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The Best CD Rates – January 2020

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Updated January 20, 2019

If you’re looking for a better yield on your savings and have time to burn, a high-rate CD at an online bank would be a great option. With a CD, you agree to lock up your funds in an account for a specific period of time, and in return the bank offers a higher yield than you’d find on a standard savings account. If you’re not keen on the idea of completely locking your money away for a set amount of time, you may want to consider a no-penalty CD. These accounts give you the benefit of locking down a rate for a set amount of time without requiring you to lock in your money for the length of the term.

CDs are often seen as the next level up after savings for that reason. If you’ve maxed out your savings account with enough funds to see you through the next year or so, it can be wise to start shoveling savings into a CD to maximize your returns.

For the best CD rates in the industry, check out online banks. They tend to offer much better interest rates than traditional banks, thanks to the lack of typical brick-and-mortar costs.

For example, let’s say you find a 12-month CD at a big brick-and-mortar bank that requires a $1,000 minimum deposit and pays 0.05% APY. If you were to open that account with just the minimum, you’d earn 50 cents after a year. Even a bigger deposit of $10,000 would only yield $5 at maturity.

At an online bank, on the other hand, you could earn 2.80% often with a minimum deposit of $1,000. Opening the account with $1,000 would yield $28, while a $10,000 deposit would earn $280 in a year, a much better return on your money no matter how you look at it. (If you would rather get a savings account or money market with no time restriction, look at the best savings accounts or best money market accounts).

The best CD rates from top banks

To find the best CD rates, we look for the banks and credit unions that consistently offer competitive CD rates month over month. This list is updated monthly, and competition continues to intensify. Here are the accounts from banks with consistently competitive CD rates:

6 months – 6 years: Goldman Sachs Bank USA – 0.60% APY – 2.20% APY; $500 minimum deposit to open
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Our advertiser Marcus by Goldman Sachs is the online consumer bank of Goldman Sachs Bank USA (the large investment bank). Your funds are FDIC insured, and Goldman offers very competitive rates. Even better: there is only a $500 minimum deposit. So, if you don’t have enough money to meet the minimum deposit of the other banks on this list, or you are looking for another bank for your savings, GS is a good option. It also doesn’t hurt that they also offer some of the best CD rates in the market today. Here are their rates:

CD TermAPY
6-months0.60%
9-months0.70%
12-months2.15%
18-months2.05%
2-year2.10%
3-year2.10%
5-year2.15%
6-year2.20%
1 Year – 3 Years: Rising Bank – 2.15% APY – 2.10% APY; $1,000 minimum deposit to open
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Rising Bank launched in February 2019 as the online division of Midwest BankCentre. Midwest BankCentre has been around since 1906 in Missouri and has acquired over $1 billion in assets. This bank decided to assert itself as a top competitor in the online banking space by offering competitive rates.

While most online banks have pulled back on rate offerings, Rising Bank continues to offer a top 2.15% APY on its 1-year CD. However, unlike some of the top online banks like Ally Bank and Goldman Sachs, Rising Bank requires a minimum deposit of $1,000 and caps balances at $500,000 on its CDs. If you have less than $1,000 to deposit into a CD, you’re better off choosing another online bank. If you have more than $500,000 to deposit into a CD, you may also want to consider another online bank.

Aside from its rates, Rising Bank also distinguishes its CDs with the early withdrawal penalties. If you need to withdraw from the 1-year CD early, you’ll only incur a penalty that is 90 days’ worth of interest. If you need to withdraw early from the 18 to 36-month CDs, the penalty is 180 days’ worth of interest. One thing to be aware of is that Rising Bank compounds interest every three months. Other online banks compound interest monthly, so this is a bit of a downside. Once this CD matures, you can withdraw the full balance to close the account. If you don’t withdraw the full balance ten days after the maturity date, Rising Bank will automatically renew your CD. Rising Bank has a mobile app for your convenience.

CD TermAPY
1-year2.15%
2-year2.05%
3-year2.10%
30 days – 5 years: BrioDirect – 0.05% APY – 2.05% APY; $500 minimum deposit to open
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BrioDirect is the online division of Sterling National Bank. While its parent bank has been around for quite some time, the online division only recently launched. Right now, BrioDirect is offering a 2.05% APY on its 12-month CD. You’ll need to deposit a minimum of $500 to open the account and start receiving the 2.05% APY. If you choose to withdraw any portion of the principal, you’ll incur an early withdrawal penalty of 90 days interest. This penalty will apply regardless of whether you’ve earned that amount of interest or not. Here are all of their rates:

CD TermAPY
30-days0.05%
3-months1.55%
5-months1.95%
7-months1.35%
9-months2.20%
11-months1.35%
12-months2.05%
18-months1.00%
24-months1.00%
30-months1.00%
36-months1.00%
48-months1.00%
60-months1.00%
6 months – 5 years: Capital One – 0.60% APY – 1.60% APY; no minimum deposit to open
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Capital One is famous for its credit card business. However, it has recently started getting aggressive with its CD rates. There is no minimum deposit for their 360 CDs, which make them comparable to Barclays’ and Ally’s CDs. Capital One CDs are FDIC insured, up to the federal maximum. And you get the comfort of depositing your money with a well-known bank. In addition to this bank’s competitive CD rates, it also has interest-earning savings, checking, and money market accounts that offer top rates. We believe this makes Capital One a great option for those wanting to do all their banking in one place.

CD TermAPY
6-months0.60%
9-months0.80%
12-months2.00%
18-months1.90%
24-months1.80%
30-months1.70%
36-months1.65%
48-months1.65%
60-months1.60%
3 months – 10 years: Discover Bank – 0.35% APY – 2.20% APY, $2,500 minimum deposit to open
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Discover is best known for cash back credit cards. However, Discover has also quietly built a leading internet bank that offers checking accounts, savings accounts and CDs. Discover has invested in a mobile banking app and strong on-shore customer service.

Although Discover does not always have the highest rate, it is very close (within basis points) across all durations. If customer service and digital tools (like apps) are important to you, Discover is an excellent consideration. Note: you can even get a CD rate with a duration as short as 3 months. However, you would be better off opening a high yield savings account if you plan on saving the money for less than a year.

Keep in mind that all CD terms come with an early withdrawal penalty if you choose to withdraw money before your maturity date. If your Discover CD is less than one year, the penalty is worth three months of simple interest. If the term is between one to three years, the penalty is worth six months of simple interest. Four-year CDs have a penalty that is worth nine months of simple interest. Five year CDs have a penalty that is worth 18 months of simple interest and seven to 10-year CDs have a penalty that is worth 24 months of simple interest.

CD TermAPY
3-months0.35%
6-months0.65%
9-months0.70%
12-months2.00%
18-months2.00%
2-year2.05%
30-months2.05%
3-year2.05%
4-year2.05%
5-year2.10%
7-year2.15%
10-year2.20%
1 year – 5 years: Barclays Bank – 2.00% – 2.10% APY, no minimum deposit to open
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Barclays is one of the oldest banks in the world. Although they’re based in London, they do have a U.S. presence and offer competitive rates on their CDs and savings account. Currently, they’re offering some of the highest CD rates in the market, and they have an edge over the rest of the institutions on this list: they don’t require a minimum balance to earn the APY or open an account. Deposit as little or as much as you’d like into a term of your choice and you can start earning interest as long as the account is funded within 14 days of opening the CD. Additionally, your funds are insured through the FDIC.

CD TermAPY
1-year2.00%
2-year2.00%
3-year2.00%
4-year2.00%
5-year2.10%
3 months – 5 years: Ally Bank – 0.75% APY – 2.15% APY; $0 minimum deposit to open (higher APY with higher deposit)
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Ally is one of the largest internet-only banks in the country. Ally’s former advertising campaign made it very clear: no branches = higher rates. And Ally has consistently paid some of the highest rates in the country across savings accounts, money market accounts and CDs. For savers with fewer funds, Ally is unique. There is no minimum deposit to open a CD. However, if you have more money, you’ll earn more in interest and in some case, earn a higher APY.
And one of our favorite features of Ally: they often (although not always) offer preferential rates on renewal. Far too often banks give the biggest bonuses to new customers, but Ally has done a good job of rewarding its existing customers. A good example of this is a 1% cash back promotion Ally is currently offering to new and existing customers. All deposits at Ally are FDIC insured up to the legal limit.

3-months:
  • 0.75% APY (less than $5k)
  • 0.75% APY ($5k minimum deposit)
  • 0.75% APY ($25k minimum deposit)
18-months:
  • 1.90% APY (less than $5k)
  • 2.00% APY ($5k minimum deposit)
  • 2.05% APY ($25k minimum deposit)
6-months:
  • 1.00% APY (less than $5k)
  • 1.00% APY ($5k minimum deposit)
  • 1.00% APY ($25k minimum deposit)
3-year:
  • 1.95% APY (less than $5k)
  • 2.05% APY ($5k minimum deposit)
  • 2.10% APY ($25k minimum deposit)
9-months:
  • 1.25% APY (less than $5k)
  • 1.25% APY ($5k minimum deposit)
  • 1.25% APY ($25k minimum deposit)
5-year:
  • 2.15% APY (less than $5k)
  • 2.15% APY ($5k minimum deposit)
  • 2.15% APY ($25k minimum deposit)
12-months:
  • 2.00% APY (less than $5k)
  • 2.00% APY ($5k minimum deposit)
  • 2.00% APY ($25k minimum deposit)
3 months – 5 years: Synchrony Bank – 0.75% APY – 2.15% APY; $2,000 minimum deposit to open
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Synchrony used to be a part of GE, and now has an online bank that pays competitive rates. The online deposits are used to fund their store credit card portfolio – and the company is publicly traded. If you have $2,000 or more to deposit into a CD, Synchrony will offer you some of the best CD rates. However, if you have less than $2,000, you’re better off going with one of the other online banks above. Your deposit will be insured up to the FDIC limit. In a rising rate environment, this is a great way to get a high interest rate without locking yourself into a long term.

CD TermAPY
3-months0.75%
6-months1.00%
9-months1.25%
12-months2.00%
15-months2.00%
18-months2.00%
24-months2.10%
36-months2.10%
48-months2.10%
60-months2.15%
12 months – 3 years: BBVA – 1.50% APY* – 1.00% APY; $500 minimum deposit to open
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BBVA has been around since 1964. This bank had humble beginnings in Birmingham, Alabama as Central Bank & Trust Company. This small community bank went through several name changes and pioneered several banking initiatives in Alabama (including opening on a Saturday and introducing the first ATM and debit card in the state). In the early 90s, the bank changed its name to Compass Bancshares. In 2007, it had its biggest change to date. The bank was acquired by a Spanish company (Banco Bilbao Vizcaya Argentaria) and renamed BBVA Compass. Recently, BBVA dropped the Compass and is now just called BBVA. Through all these changes, BBVA has grown to acquire over $92 billion in assets.

While this, now, giant bank has not historically offered competitive rates on its deposit accounts, it’s begun competing in the online space by offering online-only CDs with decent rates. Currently, BBVA is offering a competitive 1.50% on its 12 Month Online CD*. The bank does mention that this CD available for a limited time, so you may want to lock in your money in this CD sooner rather than later. You’ll need a minimum of $500 to open the CD. The early withdrawal penalty on this CD is pretty unique. It’s $25 plus 1% of the amount withdrawn. While BBVA does have other CD terms, this CD currently has the best rate.

*Note: This rate is only available to individuals who live in certain states. If you live in Alabama, Arizona, California, Colorado, Florida, New Mexico, or Texas, you will not qualify for this rate. Instead, you’ll qualify for a 1.50% APY.

CD TermAPY
12-months1.50%*
15-months1.00%
18-months1.00%
3-years1.00%

The best no-penalty CD rates

No-penalty CDs are unique because these accounts allow customers to withdraw from their CD without incurring an early withdrawal penalty. These CDs are an attractive offer to customers as it provides no risk if they choose to withdraw their money early. Here are some of the best no-penalty CD rates that are available nationwide:

7 months – 13 months: Goldman Sachs Bank USA – 1.90% APY – 1.65% APY; $500 minimum deposit to open
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Similar to its regular CDs, you only need a minimum of $500 to deposit into Goldman Sachs Bank USA’s no-penalty CDs. This makes these CDs highly attractive to customers with smaller deposits. If you choose to open one of these CDs, you’ll only be locked in for seven days after you fund the account. After the seventh day, you’re free to withdraw your funds, but keep in mind that you’ll need to withdraw the full amount.

These CDs are an excellent option if you want your money to remain liquid or if you want to invest your money into an interest-earning account for a short amount of time. One thing to note is that the 7-month no-penalty CD has a much higher rate than the regular 6-month CD (1.90% APY vs 0.60% APY). The high APY makes Goldman’s 7-month no-penalty CD a fantastic option if you want to earn interest in a short amount of time. Here is Goldman’s full list of no-penalty CD rates:

TermAPYMinimum balance to earn the APY
7-month1.90%
$500
11-month2.00%
$500
13-month1.65%
$500
11 months – 14 months: PurePoint Financial – 1.65% APY – 1.90% APY; $10,000 minimum deposit to open
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PurePoint Financial is the online division of Union Bank. Both the parent bank and this online division are backed by financial giant, Mitsubishi UFJ Financial Group (MUFG). Under the MUFG Union Bank umbrella, this institution has acquired over $130 billion in assets. As its online division, PurePoint Financial has been able to offer its customers highly competitive rates not only in CDs, but in an online savings account.

Currently, PurePoint Financial is offering an extremely competitive rate of 1.90% on its 13-month no-penalty CD. It also offers an 11-month and a 14-month no-penalty CD, but those two accounts have lower rates than its 13-month no-penalty CD. Keep in mind that you’ll need at least $10,000 to deposit into any of these CDs. If you do choose to withdraw money from this CD before the term is up, you’ll need to withdraw the full amount. You’ll also have to wait seven days after you fund the account to withdraw any of the money. Here’s a full list of PurePoint Financial’s no-penalty CDs.

TermAPYMinimum balance to earn the APY
11-month1.65%$10,000
13-month1.90%$10,000
14-month1.75%$10,000
6 months: Investors eAccess – 1.80% APY; $500 minimum deposit to open
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Investors eAccess is the online division of Investors Bank, a large bank headquartered in New Jersey that was established in 1926. The parent bank currently has over $26 billion in assets. The online division was launched earlier this year and decided to introduce itself by offering a strong rate on its inaugural product, the eAccess Money Market account. It seems this online bank is slowly offering different deposit accounts, but one thing that sticks out is that it’s offering these new products with high rates.

Currently, Investors eAccess is offering two types of CDs: a 6-month No-Penalty CD and a 10-month regular CD. The 6-month No-Penalty CD is comes with a strong 1.80% APY. You need at least $500 to open the account and you’re free to withdraw from the principal amount after the first seven calendar days from opening the account without incurring any penalties. If you choose to withdraw the full amount (including any interest earned) before the maturity date, you won’t incur any penalties, but the full withdrawal will close the account. Regardless of how much you choose to withdraw from the account, the bank will send you the funds via an official Bank Check. The check will be made out to the account owner and mailed First Class to the address on file.

TermAPYMinimum balance to earn the APY
6-month1.80%$500
11 months: Ally Bank – 1.65% APY – 1.85% APY; $0 – $25,000 minimum deposit to earn APY
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Unlike the other two banks that offer multiple terms, Ally Bank only offers one term on its no-penalty CD. While Ally doesn’t require a minimum deposit to open, it does reward higher balances with higher APYs. This no-penalty CD is great for low-balance individuals who want to keep their money liquid. However, if you’re okay with locking your money into a CD for 12 months, you’re better off going with Ally’s regular 12-month CD as it has a higher APY (2.00% APY vs 1.65% APY) and doesn’t have a certain balance requirement to earn that high rate.

If you still choose to open Ally’s 11-month no-penalty CD and you need to withdraw money before the terms ends, you’ll need to withdraw your funds in full and won’t be able to do so until seven days after funding the account. Here are the tiered rates for Ally’s no-penalty CD:

TermAPYMinimum balance to earn the APY
11 months1.65%Up to $5,000
11 months1.70%$5,000
11 months1.85%$25,000

The highest CD rates from banks and credit unions by term

The following banks and credit unions are currently offering the highest CD rates for each term.

Best 1-year CD rates

Best 1-year CD rate from a National Bank: Quontic Bank – 2.20% APY, $1,000 minimum deposit
12 Month CD from Quontic Bank

Quontic Bank is a digital bank with over $394 million in assets. Currently, the online bank is offering a 2.20% APY on its 12-month CD. You’ll need at least $1,000 to open the account and earn the APY. The account can be funded via ACH or by mailing in a check.

If you need to withdraw money from the CD early, you may incur an early withdrawal penalty that is equal to one year’s worth of interest. If you allow the CD to reach maturity, you’ll have ten days to decide whether you want to withdraw the funds, open a new CD with a different term, or renew the CD with the existing term. If you choose to withdraw the funds or open a different CD, you’ll need to call the bank to let them know. If you choose to renew the existing term, you won’t have to take any action as the CD will renew ten days after the original maturity date.


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Best 1-year CD rate from a Credit Union: USALLIANCE Financial – 2.15% APY, $500 minimum balance
12 Month CD from USALLIANCE Financial

USALLIANCE Financial is a credit union that anyone can join. The credit union was created in 1966 for employees of IBM. You can check here to see if you are eligible to join the credit union. If you do not meet any of those eligibility requirements, don’t worry. You can join (for $15) the American Consumer Council. This is a one-time fee (and you can join here). Once you are a member, you can then join the credit union.

USALLIANCE is offering a special on a 12-month CD. The credit union is offering this special to those who can deposit new money into the account, which means that you don’t currently have funds deposited in an existing USALLIANCE account. If your funds qualify, you’ll earn a 2.15% APY. This is currently the best rate available for a 1-year CD from any credit union. You’ll need to deposit a minimum of $500 of new money to open the account. If you need to withdraw money from the account before the maturity date, the penalty will equal 180 days of dividends on the amount that is withdrawn. If you need to make an early withdrawal on the principal amount, you’ll have to contact USALLIANCE for approval.

Once your CD matures, you’ll have a seven day grace period to withdraw your funds. In order to withdraw the funds, the credit union tries to provide easy access by transferring the fully matured funds to a Share Management Checking or Savings account, STAR Account, or MyLife Account (checking or savings). Once the funds are transferred to one of those accounts, you can then initiate an ACH transfer to send the funds to an external bank account.


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Best 2-year CD rates

Best 2-year CD rate from a Credit Union: MAC Federal Credit Union – 2.40% APY, $1,000 minimum deposit
24 Month CD from MAC Federal Credit Union

MAC Federal Credit Union was established in 1952 to serve active duty personnel and civil service members associated with Fort Wainwright. In 2001, the credit union expanded to serve the Fairbanks community. Now, they serve customers nationwide through online and mobile banking.

You can become a member a number of ways including residence, employment, and relation to an existing member. You can also become a member if you are part of, or choose to be part of, the Polar Bear Chapter of the Association of the United States Army. Once you’re a member, you can open the 24 Month CD with a minimum deposit of $1,000 and start earning the 2.40% APY. This CD has an early withdrawal penalty that is equal to 90 days of interest.


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Best 2-year CD rate from a National Bank: Prime Alliance Bank – 2.20% APY, $500 minimum deposit
24 Month CD from Prime Alliance Bank

Prime Alliance Bank was established in 2004 and currently has over $455 million in assets. If you have at least $500, you’ll be able to open this 24-month CD and begin earning the 2.20% APY. If you choose to withdraw from this CD early, you may incur a penalty of three months’ interest on the withdrawn amount. If you allow the funds to stay in the account until it fully matures, you’ll have ten days to decide what you’d like to do with the funds. If you choose to do nothing, the CD will renew with the same term.


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Best 3-year CD rates

Best 3-year CD rate from a Credit Union: Garden Savings Federal Credit Union – 2.53% APY, $500 minimum deposit
3 Year Share Certificate from Garden Savings Federal Credit Union

Founded in 1968, Garden Savings Federal Credit Union was opened to serve employees at AT&T Bell Laboratories, known today as Alcatel-Lucent. Today, Garden Savings membership is open to over 150 Select Employer Groups, as well as members of select New Jersey communities and family members of current members. Garden Savings Federal Credit Union maintains over $350 million in assets and has four branches in New Jersey.

Garden Savings Federal Credit Union offers a great spread of Share Certificates, including its competitive 3-Year Certificate, earning at a 2.53% APY where interest is paid monthly. It requires at least $500 to open and start saving. The early withdrawal penalty is 180 days of dividends earned. Garden Savings Federal Credit Union provides deposit insurance up to $500,000, thanks to federal coverage from the NCUA and private insurance by the Excess Share Insurance Corporation.


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Best 3-year CD rate from a National Bank: Primary Bank – 2.30% APY, no minimum deposit
4 Year CD from Primary Bank

Primary Bank was established in 2015 and is headquartered in New Hampshire. The bank has acquired over $255 million in assets. If you’re interested in opening a 3-year CD with this bank, you won’t need a specific deposit amount. The bank also doesn’t have a balance requirement to earn the 2.30% APY. The bank may impose an early withdrawal penalty if you choose to withdraw from the principal early, but you’ll have to contact the bank to learn about the penalty.


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Best 4-year CD rates

Best 4-year CD rate from a National Bank: Prime Alliance Bank – 2.40% APY, $500 minimum deposit
48 Month CD from Prime Alliance Bank

Prime Alliance Bank has a great rate on its 4 year CD as well as its 2 and 5 year CDs. If you have at least $500, you’ll be able to open this 48-month CD and begin earning the 2.40% APY. If you choose to withdraw from this CD early, you may incur a penalty of three months’ interest on the withdrawn amount. If you allow the funds to stay in the account until it fully matures, you’ll have ten days to decide what you’d like to do with the funds. If you choose to do nothing, the CD will renew with the same term.


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Best 4-year CD rate from a Credit Union: Lafayette Federal Credit Union – 2.27% APY, $500 minimum deposit
4 Year Fixed CD from Lafayette Federal Credit Union

Lafayette Federal Credit Union was founded in 1935 and serves communities in the Washington, D.C. area. Membership is also open to employees of select partner groups, members of the Home Ownership Financial Literacy Council, current members’ family members and current or future members of the American Consumer Council. You can access Lafayette FCU accounts and services online, on mobile and over the phone.

Lafayette Federal Credit Union currently offers the best rate on its 4-year term Fixed-Rate Certificate. With just $500, you can start growing your money at its 2.78% APY. Just be careful of making an early withdrawal as it will cost you 480 days worth of dividends.


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Best 5-year CD rates

Best 5-year CD rate from a Credit Union: Lafayette Federal Credit Union – 2.52% APY, $500 minimum deposit
5 Year Fixed CD from Lafayette Federal Credit Union

Founded in 1935, Lafayette Federal Credit Union is based in Rockville, Md. It has branches in Maryland, Virginia and Washington, D.C., plus CO-OP Shared Branches and ATMs throughout the country. Lafayette FCU is also accessible online, on mobile and over the phone, although you may face long wait times.

You can become a member if you are a resident or employee in Maryland, Virginia or Washington, D.C., an employee of an approved agency or company, an immediate family member of a current member, a member of the Home Ownership Financial Literacy Council or a current or future member of the American Consumer Council.

Lafayette Federal Credit Union’s 5-year Fixed-Rate Certificate offers competitive savings, earning
2.52% APY. It requires only $500 to open. You’ll lose 600 days’ worth of dividends if you make a withdrawal from the 5-year term Fixed Rate Certificate.


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Best 5-year CD rate from a National Bank: Prime Alliance Bank – 2.50% APY, $500 minimum deposit
60 Month CD from Prime Alliance Bank

Prime Alliance Bank features one of the highest bank rates on its 5 year CD. For the current month, we’re seeing Prime Alliance as one of the most competitive Bank providers of CDs. Interested savers should take a look at its 2 year and 4 year offerings as well. If you choose to open a 5 year CD with Prime Alliance, keep in mind that you may incur a three month interest penalty on early withdrawals. However, if you keep your money in the CD for the full-term, you’ll earn a rate as high as 2.50% APY with a minimum deposit of $500.


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The cities that are most likely to use CDs for their savings

We recently looked at the 100 largest U.S. metros to find the cities with the highest percentage of households that own certificates of deposit.

Among the 100 largest U.S. metros, San Francisco came out on top, with 25.4% of households owning certificates of deposit. That’s more a little more than twice as many households, on a percentage basis, than Greensboro, N.C., our bottom-ranked city, where only 12.5% of households own CDs.

Typically, households in large cities are more likely to sock money away in CDs. Chicago, Los Angeles, New York and Washington, D.C. — among the 10 largest metros in the U.S. — all make our list of top 10 cities where people own CDs. There are some exceptions: Odgen, Utah ranks No. 4 in the nation for CD saving: 21.9% of Ogden households have CDs.

Variability in local CD rates may explain some of the differences, as the highest rates available by state can vary by as much as one percentage point. In fact, in Jan. 2019, Utah had the highest average local 1-year CD yield in the country.

Questions to ask before you open a CD

1. How are CDs different from savings accounts?

With a CD, the saver and the bank make stronger commitments. The saver promises to keep the funds in the account for a specified period of time. In exchange, the bank guarantees the interest rate during the term of the CD. The longer the term, the higher the rate – and the higher the penalty for closing the CD early. With a savings account, you’re limited to six withdrawals or transfers per month. Otherwise, you can empty the account at any time without paying a penalty. You can’t lock in the interest rate on a savings account, though, since the bank can change the interest rate at any time.

2. Am I better off keeping my cash in savings?

CDs work best if you’re confident you won’t need to access a certain amount of money for a specified period of time. Let’s say you have $10,000 laying around that you can safely say you won’t need to use for two years. In a high-yield savings account earning 2.45%, you would earn $496.00 over two years with annual interest compounding — and potentially even more, if your bank compounds interest more frequently. If you put that money into a 2.90% 2-year CD, you would earn $588.41 (compounding yearly) once the account matures. The extra interest income is easy money, considering the ease of opening an account online. However, if you think you might need to use the money in the next couple of months, especially if your finances are already a little rocky, a savings account is a much better idea for its better flexibility.

It’s important to note that deposit rates are a bit in flux right now, due to the uncertainty surrounding the federal funds rate (more on that below). But we’re currently seeing some high, favorable interest rates on 1-year CDs, rates that outstrip savings account rates.

If you can afford to part with the funds, “choosing a 1-year CD now does make sense rather than keeping the money in a savings account,” says Ken Tumin, founder of LendingTree-owned DepositAccounts.com. “However, it is possible that 1-year rates could go below some savings account rates.”

That’s why it’s important to compare rates before you sign up for a certain account.

Tumin also notes that there is an added tax benefit to opening a 1-year CD now over a savings account. With a 1-year CD, you can choose to have interest paid at maturity, or in 2020 on accounts opened now. Taxes would be owed on that interest for 2020, but not paid until 2021. Savings accounts, on the other hand, pay out interest each month. So a savings account opened today will generate interest income for the 2019 tax year.

3. What CD term length should I select?

The early withdrawal penalties on CDs can be significant. On a 1-year CD, 90 days’ worth of interest is a typical penalty, although it can reach as high as 180 days. On 2- and 3-year CDs, a 6-month penalty is about average. The impact of the penalty on your return can be significant: if you opened a one-year CD with a 2.65% APY and closed it after six months, you would forfeit half of the interest and earn only 1.32%. You would have been better off with a savings account paying 2.25%.

The worst case scenario is with the longest CDs. 5-year CDs usually have a one-year penalty for taking out funds early. If you open a 5-year CD and close it quickly, you could actually end up losing money.

Given the risk of early withdrawal penalties, it’s important that you’re completely confident that you will not need to withdraw the money early. Check that you already have enough savings in a flexible emergency fund to cover you for the next few years in the event of an accident or surprise trip to urgent care. Ask yourself whether your deposit would be put to better use paying off any debts. If you’re not completely convinced you can sock away that much money for such a commitment, go for a shorter CD term or a savings account.

As of right now, if you’re trying to jump on the best rates and have cash to stash away for years, your best bet is to lock in a 5-year CD to get the best rates possible.

“It doesn’t look like we’ll see another Fed rate hike in the first half of the year,” says Ken Tumin. “In the last month or two, we’re seeing some drops in CD rates.”

However, this downward movement looks like more of a correction being made by banks who may have boosted their CD rates too far too fast, instead of signaling the start of an industry-wide drop in rates.

“We won’t see a big drop until we see signs that the Fed will start cutting rates,” Tumin notes.

Tumin suggests finding long-term CDs with small or mild withdrawal penalties, like Ally. That way, in the event you do need to break into your funds (whether for an emergency or to move to a new, higher rate), you won’t lose the majority of your savings. So while there are still 5-year CDs out there with 3% APY and higher, you’re going to want to lock those in for the long term.

4. Should I consider my local bank or credit union?

The interest rates shown in this article are all from credit unions and online banks that offer products nationally. However, our product database includes traditional banks, community banks and credit unions.

If traditional banks offered better rates, they would have been featured in this article. Internet-only banks have dramatically better interest rates. That should not be surprising — because internet-only banks do not have branches, they are able to pass along their cost savings to you in the form of higher interest rates and lower fees.

If you’re worried about early withdrawal penalties, credit union CDs might be your best bet; on average, they tend to have lower penalties than banks. Pair that with high credit union CD rates, and you’ve got a winning savings combo. (Interestingly, while internet banks tend to offer the best CD rates, they also tend to assess bigger early withdrawal penalties than brick-and-mortar banks.)

How to find the best CD for you

If you don’t find an account that meets your needs in this article, you can use the MagnifyMoney CD tool to find the best rate for your individual needs. Input your zip code, deposit amount and term. The tool will then provide you with CD options, from the highest APY to the lowest.

Even though CDs are traditionally pretty structured, you still have hundreds of options available to you. If your savings goal is years in the future, look closer at longer terms like 5- and even 10-year accounts. If you don’t quite have thousands of dollars to stash away, you can find a bank that requires a lower minimum deposit, if at all. You can also find select no-penalty CDs, which tend to be around one year long or less.

You can learn more about us and how we make money here.

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.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at [email protected]

Lauren Perez
Lauren Perez |

Lauren Perez is a writer at MagnifyMoney. You can email Lauren here

Advertiser Disclosure

Earning Interest

Best Money Market Rates & Accounts – January 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Updated January 16, 2020

If you’re looking to save more money beyond your regular savings account, consider adding a money market account to the mix. A money market account can earn at a higher rate than a savings account, especially if you have a larger balance to deposit. Many MMAs tier their rates as well, rewarding higher balances with higher rates.

Like most deposit accounts, the rate on money market accounts has grown over the past few years, up from 0.188% APY in 2016 to 0.372% APY in January 2020. Savings account rates have also increased, but still averaged only 0.272% APY in January 2020.

You can do much better than a 0.372% APY on a money market if you’re willing to break with traditional brick and mortar banks. Opening an MMA at the bank around the corner, for example, may not yield more than 1.00% APY, while an internet-only bank might offer a rate of 2.00% APY or higher. With a rate like that, you can boost your savings by a wide margin.

If you were to put $50,000 into an MMA earning 0.04%, you would earn only $20 in interest over a year. Put that same starting amount into an online bank account at 2.00%, and you’d earn $1,000 in interest over a year.

With so many options out there, it can seem daunting to search for a new bank account with a potentially new bank. We’ve made it it easier for you by rounding up the best money market accounts out there. We searched through over 12,000 banks and credit unions to find the money market accounts paying the highest interest rates. We also looked at an account’s minimum requirements and fund accessibility.

Overall, we found that internet banks consistently beat the competition. You might not recognize all their names — new online banks are continuing to crop up — but if it’s high interest rates you’re looking for, it might be good to branch out since online banks are the way to go. Here are our favorite rates for January 2020:

1. Guaranteed Rate Through 6/30/2020: Customers Bank – 2.25% APY, $25,000 minimum deposit and balance to earn APY

Ascent Money Market - Online Only from Customers BankCustomers Bank was founded as Century Bank in 1997 and rebranded in 2011 to the name we know today. The bank has acquired over $10 billion in assets since it opened its doors. If you have a minimum of $25,000 to deposit and are looking to save that money, Customer Bank’s Ascent Money Market Savings Account may be just what you need. If you’re able to fund the account within 30 days of application approval, you lock in a minimum APY of 2.25%. Customers Bank is currently guaranteeing this rate through June 30, 2020. The language on the Ascent page states, “The minimum rate of 2.25% APY is guaranteed thru June 30, 2020.” This implies that if the bank increases the rate on this account, customers will benefit from the rate increase. There isn’t a monthly service fee and there isn’t an excess transaction fee if you happen to make more than six transactions in a statement cycle. You will simply receive a warning letter each time you exceed six transactions and the bank will close your account if you’re sent a third warning letter. The bank encourages accountholders to use this account to hold savings, so there aren’t any check-writing capabilities or ATM/debit cards issued with this account. The bank also limits ACH transfers to $5k per day and $50k per statement cycle. If you choose to wire money from an external account to fund this account, the bank will waive the $10 incoming wire transfer fee. The guaranteed rate makes this account a great option for true savers with at least $25,000 to deposit.

LEARN MORE Secured

on Customers Bank’s secure website

Member FDIC

2. Favorite Online Package: Ally – 0.75% APY, no minimum deposit and link to free checking

Online Savings Account from Ally BankAlly Bank is a very popular internet-only bank. If you keep a daily balance of $5,000 or less, you will earn the 0.75% APY. If you’re able to keep a minimum daily balance of $25,000 the APY increases to 0.75%. Although the interest rate on the money market account is not the highest, Ally does offer a very competitive overall package – particularly if you link the account to an Ally checking account. The checking account has no minimum balance and no monthly fee. You can link your money market account to your checking account to provide overdraft protection. Money would be transferred to your checking account with no transaction fee if you ever made a mistake. You would be able to access your money market account with your Ally ATM card, which has free AllPoint access and up to $10 of non-Ally ATM fees reimbursed every month. This money market account is a nice way to provide yourself with overdraft protection while earning interest. If you don’t need check-writing capabilities on your savings, you would still be better off with Ally’s savings account.

LEARN MORE Secured

on Ally Bank’s secure website

Member FDIC

The rest of these are the best money market accounts listed by APY regardless of minimum balance:

3. High Rate: Sun East Federal Credit Union, 2.20% APY, $5,000 minimum balance to earn APY

Max-Yield Money Market Account Promotional - New Money (13 Month Intro Rate) from Sun East Federal Credit Union

Sun East Federal Credit Union was established in 1949 by employees of the Sun Oil Company. These employees wanted to help each other out financially and decided to do so by establishing their own credit union. Since its establishment, the credit union has grown to acquire over $634 million in assets. Anyone can become a member of this credit union by donating $10 to the Sun East Charitable Foundation. You can also qualify by your location, family members, or through employers.

Once you become a member of this credit union, you’ll be able to open the Max-Yield Money Market Account. This account is currently offering a 2.20% APY that is guaranteed for 13 months. You’ll need to maintain a balance of at least $5,000, but the balance can’t exceed $250,000. Keep in mind that after the 13-month promotional period ends, the account will turn into the Classic MMA. The Classic MMA earns a much lower APY. If you aren’t able to maintain the minimum balance of $5,000, you’ll incur a monthly fee of $10. This account does come with check-writing capabilities. You’re able to manage this account online as well as through the credit union’s mobile app.

LEARN MORE Secured

on Sun East Federal Credit Union’s secure website

NCUA Insured

4. High Rate: Affinity Plus Federal Credit Union, 2.02%APY, $0 minimum balance to earn APY

Superior Money Market from Affinity Plus Federal Credit Union
Affinity Plus Credit Union is a Minnesota-based credit union, but even if you do not live in the North Star state, you can take advantage of the attractive financial products they offer. Membership to the credit union is open to anyone who makes a one-time dues payment of $25 to the Affinity Plus Foundation.

Affinity Plus Credit Union offers a slew of money market accounts, but its Superior Money Market Account stands out, with a 2.02%  APY on balances up to $25,000. Additionally, there is no minimum deposit required and no monthly maintenance fees. Balances over $25,000 earn a 1.00% APY.

To earn the higher 2.02% APY, you must have a minimum direct deposit of $500 per month (which could come from payroll, Social Security or unemployment) to any Affinity Plus checking, savings or money market account, and also be enrolled in digital statements. If you don’t meet those requirements, you’ll earn 0.10% APY.

LEARN MORE Secured

on Affinity Plus Federal Credit Union’s secure website

NCUA Insured

5. High Rate: BankUnitedDirect, 2.00% APY, $2,500 minimum balance to earn APY

Online Money Market from BankUnitedDirect
BankUnitedDirect is an online banking division of BankUnited, N.A., itself a subsidiary of BankUnited, Inc. BankUnitedDirect is based in Florida and has $33 billion in total assets as of September 2019. BankUnitedDirect is accessible online, including on its mobile app.
In addition to its Certificates of Deposit, BankUnitedDirect offers a competitive Money Market Account. The account requires a $2,500 minimum deposit to get started. Then you can start earning at its 2.00% APY. Interest is compounded and credited monthly. You must maintain a $2,500 minimum balance to avoid a $15 monthly fee. You can order checks associated with a Money Market Account by calling BankUnitedDirect.

LEARN MORE Secured

on BankUnitedDirect’s secure website

Member FDIC

6. High Rate: MemoryBank – 2.00% APY, $50 minimum to open

Online Money Market Account from MemoryBankMemoryBank is the online division of Republic Bank & Trust Company. While this online division launched in 2016, its parent company has been around since 1982 and has over $5 billion in assets. Currently, MemoryBank is offering a 2.00% APY on its Online Money Market Account. You’ll need a minimum of $50 to open the account, but you won’t need to maintain this amount to earn the APY. The account doesn’t come with a monthly service fee, but it also doesn’t have check writing capabilities or ATM access. MemoryBank does have a mobile banking app to help you manage your account on-the-go.

LEARN MORE Secured

on MemoryBank’s secure website

Member FDIC

7. High Rate: Pacific National Bank – 2.00% APY, $5,000 minimum balance to earn APY

MMDA Online Special (New Money Only) from Pacific National BankPacific National Bank has quite an interesting history. In 1982, Banco Del Pacifico Ecuador (BPE) decided to establish Banco Del Pacifico International in Miami, FL as an Edge Act bank. The Edge Act allowed national banks to do international banking through divisions chartered by the Federal Reserve Bank. By 1985, Banco Del Pacifico International decided to become a national bank charter and changed its name to Pacific National Bank. Since this change, the bank has acquired over $499 million in assets. The bank initially offered its services to South Florida residents, but decided to expand to all U.S. residents with a valid Social Security Number in 2016. Today, Pacific National Bank is offering an online special on its money market account. With a minimum deposit of $5,000, you could earn an APY of 2.00%. You’ll need to maintain that amount in the account on a daily basis to waive the monthly maintenance fee of $25 and to continue earning the high rate. Check writing is available with this account, but keep in mind that you can only make six certain transaction within a month due to federal law. If you exceed six certain transactions within a month, Pacific National Bank will charge a fee of $20 per additional transaction. You may also make ACH transfers, free of charge, without any limits after the initial funding. In addition to banking online, the bank offers a mobile banking app for your convenience.

LEARN MORE Secured

on Pacific National Bank’s secure website

Member FDIC

8. High Rate: Prime Alliance Bank – 1.97% APY, $10,000 minimum balance to earn APY

Personal Money Market from Prime Alliance BankPrime Alliance Bank was established in 2004 and has grown to acquire over $455 million in assets. The bank is currently offering a Personal Money Market account with an APY of 1.97%. You’ll need to deposit and maintain a balance of at least $10,000 in order to earn this APY. If your balance drops below $10,000, the APY will drop to 1.87%. There aren’t any monthly fees with this account. Prime Alliance Bank will provide an ATM card if you request one. This account can be managed online or via the bank’s mobile app.

LEARN MORE Secured

on Prime Alliance Bank’s secure website

Member FDIC

9. High Rate: Quontic Bank – 1.95% APY, $5,000 minimum balance to earn APY

Personal Money Market from Quontic BankQuontic Bank was established in 2005 and has acquired over $394 million in assets. This online bank is currently offering a money market with some high rates if you’re able to deposit at least $5,000. There is a minimum deposit requirement of $500 and if your balance remains at that amount, you’ll earn 1.85% APY. If you’re able to maintain a balance between $5,000 – $99,999.99, you’ll earn 1.95% APY. If you’re able to maintain balance of $100,000 or more, you’ll earn 2.05% APY. There aren’t any monthly fees. The account does come with a Mastercard Debit Card, which you can use at any Allpoint or MoneyPass ATM at no charge. If you happen to have a Quontic or Citi branch in your area, you’ll also be able to use those ATMs at no charge. Quontic Bank has a mobile banking app that allows you to access the account wherever you are.

LEARN MORE Secured

on Quontic Bank’s secure website

Member FDIC

10. High Rate: NorthPointe Bank – 1.85%APY, $25,000 minimum balance to earn APY

Ultimate Money Market from Northpointe Bank
Northpointe Bank, is a fairly large bank located in Grand Rapids, MI. They have over $1 billion in assets and have only been around since 1999. Currently, they’re offering a 1.85% APY on their Ultimate Money Market account. While you’ll only need $1,000 to open the account, you’ll have to have a minimum balance amount of $25,000 to earn the high APY. Once your balance exceeds $1 million, the APY will drop to .50%. This account comes with a debit card and checks. Northpointe Bank does not charge a monthly maintenance fee, but will charge a $15 Excess Transaction Fee each time you exceed six certain transactions a month. The offer online banking and have a mobile banking app.

LEARN MORE 

Member FDIC

11. High Rate: CNBBankDirect – 1.91%APY, $25,000 minimum balance to earn APY

Premium Money Market from CNB Bank Direct
Established in 2008 as a division of Citizens National Bank, CNBBankDirect’s Premium Money Market account currently boasts an impressive APY of 1.91% on balances over $25,000. That rate is applicable to balances ranging from $25,000 to a whopping $2 million. There is a minimum balance of $25,000 required to open an account, and while it does not charge a monthly service fee, this account does require a minimum balance of $1 in order to keep the account open.

Citizens National Bank has roots dating back to 1920. Headquartered in Bluffton, Ohio, the bank has assets totaling over $840 million and nine physical locations throughout the state of Ohio.

LEARN MORE Secured

on CNB Bank Direct’s secure website

Member FDIC

12. Premier Members Credit Union – 3.00% APY up to $2k

Premier Members Credit Union

Premier Members Credit Union is open to anyone willing to make a $5 donation Impact on Education, a charity for the Boulder Valley School District. This credit union is currently offering an incredible rate of 3.00% with only $5 to open the account. You can earn this APY on balances up to $2,000. Amazingly, even if you grow the balance up to $5,000, you’ll earn 1.00% APY. As the balance increases, the APY decreases to the following:

  • $5,000.01-$10,000: 0.45%
  • $10,000.01-$50,000: 0.30%
  • $50,000.01-$100,000: 0.30%
  • $100,000.01-$250,000: 0.25%
  • $250,000.01+: 0.25%

Premier Members Credit Union rewards low balance savers by placing the highest rate with the lowest deposit, but if the balance grows they start using a reverse tier system where they blend the APY as the balance grows. Checks are available with this account, but you can only make six withdrawals per month. Each additional withdrawal will be assessed a $10 fee.

LEARN MORE Secured

on Premier Members Credit Union’s secure website

NCUA Insured

What is a money market account?

A money market account is a special type of savings account: Cash you put in the account remains deposited with the financial institution, where it earns a variable annual percentage yield. Because the name of this deposit product has the word market in it, you may assume a money market account is some kind of investment product, but it’s not.

One of the features that differentiates a money market account from a savings account is that institutions generally make it easier to access deposited funds by offering checks and ATM cards. Note that some institutions are starting to provide them for savings accounts, too. Keep in mind that much like a savings account, money market accounts are governed by Regulation D, the Federal Reserve rule stating you can only make a maximum of six withdrawals via check or debit card. Additional withdrawals may incur a fee from your bank or credit union.

It’s also important to understand that money market accounts are different from money market funds. In the 1980s, shoulder pads and hair weren’t the only things that were big: Yields on money market funds were both low-risk and offered a good rate of return. To help out the banking sector, Congress passed the Garn-St Germain Depository Institutions Act of 1982, which allowed banks to offer a new type of savings account — money market accounts — with an interest rate based on those offered in money markets.

What to consider before opening a money market account

Before you get bogged down in the details, let’s take a look at some quick pros and cons of a money market account.

Pros:Cons:
  • Typically carry higher interest rates than savings accounts
  • Convenient access to your funds with check-writing abilities and a debit/ATM card (not offered on all accounts)

  • May carry monthly maintenance fees or a high balance to waive one
  • Still limited to six transfers and withdrawals per month like a savings account (or you’ll face a fee)
  • You’re better off using a higher yield product like CDs for money you won’t need in the immediate future

Who money market accounts are best for

Now that you know the basics of a money market account, should you get one? They’re a good choice if you have a big deposit you’d like to keep safe and growing at a high interest rate. Then when you need to access that money, perhaps for an upcoming purchase or in an emergency, you can often easily do so with an ATM/debit card or by writing a check.

Savings accounts vs. money market accounts

Money market accounts often earn a higher rate than standard savings accounts. The caveat is that MMAs often require higher opening deposits or higher balances than a standard savings account. Even so, you may also find that one bank’s top money market rate earns at the same rate (or lower) as a savings account at another bank.

For example, one of the best savings accounts, Ally’s Online Savings account, offers a 1.60% APY while its money market account earns at a mere 0.75% APY (on most balances). So if it’s high interest rates you’re after, be sure to compare accounts across the board rather than turning immediately to a money market account. Just be sure to keep your balance limits in mind when shopping around.

What often separates money market accounts from savings accounts is their check-writing abilities or issued ATM/debit cards. This provides easier access to your money especially if you have larger balances you’re saving for a bigger purchase. Not all money market accounts offer these features, though. Furthermore, money market accounts are still savings vehicles, so they’re also limited to six outgoing transactions per month, like transfers and withdrawals.

Read more about the differences between money market and savings accounts here.

CDs can offer higher rates than money market accounts

Savings accounts and money market accounts often pay much lower interest rates than CDs. Right now you can get a 1-year CD paying 2.15% APY (with only a $500 minimum). You can find the best CD rates here. If you build a CD ladder, you can take advantage of 5-year rates that are currently as high as 2.41%. Creating a CD ladder also allows you to protect your investments over the years by locking in today’s high rates in a long-term account while also staying flexible for any potential rate increases with your shorter-term accounts. The interest rate on a money market account can change right away, at the bank’s discretion.

If you need some savings more immediately, money market accounts are great places to keep that money— it’ll keep growing, while still remaining accessible. In contrast, should you need to access your CD funds before it matures, you’ll likely face a pretty heavy penalty, typically forfeiting three to six months of interest.

A money market account isn’t the same thing as a money market fund

Money market accounts, like deposit accounts, provide FDIC insurance on your deposits up to $250,000. Money market funds, on the other hand, are investment accounts, most likely sold by your broker, and are regulated by the Securities and Exchange Commission instead. Money market funds invest in highly liquid cash and cash equivalent securities that typically mature within 13 months.

As an example, Vanguard offers the Prime Money Market Fund. Like other money market funds, this one “invests in short-term, high-quality securities.” Its objective is to keep the fund trading at $1 and generate a decent return. Still, money market funds can end up with a lower return than those you see from the money market accounts listed in this article. Since money market fund returns are dependent on the market and the Federal Reserve Rate, it’s important to keep an eye on the current interest rate climate to see whether investing in these funds are worth your time and money.

Money market funds charge expense ratios, or management fees, that are charged as a percentage of your fund (Vanguard’s is currently 0.16% as of Dec. 2018). You can also end up paying some transaction fees. It’s important to watch out for an account’s fees which can often lessen your total investment in the end. Like money market accounts, money market funds can also require a high minimum balance to open an account.

Most people compare the return of a money market fund (sold by their broker) to the interest rate paid by a traditional bank (sold by their local bank teller). As a result, they are willing to take the risk of a money market fund. However, as you can see from the best money market accounts in this article, you can get FDIC insurance and beat the return of most funds without taking on the risk of market investments.

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.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at [email protected]

Advertiser Disclosure

Strategies to Save

Review: The Aspiration Account

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

The 1.00% APY has one of the highest rates in the country. If you move both your checking account and savings account into an Aspiration Account, you would be able to earn a high interest rate on your money while avoiding the risk of overdraft and enjoying the convenience of only having one account.

Aspiration is a fairly new financial services company that aims to be “the investment firm for the middle class.” In this video (that could pass for a parody if you didn’t realize they were serious), the company proclaims that it is possible to be a “capitalist with a conscience.” Lofty goals are behind the company and the products they have designed. The CEO (Andrei Cherny) was a former Clinton White House aide, and with Aspiration he is trying to take action and create a new type of financial services firm that lives up to his ideals.

All products offered by Aspiration (which includes two investment funds and a cash management account) have the same pricing model. You decide how much to pay. Yes, the fee is set entirely by you, the customer. You can set it to $0 or you can set it to any amount below $10. You can change the fee whenever you want. They provide a service and you decide what it is worth.

Aspiration is making a big bet.

With traditional banking, people are nickel and dimed every month. Make an out of network ATM withdrawal, and you could end up spending $10 in fees. Put your money into a savings account, and earn only 0.01%. By using Aspiration, you could be much better off financially than banking with your traditional bank. And you can do your own calculation and decide how much of that savings you share with Aspiration. They are hoping that you will share enough for the business to continue.

Application Process for the Aspiration Account

Opening an account used to be a bit challenging as you needed to be invited. However, Aspiration has made it as simple as ever to open an account. Simply click on the “Get Started” button on their website and enter your email address.

 

At that point, you should be directed to a page that allows you to open your account online and apply for the account.

 

Create your password, check the box to let Aspiration know you’ve read the Terms and Conditions, and click “Let’s Go!”. Since this is an online account, there will be extensive KYC (know-your-customer) and compliance questions. I was required to provide:

  • Answers to identity verification questions. These are questions generated by a credit bureau. So, you will be asked to provide your social security number, but they ensure that they won’t “run the kind of credit check that will ding your score”. You might also be asked to answer questions about your mortgage payments, car loans, and other credit bureau items to identify yourself.
  • A link to an existing bank account. This is used to provide the initial funds in the account. I put $10 into the account for a test drive. (By doing this, Aspiration also reduces its risk, because you will have gone through the compliance checks of your existing bank).

Once you finish the account opening process, it may take a few days for the account to be open and for you to receive your debit card in the mail. Aspiration has partnered with Coastal Community Bank in a way that is similar to how Simple operated. (Simple, for those who remember, was not a bank. It created the front-end user interface, but partnered with an FDIC-regulated bank).

Aspiration Mobile App

In 2016, Aspiration joined the rest of the financial industry with the launch of their mobile app. Their app allows you to view your Aspiration Account balance and transaction history, remote deposit checks using your phone’s camera, schedule transfers between the Aspiration Account and other bank accounts, pay bills, and track the impact of your spending habits. The mobile app also allows you to use fingerprint authentication to secure the data.
There are two features that stand out:

  1. Their Payments feature
  2. Their Aspiration Impact Measurement (AIM) feature

Payments

Payments is Aspiration’s bill pay feature. Not only does this feature allow you to pay your bills, but it also allows you to pay your friends. However, unlike other bill pay and money transfer features (like Zelle), Aspiration’s Payments feature sends payees a paper check with your name, address, and optional memo if you choose to include one. This feature is available at no charge to the account holder.

Since this feature is sending a paper check, you can expect the payee to receive the check within 5-7 business days from the send date. Fortunately, Aspiration doesn’t limit the number of payments that can be scheduled and they don’t limit the amount of money you can send.

Aspiration Impact Measurement (AIM)

AIM is a pretty unique feature as it allows you to see the impact you’re making on the planet and people based on your spending habits. This feature will provide you with a score that is determined by the types of businesses you frequent. The score is calculated by how the businesses treat their employees, customers, community, and environment. So, businesses are given a score and you’re given a score based on where you do your shopping.

Aspiration shares that they created AIM “so that we can all think about how our everyday spending can make the world a better place.” This may sound very “kumbaya”, but there’s no denying that they’ve created an innovative feature.

What We Like

  • Unlimited, global ATM fee reimbursement: With this account, you can use any ATM in the world and it won’t cost you a dime. Not only won’t Aspiration charge you a fee, but you will be reimbursed any fee charged by the other bank whether they are located in the U.S. or in another country.
  • Zero overdraft and stop payment fees: This is a huge perk as these are some of the “gotcha” fees that you’ll encounter at big banks.
  • Other fees are also fairly lower than big banks: Outgoing wire transfers and receiving an incoming wire transfer will only cost you 82 cents.
  • One of the best interest rates in the market: At a traditional bricks-and mortar bank, you would receive no interest on your checking account, and you would earn only 0.01% on your savings account. With this account, you earn 1.00% on your entire balance. The best online checking account in the market is currently paying 1.75%, but you need to maintain a balance to earn this APY.
  • You no longer need to have a separate savings account and checking account. With that, you no longer need to worry about overdrafts. At a traditional bank, you could end up paying $10 just to have money automatically transferred from your savings account to your checking account if you make a mistake. Because you can keep all of your money in one account, you will not need to worry about overdraft transfers.
  • All deposits are FDIC-insured, up to $250,000 per depositor.

What We Find Lacking

  • Bill pay functionality. While Aspiration does mention that they will be making updates and improvements to their Payments feature, they don’t seem to mention going away from the paper check method. While sending paper checks may be a good solution for a feature that once didn’t exist at Aspiration, it’s still not as efficient as most online bill pay features that other banks offer.

Who Could Benefit From the Aspiration Account Now?

The perfect profile for an Aspiration Account customer today would be:

  • You travel a lot, and frequently need to use ATMs that are outside of your bank’s network
  • You have a lot of cash that you keep in your account and would like to earn interest on that money
  • You are about the impact you make on people and the environment.

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on Aspiration’s secure website

Alternatives if This Account is Not Right For You

This account is going to get better over time. It won’t come as a surprise if this account starts to become much more competitive.

Depending upon what feature is most important to you, there are excellent alternatives:

  • If you want the highest interest rate, you can earn up to 1.80% with an online savings account with a moderate deposit amount requirement. You can find the best savings account here.
  • If you want to avoid ATM fees globally, but need better bill pay capabilities, you should open a Charles Schwab checking account. You can find that account, and others, on our checking account page.

This Looks Great and Will Get Better. But is it Sustainable?

One of the biggest worries we have at MagnifyMoney is the following: when something looks too good to be true, it usually doesn’t last long. The offer can last for a few years, but eventually market forces will catch up with it.

Providing unlimited reimbursement of ATM fees globally is expensive. Ally originally offered the same perk and then capped that benefit at $10 per month ($120 per year), because it was impossible for them to make money on the checking accounts otherwise. Aspiration does not have a magic formula, and eventually the business will need to make money somewhere.

Often, banks do not make money on checking accounts. Instead, these accounts serve as the foundation account and the bank cross-sells other products. Perhaps this is Aspiration’s plan.

Regardless, the product is very consumer friendly and potentially lucrative. According to CrunchBase, the business has raised over $67 million. Clearly, the business will need to raise more capital as it scales, especially given the low level of customer profitability expected. There is certainly limited risk to taking advantage of the great offer available now. At MagnifyMoney, we just hope that they find a way to make money sustainably. As Ally customers know all too well, it can be frustrating to switch accounts based upon a strong feature (unlimited ATM reimbursement), only to have that benefit taken away when it is deemed too expensive.

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Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at [email protected]