly invite a whole heap of fees. While certain travel cards allow you to avoid these charges, or provide such generous rewards as to make the fees worth it, you may end up paying an additional 3% of your transaction in total fees from both the credit/debit card issuer (your bank or credit union) and the card’s network (Visa, Mastercard, Discover, etc.) The exact structure of these fees varies from bank to bank and card to card, but they generally can be understood as consisting of:

  • The card network’s foreign transaction fee: This is the 1% Visa and Mastercard charge for each foreign transaction, separate of whatever your card issuer will charge you. Discover doesn’t charge a foreign transaction fee (though again, that doesn’t mean using your Discover card abroad won’t incur a foreign transaction fee with the card issuer). American Express is both a card network and a card issuer, and charges a fee of 2.7%.
  • The card issuer’s foreign transaction fee: Since you don’t get your credit cards directly from a credit card network (unless it’s American Express), your card issuer (the bank or credit union that approved your account) has a stake in your spending and will also charge you a foreign transaction fee. Some banks, such as Capital One, make it a point to charge no fees and will go so far as to pay the card network’s 1% fee if its linked to one of the bank’s 360 accounts. Most aren’t so generous, and tack on their own fee (of around 2% in most cases).

You might try to avoid international bank transaction fees by paying with cash, but unless you plan on bringing enough greenbacks from home to make airport security think you’re an arms dealer, you’ll have to withdrawal that money from a foreign ATM. And that comes with its own set of fees — usually a percentage of the total transaction, plus a flat per-transaction fee.

To give you a better idea of how much of a drag these fees can be on your wallet, here are the standard fees from the “Big Four” U.S banks (these fees may be waived if you are a customer with a premium account). Keep in mind these fees usually only apply when you are dealing with a third-party ATM while abroad — finding ATMs either owned by your bank or with a foreign bank in partnership with your domestic bank is a common way you can avoid the fees listed below.

International ATM fees charged by major banks

Chase

$5 flat fee per withdrawal, plus 3% of each transaction and whatever fee the ATM owner charges

Wells Fargo

$5 flat fee per withdrawal and whatever fee the ATM owner charges

Bank of America

$5 flat fee per withdrawal, plus 3% of each transaction and whatever fee the ATM owner charges

Citibank

$2.50 flat fee per withdrawal, plus 3% of each transaction and whatever fee the ATM owner charges

Avoid fees by finding your domestic bank ATMs while abroad

“Most large multinational banks have branches in large foreign cities,” said Rick Brooks, CFP and CPA at Blankinship & Foster in California. “For example, my daughter opened an account at CitiBank for her semester abroad in Hong Kong. She didn’t need a local bank account because Citi was sufficient for her needs.”

The easiest way to figure out if your domestic bank has a branch in a foreign country is to call them and ask, but Bank of America customers should note their bank participates in the international Global ATM Alliance, a deal brokered by select major banks around the world to allow their customers to use any of their ATMs while only paying minimal fees. You’ll notice the fees are “minimal” but still exist. You’ll still have to pay a 3% transaction fee, but that’s better than having to also pay BoA’s fee for using a third-party ATM and the third-party fee.

Global ATM Alliance bank

Coverage area

Barclays

United Kingdom: England, Northern Ireland, Scotland, Wales, Jersey, Guernsey and the Channel Islands

BNP Paribas

France

BNL D'Italia

Italy

UkrSibbank

Ukraine

TEB

Turkey

Deutsche Bank

Germany and Spain

Scotiabank

Canada, Mexico, Peru, Chile and the Caribbean including: Anguilla, Antigua & Barbuda, The Bahamas, Barbados, British Virgin Islands, Cayman Islands, Dominica, Dominican Republic, Grenada, Jamaica, Saint Maarten, Puerto Rico, Saint Kitts & Nevis, Saint Lucia, Saint Vincent & the Grenadines, Trinidad & Tobago, Turks & Caicos Islands and U.S. Virgin Islands

Westpac Bank

Australia and New Zealand

Even if your international location doesn’t have a branch of your bank back home, there’s still actions you can take to minimize the amount of fees you’ll pay during your trip. “You might want to limit your withdrawals in that case and “make them count” by taking out larger amounts and budgeting that cash over the month,” said Jessica O’Donnell, a CFP based in Massachusetts.

Do I need an international bank account?

Like being in love, knowing when you need an international bank account feels different for everyone. Some people judge it based on the amount of time you spend abroad. “The longer you plan to stay in a foreign country, the more attractive it is to open a bank account there,” said O’Donnell. “This is a necessity if you will be working or studying there for a year or more.”

Others place more importance on the type of financial transactions you plan on doing while abroad, rather than how long you’re staying. “When a person is working in a foreign country, or they own real estate, often it makes more sense at that point to open a local bank account to better handle expenses in the local currency,” said Daniel Tobias, a CFP based out of Charlotte, N.C.

What you’ll need to open your international bank account

Not all international banking is created equal when it comes to the paperwork you’ll need to prepare to open an account. From Beijing to Berlin, banks have to adhere to their own country’s regulations when it comes to opening accounts, and you may have to jump through some hoops you couldn’t anticipate beforehand. However, you should typically expect to bring:

  • Proof of residency
  • A letter of recommendation from a domestic bank
  • Photo identification
  • A professional reference

In some cases, opening a bank account may not be that much more complicated than it would at home — but you shouldn’t bet on it. “The biggest trouble is walking into a bank in a foreign country where you don’t speak the language, sitting down with your passport and not a local identity document, and the person across from you who has never dealt with a foreigner has no clue what to do,” said Tobias.

For tax purposes, it’s ideal to keep the amount in your foreign bank account less than $10,000 (USD) if possible. Otherwise the bank has to report your account to the IRS and you’ll have to file it as part of your American tax returns.

“In recent years, banks overseas serving American customers have had to provide the IRS with documentation on accounts held with them by U.S. citizens or dual citizens,” said Eileen Sharkey, a Denver-based CFP. “The banks generally cannot charge their customers for this compliance work, and are now generally reluctant to open accounts for Americans.”

The bottom line on international banking abroad

If you’re time abroad can be characterized as a trip or a vacation — even if it lasts a few months or more — chances are you don’t need to open an international bank account in a foreign country. If you’re fee-adverse, you can either apply for a credit card that doesn’t charge a foreign transaction fee or research what bank’s ATMs and branches are the most common at your destination and see if you can open a domestic account with a bank that allows you to take advantage of a low or no-fee network (like Bank of America).

Anyone who needs to do banking beyond facilitating simple spending money (such as buying property), opening a local account will almost certainly become a necessity. It may be a huge headache, but your alternative is potentially paying huge sums in currency exchange fees.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James Ellis
James Ellis |

James Ellis is a writer at MagnifyMoney. You can email James here

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Banking

CD vs. Savings Accounts: Which Is Better for Your Savings?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Making the decision to start saving a portion of your income isn’t an easy one, as evidenced by the 29% of American households that have less than $1,000 in savings. But once you’ve started down the path to becoming a regular saver, you’re likely to discover that it isn’t as simple as stuffing money under a mattress.

Banks, credit unions and other financial institutions offer a cornucopia of different savings products, clouding your commitment with a morass of marketing buzzwords. Fortunately, you’ve come to the right place for clarity on two of the most popular places to park and save your money: certificates of deposit (CDs) and personal savings accounts.

Which one is best for you and your money all depends on why you’re saving. If you plan on saving for a specific goal and know you won’t need to spend it until a fixed date in the future, you’ll want to look at a CD. If your reason for saving is so you don’t have to start burning the furniture for warmth the next time the furnace breaks, then you should put your money in a savings account.

“You give up some yield by using a savings account instead of a CD,” said Ken Tumin, founder of DepositAccounts.com, a website which, like MagnifyMoney, is owned by LendingTree. “However, you get quicker and easier access with a savings account.”

CDs vs. savings accounts: The case for CDs

Key takeaways:

  • Higher interest rates than savings accounts
  • A fixed interest rate that the bank can’t change for the duration of the CD’s term
  • One of the safest places to deposit your money, but you can’t access it without penalties

CDs are accounts where a bank, credit union or online financial institution agrees to hold your money for a set amount of time and pay you a fixed rate of interest on the deposit. For CDs, the interest rate, which is expressed as the annual percentage yield (APY), tends to be higher than that you generally see on savings accounts.

Institution

Minimum Balance Amount

APY

CD Bank — 12-month CD

$10,000

3.00%

Banesco USA — 12-month CD

$1,500

2.85%

Quontic Bank — 12-month CD

$1,000

2.85%

Limelight Bank — 12-month CD

$1,000

2.85%

Live Oak Bank — 12-month CD

$2,500

2.80%

*CD accounts were selected from the database of DepositAccounts.com (which like MagnifyMoney is owned by LendingTree) based on the following criteria: account is available nationwide; bank’s health rating is at least B+; depositor has a minimum of $10,000.

For those savers who only care about earning the highest interest rate possible, CDs may sound like the way to go. However, these accounts come with some important restrictions. With the exception of a few select offerings, once you deposit your money in a CD, you can’t withdraw it early without facing stiff penalties. Usually banks describe this penalty in terms of days of interest earned by your deposit — for example, the average penalty for early withdrawal on a 1-year CD is 120 days worth of interest, which would be deducted from the money in the account, plus any interest it has earned before the withdrawal.

Similarly, you usually can’t deposit new funds into an existing CD before the term of that CD is up. An easy way to think of a CD is an agreement between you and the bank to freeze your deposit in time where it’s locked into earning a fixed amount of interest.

Banks like this because in theory, it guarantees your money will stay with the bank for at least the term of that particular CD. Depositors get to reap the benefits of putting their money in a safe account where it earns money at an interest rate they can count on — the bank may slash the interest rate earned by CDs of that term the day after the deposit, but the customer is locked into the original rate.

Using a CD ladder to maximize earnings

One common method CD depositors use to avoid tying their money up in accounts earning a fixed interest rate while rates in general are rising is the CD ladder. The basic idea is that you place your money in a short-term CD, for example, one that matures at three months. Once the term for that CD is over, you immediately place it in a CD with a longer term, theoretically taking advantage of the rates that are higher than those offered three months ago.

Using a CD ladder means your money will be constantly earning the highest rates available while also remaining safe in a CD, but it requires you to keep on top of when your CDs mature. Many CD accounts come with terms that automatically reinvest your money in the same CD if you don’t do anything with your funds, which would defeat the purpose of the CD ladder.

You also have to feel confident that banks will offer higher rates for CDs, which has been true in recent years but won’t necessarily last forever. In an environment with falling rates, you would want to lock your money in a CD with the longest possible term in order to guarantee it earns the highest interest it can.

CDs vs. savings accounts: The case for savings accounts

Key takeaways:

  • More liquid than CDs, allowing you to access your money up to 6 times a month
  • Interest rates tend to be lower than CDs, meaning you earn less money
  • Unless specified otherwise, the bank can change the interest rate at any time

When you think about saving, one of the first products you consider is a savings account (it’s in the name, after all). Savings accounts provide a safe, reliable place to deposit your funds which allow you to earn interest while still having access to the money. While savings accounts can act as a general, all-purpose savings vehicle, they’re best utilized as a place to store your rainy day or emergency funds for those times you need cash in a hurry.

*Savings account

Monthly maintenance fee

Minimum deposit required

APY

USALLIANCE Financial — High Dividend Savings

$0

$500

2.50%

Comenity Direct — High-Yield Savings Account

$0

$100

2.48%

Banesco USA — BanesGrow Savings Account

$5

$100

2.47%

Rising Bank — High Yield Savings Account

$0

$1,000

2.45%

WebBank — Savings

$0

$1,000

2.50%

*Savings accounts were selected from the database of DepositAccounts.com (which like MagnifyMoney is owned by LendingTree) based on the following criteria: account is available nationwide; bank’s health rating is at least B+; depositor has a minimum of $10,000.

While the exact details will vary from account to account, most banks will allow you to make a maximum of six withdrawals/transfers each month free of charge (the maximum federal regulations allow under Regulation D). If you go over your withdrawal limit for the month, the bank may charge you a fee for that transaction. The fee’s amount will depend on the bank and the individual savings account — Bank of America levies a $10 fee per over-the-limit transaction on one of its savings accounts, while Chase charges $5 for one of its personal savings accounts, to give two examples.

Should you use a hybrid account?

These penalties may not seem huge, but they should give you the hint that savings accounts aren’t meant to serve as your main transactional account — that’s what checking accounts are for.

That said, the line between the two have blurred in recent years thanks to financial tech companies offering hybrid accounts that give you unlimited access to your funds while earning a high interest rate comparable with most savings accounts. But with hybrid accounts, also known as cash management accounts, you have to be comfortable with depositing your savings with an online-only institution and understand the nitty-gritty details of where these companies place your money, so you make sure your funds are both earning the promised interest rate and that the money is safe.

CDs vs. savings accounts: Where is my money safer?

Whether you choose a savings account or a CD, the money you deposit should fall under the protection of insurance provided by the Federal Deposit Insurance Corporation (better known as the FDIC). This independent government agency guarantees that in the event the bank fails or is swallowed by a sinkhole or suffers some other catastrophe that wipes out your account, the government will pay you back both the principal and the interest up to $250,000 (in a single account).

Accounts that are FDIC-insured will state so in the fine print of the account’s terms, so take the time to look over all the relevant documents before handing over your funds to an institution. Almost every major bank will have their basic accounts (checking, savings, CDs, etc.) FDIC-insured but fintech startups may not; make sure you do your homework before opening an account with a newcomer.

The bottom line on CDs vs. savings accounts

The choice on whether to deposit your savings in a CD or a savings account shouldn’t be a difficult one, considering they both serve a fairly distinct role in personal banking. People who don’t need easy access to their savings and want it to earn the highest interest rates should look into CDs. Those wanting a place to build their emergency savings that they can tap for unforeseen expenses should start shopping for savings accounts. In all likelihood, this won’t be an either/or choice and you’ll use both products.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James Ellis
James Ellis |

James Ellis is a writer at MagnifyMoney. You can email James here

TAGS: