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Banking

Best Savings Accounts for Kids

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.

Piggy banks are fun for small change, but if you want to teach your kids important lessons about managing money and the power of compound interest, get them their own savings account. While your local bank branch probably offers more than one savings account product, you might consider looking online for one that’s designed with children in mind.

To aid in your search, we have chosen six savings accounts tailored for kids from a selection of nearly 100 kids’ savings options offered at banks and credit unions around the country. We based our selections on how well they met these five criteria:

  • Competitive annual percentage yield (APY): Accounts should demonstrate the rewards you can get by saving your money, and a competitive interest rate helps achieve that objective.
  • Low fees: Kids don’t need to lose their money to fees, so finding an account with zero fees was important.
  • Low minimum deposits: Most kids don’t have a large amount of money to save when they first open an account. Having a low minimum deposit requirement can help them get started quicker.
  • Broad geographical reach: Banks and credit unions need to be available to a large geographic market, with extra points for physical locations where kids can go and deposit cash and coins.
  • Great educational tools: Savings accounts that are geared to kids should have some educational tools to help them learn about what it takes to achieve financial success. Bonus points if the tools are fun, too.

 

Best overall savings account for kids: Capital One

Kids Savings Account from Capital One Capital One’s Kids Savings Account has all of the features you’d expect to see in a savings account for adults but with the additional feature of parental controls, which makes it a great overall solution for kids of all ages. The account earns 0.50% APY, has no monthly fees and can be opened with $0. You can set it up the account, and make your initial deposit at a later date.

The Kids Savings Account parental controls allows parents to sign into the account under their own usernames and passwords to help their children manage their funds. Parents always control transfers in and out of the account, offering good balance between independence for the young holder and parental oversight. Kids get to view their balance and watch their money grow.

Capital One lets you create an automatic savings plan linked with other accounts, so you can automatically transfer your child’s allowance into their Kids Savings Account. When it comes to geographical reach, Capital One has approximately 500 branch locations, as well as a great mobile banking app, which allows you to deposit checks and check balances.

Capital One Kids Savings Account
APY: 0.50%
Monthly Fees: $0
Minimum Opening Balance: $0

SEE DETAILS Secured

on Capital One’s secure website

Member FDIC

Best savings account for college savings: Citizens Bank

CollegeSaver from Citizens Bank (RI) If you want to be rewarded for consistent savings, the Citizens Bank CollegeSaver account has a bonus you might consider. If you open the account before your child is six and make a deposit of at least $25 each month until your child turns 18, Citizens Bank will give you a $1,000 bonus (the current account APY is a low 0.05%). You can also open this account if your child is between 6 and 12 years of age, but the minimum monthly deposit will be $50 and opening deposit is $500.

If you were to open the account today with an initial deposit of $25 upon the birth of a child (and assume the current APY held for 18 years), and then deposit $25 a month for 18 years, your $5,400 investment would accrue $24.48 in interest. Add the bonus and you’ll end up with $6,449.48. The bank doesn’t put any stipulations on how the money can be spent, so you can use the balance for college or any other financial needs.

Citizens Bank CollegeSaver
APY: 0.05%
Monthly Fees: $0
Minimum Opening Balance: $25 for children under six years old; $500 for children age six to 12

SEE DETAILS Secured

on Citizens Bank (RI)’s secure website

Member FDIC

Best savings account for a young child: PNC Bank

S is for Savings from PNC Bank If you want to engage your child with educational tools, PNC’s S is for Savings account offers a lot. Granted, this account offers the lowest APY of the banks that made this list, but it makes up for it with its interactive online banking experience.

The Learning Center features Sesame Street characters that will help them learn basic money concepts. The site has fun activities you and your child can do together.

Features include the ability to set up automatic savings deposits that help them see the benefits of having a savings routine. Kids can work towards goals and learn about the three components of money: saving, sharing and spending. As your child gets older, you may choose to transfer their accumulated balance to a savings account at a bank that offers a higher interest rate.

PNC Bank’s S is for Savings
APY: 0.01%
Monthly Fees: $0 for account holders under 18
Minimum Opening Balance: $25

SEE DETAILS 

Member FDIC

Best savings account for teens: Alliant Credit Union

Kids Savings Account from Alliant Credit Union When your child turns 13, Alliant Credit Union considers them to be a young adult, offering their High-Rate Savings Account with a 1.35% APY and no monthly fees. For teens who want to set savings goals, the credit union allows them to set up supplemental accounts that can be earmarked for specific items, such as saving for a new car.

What makes this a great option for a teen is that Alliant also offers an interest-paying teen checking account for kids ages 13-17. The checking account earns an APY of 0.25%. The two accounts can be linked and both will earn your teen interest. Alliant also refunds up to $20 per month in ATM fees if the teen uses out-of-network machines.

To open an account at Alliant Credit Union, you must be a member. Membership is open to employees or former employees of partner businesses or organizations. Or you can join by making a $10 donation to the Foster Care to Success Foundation.

Alliant Credit Union High-Rate Savings:
APY: 1.35%
Monthly Fees: $0
Minimum Opening Balance: $5

SEE DETAILS Secured

on Alliant Credit Union’s secure website

NCUA Insured

Best APY for a kid’s savings account: Spectrum Credit Union

MySavings from Spectrum Credit Union Spectrum Credit Union currently offers the highest interest rate on the market for a kid’s savings account, but only on a relatively limited balance. Spectrum’s MySavings account earns 7.00% APY on account balances up to $1,000, making for a rate that’s higher than many CDs. Balances over $1,000 earn the regular savings rate, which is 0.50%. A high interest rate can help get kids excited about savings as their balance will grow quicker.

Spectrum Credit Union currently has branches in six states, but deposits can be made nationwide through the Credit Union CO-OP Shared Network. Membership is open to anyone by joining the Contra Costa County Historical Society ($15 membership fee) or the Navy League of the United States ($25 annual membership fee).

Spectrum Credit Union MySavings
APY: 7.00% for the first $1,000; 0.50% on balances above $1,000
Monthly Fees: $0 for account holders under 18
Minimum Opening Balance: $0

SEE DETAILS Secured

on Spectrum Credit Union’s secure website

NCUA Insured

Best online tools for a kid’s savings account: Capital One

Kids Savings Account from Capital One Kids are digital natives, and that makes a kid’s savings account’s online banking features extra important. In addition to being our pick for best overall savings account for kids, the Capital One Kids Savings Account offers a great selection of online saving and budgeting tools that will keep kids engaged and informed.

One of the best features is the ability to create additional savings accounts and set a target goal for each account. For example, you child may set a goal for holiday gifts, another goal for a new bike or car and another goal for vacation money. They can even give each account a nickname, such as “My Wheels Fund.”

Capital One has a full suite of online tools for your child to track their progress and success, helping to keep them focused on their goals. Capital One also offers standard features on its mobile banking app, some of which are available for kids, including the ability to check their balance or make a mobile deposit.

Capital One Kids Savings Account
APY: 0.50%
Monthly Fees: $0
Minimum Balance: $0

SEE DETAILS Secured

on Capital One’s secure website

Member FDIC

Why your kid should have a savings account

It’s never too early to start teaching your kids about money, and a savings account is a great tool to help accomplish this aim. According to the 9th Annual Parents, Kids & Money Survey by T. Rowe Price, 55% of parents said their child has a savings account, but just 23% of kids said that they talk to their parents frequently about money. Parents who discuss financial topics with their kids at least once a week are more likely to have kids who say they are smart about money than than those who do not have a discussion with their children.

Savings accounts show kids the value of saving at an early age. They get to watch their money grow as compound interest work its magic, and they can set short- and long-term goals for the money they save. The reward of achieving the goals will teach life lessons on patience and planning. Once you open an account for your kids, share money management tips with them, things like “paying yourself first” by saving a portion of gifts and allowances they receive instead of spending it all.

When you teach your child good money habits early on, you help set them up for success later in life. Putting your child on the path for financial responsibility and independence by choosing the best savings account for kids could be the greatest gift you can give them.

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.

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Banking

What Is a Cash Management 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.

Actions have consequences. Staying up too late will turn you into a zombie at work the next morning, eating ice cream for breakfast will force you to buy new jeans — and placing your money in a conventional checking or savings account could yield a piddling amount of interest.

The internet hasn’t found a way to circumvent the biological necessities of sleep and a healthy diet — yet — but it can empower banks and financial institutions to offer accounts with APYs climbing well above 2.00% in some cases, all while providing the ease-of-access and convenience of a checking account. In the evolving world of online banking, these are usually called cash management accounts, and you need to know more about them.

You may have read about cash management accounts. They go by a variety of names: hybrid checking, hybrid accounts, cash management vehicles. Like many consumer financial products, readers may be a bit unclear about how these accounts actually work — and to start, note that they are very different than the “cash management accounts” offered by certain online stock brokerages.

“We’re trying not to think like traditional bankers, with the usual boundaries of how an account should be used,” said David Hijirida, CEO of Simple, which offers its own cash management account. “What we’ve found is that most customers use our accounts in a way that combines both checking and savings behaviors.”

Let’s get to the heart of the matter by defining what these new accounts are and whether they’re right for you and your money.

What is a cash management account?

Whatever the name, a cash management account combines the high interest rates of a savings account or certificate of deposit with the accessibility of a checking account.

With some of the accounts reviewed below — like Aspiration’s Spend and Save and Simple’s Checking and Protected Goals Accounts — the product actually consists of a checking account (which typically earns little to no interest) linked with a savings account (which earns a pretty decent APY) and features instantaneous, unlimited transactions between the two. Others — like Radius’ Hybrid Checking — comprise a single checking account earning a high APY, minus all the usual requirements typical of a traditional high-yield checking account.

While cash management accounts consisting of both a checking and savings account earn some of the highest APYs, you need to watch out that you don’t keep the majority of your funds in the checking or spending portion — where it earns minimal interest. Because transferring funds between the checking and saving portions happens instantly and doesn’t come with any limits, this is an easy mistake to avoid.

The boundary between “cash management account” and “high-yield checking” account can be hazy, but they share the following characteristics that place them in the “cash management” category.

  • Zero fees: One of the more attractive facets of cash management accounts is that most have no monthly maintenance fees (or only charge a small amount). This helps differentiate them from high-yield checking accounts, many of which require users to meet multiple specific requirements each month or pay maintenance fees in order to earn the high APY.
  • A higher APY than your typical checking account: According to DepositAccounts.com (like MagnifyMoney, it too is owned by LendingTree), the average APY a checking account earns is 0.187%. Traditionally that’s been seen as the trade off depositors make with banks in order to have easy, everyday access to their funds. The cash management accounts we review here represent true hybrid accounts that combine the liquidity of checking accounts with the high interest rates of savings accounts. All of them offer a much higher APY than the average checking account and, in many cases, higher than the interest earned in many savings accounts.
  • They’re online accounts, mostly: The institutions offering cash management accounts mostly exist as ones and zeros on the web. Some of these companies, like Aspiration, aren’t even banks themselves, but have partnered with traditional banks to provide customers with their services.

How do cash management accounts earn so much interest?

While the particulars vary from account to account, the principal underlying cash management account combines a traditional checking and savings account in one instrument — you deposit money with a bank or institution, where it earns interest. The financial institution then takes a cut of that interest in order to make money, and passes the rest on to you (which is reflected in the interest that particular account earns).

Because banks prefer customers to deposit as much money as possible for an extended period, they usually give accounts and products that limit customers’ ability to withdraw their cash higher interest rates in order to incentivize depositors into using those products.

Average Checking Account APYAverage Savings Account APYAverage 1 Year CD
APY
Average 5 Year CD
APY
0.187%0.269%1.198%1.840%

As you can see from the chart above — this data comes from DepositAccounts.com — the more liquid your account, the less interest it earns for you. Checking accounts, which provide almost unlimited access to your money, earn the lowest APY on average. Certificates of deposit with a five-year term, which usually come with a steep financial penalty if you withdraw the money before the term is up, provide the highest interest, on average.

So how do the companies offering cash management accounts bypass this norm to offer customers high interest rates on accounts with little to no restrictions on withdrawals? A big part of the answer is their low overhead, thanks to their online-only operations.

Megabanks like Chase employ thousands and maintain a sprawling network of physical locations, while an online-only institution like Aspiration, offering the Spend and Save cash management account, might have only a few dozen employees on its payroll.

“Because we’re online-only, it helps us pass on those kinds of savings to our customers,” said Andrei Cherny, CEO of Aspiration.

Where does my money go when I deposit it into a cash management account?

Since many of the institutions offering cash management accounts lack the extensive infrastructure of traditional banks, you may be wondering where your money is actually deposited with these accounts.

The answer is that they partner with a bank (or a series of banks) to manage your funds. At the end of the business day, the money in your cash management account is swept into one of these participating bank’s accounts, where it enjoys the normal protections provided by FDIC accounts.

This information should all be disclosed to you when you open a cash management account, and if it’s not you should hesitate before placing a large amount of money in the account.

“As with anything, read the fine print,” said Jonathan Chapman, CFP at WJ Interests based in Sugar Land, Texas. “Look under the hood to see what banks they partner with to ensure they are working with quality institutions.”

Customers should also keep an eye on the individual FDIC-insured accounts where your money is swept at the end of the day. Make sure none of the balances exceed the insurance’s limit ($250,000) — otherwise, the portion of your balance that’s greater than $250,000 is at risk of being uninsured.

The potential pitfalls of cash management accounts

The high interest rates offered by these accounts make them attractive to customers who want their money to grow at a decent rate while still remaining accessible, but they’re not for everyone. Because most of these hybrid accounts are offered by online-only banks or institutions, customers have to feel comfortable banking with a company that may lack decades of history — especially if they’re already accustomed to doing business with another bank.

“As an advisor, my most difficult work is to get people to follow through on my recommendations,” said Jayson Owens, CFP at Bright Road Wealth Management based out of Anchorage, Alaska. “To accomplish this, I rarely recommend changes to a primary checking account. The cost in time typically outweighs the benefit of the change.”

Another related concern customers may have about these cash management accounts is if the companies offering them will stick around for the long haul. “Clients may not lose money but the company may get acquired or shuts down which would cause unnecessary hardship,” said
Deva Panambur, CFA and CFP at Sarsi, a wealth management company based in West New York, N.J.

While you’re not going to be able to waltz into the CEO’s office and demand a look at his five-year plan, you should take into account your gut reaction to how a company offering a cash management account presents itself and whether it has a viable shot at longevity.

The best cash management accounts

Account nameAPY earnedMinimum balanceMonthly Maintenance Fee
Simple Account1.55%$0.01$0
Betterment Everyday Cash Reserve and Checking*0.30% $0$0
Wealthfront Cash Account*0.26% APY on the entire balance$1$0
SoFi Money1.10% APY on the entire balance$1$0
Radius Rewards Checking Account0.15% APY on balances of $100,000 and greater; 0.10% APY on balances between $2,500 and $99,999.99$100,000 to earn the highest APY; $2,500 to earn 0.10% APY$0
Aspiration Spend and Save0.25% APY on the entire balance$1,000 monthly deposit to earn 0.25% APY or $10,000 Save account balance
$0

*These cash management accounts currently don’t have a way for you to spend money directly from the account (such as a debit card or check) and require you to transfer money from the cash account to a third-party account before spending.

Simple Account

Simple was created out of frustration with the banking industry. According to the founders, they were confounded by the complexities of certain bank accounts; their solution was to offer a no fee bank account that earns interest and helps you budget your money “in one simple app.”

What makes this bank account stand apart from other online checking accounts? Well, for starters, it’s a checking account that doesn’t have any fees, not even if you use an international ATM (however, a fee may still be charged by the ATM owner). With this cash management account, you can earn 1.55% APY on balances in your Protected Goals account that range from just $0.01 to $10,000. If you’re able to maintain a balance of over $10,000, Simple will reward you with a higher APY of 1.55%. The Protected Goals Account — basically a savings account that lives within your larger Simple account, where you can instantly transfer money in and out of as many times as you want without any penalty.

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on Simple’s secure website

Betterment Everyday Cash Reserve and Checking

Betterment plans on its Everyday Cash Reserve and Checking accounts to work in tandem, but currently only the Cash Reserve is available for customers. The Cash Reserve account promises a promotional APY of 0.30%. Previously, you needed to sign up for an Everyday Checking account in order to earn the 0.30% APY, however this does not appear to be the case anymore. The Everyday Checking account is currently being rolled out on a limited basis to customers on the wait list.

Because money in the Everyday Cash Reserve account is held by several program banks, customers enjoy FDIC protection up to $1 million. There’s no limit to the amount of times you can transfer money in and out of your Cash Reserve account (unlike a traditional savings account at a bank) but it does take 1-2 business days to for Betterment to process these transfers.

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on Betterment’s secure website

FDIC Insured

Wealthfront Cash Account

This robo-advisor offers savers a cash management account that earns 0.26% APY and doesn’t require you to open an investment account. Because Wealthfront sweeps the money you deposit in the cash account into several partner bank accounts, your money is FDIC insured up to $1 million, a selling point for those wanting large balances to receive the maximum protection. Currently Wealthfront doesn’t offer a debit card to allow you to directly spend the money with a merchant (though the company promises its working on it), but you can transfer funds from the cash account to a third-party account or an internal Wealthfront investment account free of charge.

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on Wealthfront’s secure website

FDIC Insured

SoFi Money

Though it’s probably better known for its mortgages and student loans, this online-only investment firm has staked a claim in consumer banking by offering its Money account, which offers a generous APY.

SoFi doesn’t require depositors to maintain a minimum balance in this account in order to earn that high interest rate, one of the few accounts in the market that doesn’t place a barrier between the customer and the high APY. Account holders also get additional goodies like free paper checks upon request and unlimited reimbursement of ATM fees.

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on SoFi’s secure website

Radius Rewards Checking Account

Radius Bank is a community bank headquartered in Boston. The Radius Rewards Checking account is free, as long as you open the account with the required deposit of $100.

Because the Rewards account offers a much-higher than average interest rate for a checking account without saddling the customer with a laundry list of requirements — like a number of debit transactions required each month — Radius’s account joins the list of best cash management accounts.

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on Radius Bank’s secure website

Member FDIC

Aspiration Spend and Save Account

Aspiration aims to transform personal banking from a chore customers tolerate to an act of social responsibility — at least according to their marketing campaign, which heavily emphasizes the fact that customers only pay whatever they wish in fees, with 10 percent of that money going to charity. But even depositors who don’t buy into Aspiration’s brand ethos will likely find themselves intrigued by the company’s Spend and Save account, which promises a 0.25% APY on what is effectively a checking account.

Similar to Simple, Aspiration has packaged together a savings account and a checking account into a single consumer product allowing users to move their money between both portions instantly and as many times as they wish. Users should be careful not to leave the majority of their funds in the checking portion, which owns zero APY. Instead most of the money should live in the savings account, where it earns the 0.25% APY the company advertises so prominently.

You can move your money between both parts of the Spend and Save account instantly, so having most of it in the savings portion shouldn’t slow you down during a shopping spree; however, it’s important to note in case you get careless and leave a big chunk of change in the spending portion, where it earns no interest.

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on Aspiration’s secure website

 

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.

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Banking

Best Savings Accounts

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.

Interest rates on savings accounts vary greatly, which means you need to shop around to find your best rate available. It’s possible to find rates reaching well past 2%, while the average savings account rate stands at around 0.27% (as of March 2020). This is why we check rates daily at more than 5,000 U.S. banks and credit unions, to make it easy for you to gain the best possible return on your savings.

A savings account is a key component of everyone’s financial life, but everybody needs something a little different from their savings account. That might mean you want to maximize your interest earnings, while others might need easy branch access. For that reason, we’ve outlined the best savings accounts in several different categories to better help you find the right one for your preferences.

So whether you’re shopping around for a new savings account or you need to open one for the first time, this comprehensive guide should help you get started. Below, you’ll find the best savings accounts to choose from, and a full brief on every aspect of selecting the right account for your needs.

Rates are accurate as of March 5, 2020

Best Savings Account Rates from Top Online Banks

Some people really put an emphasis on banking with a well-known, dependable bank that offers high rates and great features. For this reason, we’ve compiled a list of the big online banks that have had competitive rates for two consecutive years and either don’t require a minimum deposit amount or have a low minimum deposit amount requirement.

1. Barclays – 1.60% APY, no minimum deposit to open account

Barclays

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on Barclays’s secure website

Member FDIC

Barclays originated in London over 300 years ago. In 1965, Barclays incorporated Barclays Bank in California, and in 1971, incorporated Barclays Bank of New York, where its Wealth unit is now based. While the bank has a presence in several U.S. cities, it settled its headquarters in Wilmington, Del. in 2001, where the online business currently resides.

While Barclays had been predominantly making a name for itself in the credit card space, the bank launched its online savings account in 2012 with a fairly competitive rate. Since its launch, the bank has remained consistent with its rate and even decided to up its game in March 2019 to compete with the other online banks. Today, Barclays holds on to a 1.60% APY, and doesn’t require a minimum amount to open the account or a balance to earn that APY.

You can fund the account by transferring funds via ACH, setting up direct deposit, mailing a check or uploading a picture of a check via the bank’s Deposit Checks feature. Be aware that Barclays may hold your deposited funds for up to five business days if deposited by check or electronically. If you fund the account via ACH or transfer from another bank, the funds will be available immediately. The maximum amount that you can withdraw or deposit is $250,000 per transaction.

If having the ability to bank at the palm of your hand is important to you, you’ll be happy to know that Barclays has a mobile app.

2. American Express National Bank – 1.60% APY, no minimum deposit amount

American Express National Bank

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on American Express National Bank’s secure website

Partner Offer

Member FDIC

While this institution was established in 1989, American Express National Bank can trace its roots back to 1850 when its parent company, American Express, was originally founded. Not unlike Barclays, American Express is widely known for its credit card products.

With our sponsored advertiser, American Express National Bank, you can also open deposit accounts like its Personal Savings Account. Luckily for banking customers, the account historically offers good rates that consistently land it in top rankings. Today, you can take advantage of its 1.60% variable Annual Percentage Yield (APY) with any deposit amount. The account doesn’t charge a monthly fee, nor any fees for wires or to deposit checks.

This high yield savings account does not come with an ATM/debit card or checks. You can deposit money by mailing a check and make online transfers to and from your account. When pulling funds from your external bank, it will take five business days to appear in your account when you initiate the transfer from your Personal Savings account, and one to three when you initiate through your external account. Sending funds from your Personal Savings Account will take one to three business days no matter which side you initiate from. American Express Personal Savings is accessible online only; it does not have a mobile app.

3. Goldman Sachs Bank USA – 1.70% APY, no minimum deposit to open account

Goldman Sachs Bank USA

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on Goldman Sachs Bank USA’s secure website

Member FDIC

Marcus by Goldman Sachs® is a brand of Goldman Sachs Bank USA that powers the bank’s online savings accounts, as well as its personal loans. Marcus launched its online savings account in 2016 with a competitive rate (at the time). While savings rates have fluctuated, continue to do so, this online brand has continued to offer a consistently competitive rate on its savings account. Today, the bank is offering a 1.70% APY. There isn’t a minimum deposit amount or balance requirement to earn the APY — plus, this account doesn’t come with any monthly fees either.

You can easily fund the account by either transferring your funds directly from a linked external bank account, setting up direct deposit, sending a check or sending a domestic wire transfer. While you can deposit as much as $1 million per account, you’ll only be able to transfer a maximum of $125,000 per outgoing transfer when initiated online. Marcus does give you the option to call its customer service number if you need to withdraw more than that amount. Keep in mind that you’ll be limited to making six certain withdrawals or transfers per statement period.

One downside to this online-only bank is that it doesn’t currently have a mobile app that allows you to conduct transfers, so you’ll have to conduct transfers on Marcus’ website. However, the online bank did join forces with Clarity Money, a personal finance app from Goldman Sachs Bank USA. Through Clarity Money, you’ll be able to monitor your account and manage your finances in a simple way.

4. Capital One — 1.50% APY, no minimum deposit to open account

Capital One

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Member FDIC

Turn to Capital One 360 for Capital One Bank’s more competitive rates. As an online-only operation, Capital One 360 accounts provide savers with higher deposit rates for better savings. They’re not just a flash in the pan either; Capital One remains one of our top picks for their consistently competitive rates.

The Capital One 360 Performance Savings earns a 1.50% APY on all balances. There’s no monthly fee, so your savings can grow in peace without the bank taking out a chunk. You can open the account with any deposit amount that works for you, as there is no minimum deposit nor balance requirement.

Capital One 360 accounts can be managed easily online, on the bank’s mobile app or at a Capital One Cafe or branch.

5. Discover Bank – 1.50% APY, no minimum deposit to open account

Discover Bank

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Member FDIC

Known for its credit cards, Discover’s first card was first used in 1985. In that same year, Discover acquired Greenwood Trust Company, which officially changed its name to Discover Bank in 2000. Today, you can find several online banking products from Discover Bank, including certificates of deposit and a cashback checking account.

Dip into Discover Bank’s deposit offerings with its competitive Online Savings Account. There’s no minimum to open the account or start earning its 1.50% APY. Plus, interest is compounded daily and paid monthly for faster earnings. Discover also promises no fees so you can avoid fees on items like monthly maintenance, checks, returned deposited items, excessive withdrawals and insufficient funds.

Discover Bank is accessible solely online, which includes its mobile app, available both in the Apple App Store and Google Play. Its mobile app offers check deposit.

Best Rates from New Online Savings Accounts

Over the last year or so, there have been several new online banks being created by bigger banks or big banks introducing new online savings options. This list includes those banks that have either launched within the last two years or introduced a brand-new savings account with consistently high rates within the last two years.

1. North American Savings Bank (NASB) — 1.97% APY, $50,000 minimum deposit to earn APY

North American Savings Bank

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on North American Savings Bank’s secure website

Member FDIC

Founded in 1927, North American Savings Bank is headquartered in Kansas City, Mo. It is a full-service bank with a range of deposit and lending products. You can find NASB locations in the Kansas City area.

NASB’s High Rate Savings account reserves its 1.97% APY for high balances between $50,000 and $5 million. Any balance outside of that range that will earn 0.10% APY instead. Whatever your balance, NASB guarantees your rate for six months after opening. You’ll need at least $50,000 to open the account. There is no monthly fee to worry about, and you will have to enroll in E-Statements.

You can access your account online, over the phone and through Mobile Banking, which includes Mobile Check Deposit.

2. CIBC USA – 0% APY, $1,000 minimum deposit to open account

CIBC USA

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on CIBC USA’s secure website

Member FDIC

CIBC, or Canadian Imperial Bank of Commerce, began as two Toronto-based banks: The Canadian Bank of Commerce (founded in 1867) and the Imperial Bank of Canada (founded in 1875) — the two banks merged in 1961. CIBC expanded into the U.S. in 1991 with CIBC U.S., and established its headquarters in Chicago. You can find CIBC USA locations in Illinois, Michigan, Missouri and Wisconsin.

The online-only CIBC Agility™ Online Savings Account offers a competitive 0% APY on all balances, although you’ll need at least $1,000 to open an account and get started. It does not charge a monthly fee, so your savings can keep growing uninterrupted.

To withdraw funds from your account, you can make transfers between accounts (both internal and external) or submit a request in writing for a check to be issued in your name. To deposit money, you can also make ACH transfers or send a cashier’s or personal check to CIBC USA in either the bank’s name or your name. Check deposits are placed on a 10-day hold.

In addition to online account access with CIBC NetBanking, you’ll also have further on-the-go access with the CIBC US Mobile Banking App.

3. HSBC Direct – 1.70% APY, $1 minimum deposit to open account

HSBC Direct

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Member FDIC

HSBC Direct is the online-only offering from HSBC Bank USA, which traces its history back to the Hongkong and Shanghai Banking Corporation Limited in 1865. As part of HSBC Bank USA, the HSBC Direct Savings account earns a competitive 1.70% APY on all balances. You must open an account with at least $1 in new money, meaning money not already on deposit with HSBC. There is no monthly fee to worry about here.

HSBC Direct provides Money Management Tools that are designed to help you manage your money, set goals and stick to a budget. This includes email alerts for bills, low balances and fees, customizable goals and comparable income and spending.

When you have an HSBC US account, you can pay bills and make transfers and other payments in the Move Money section. Transfers in and out of the account typically take three to five business days to clear. Deposits into the account are limited to $3,000 daily and $5,000 monthly. An ATM or debit card is not included with this account.

Take advantage of the HSBC Mobile Banking App for further accessibility, like mobile check deposit. You can find it in the App Store and Google Play.

4. Vio Bank – 1.75% APY, $100 minimum deposit to open account

Vio Bank

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Member FDIC

Vio Bank is an online division of MidFirst Bank which was founded in 1911.

Vio Bank has certainly been a recent stand-out candidate for its competitively high rates on its CDs as well as its High Yield Online Savings Account. It currently earns 1.75% APY and compounds interest daily for better savings. Plus, there’s no monthly fee. You will need at least $100 to open the account. It’s better to stick to electronic statements here, because paper statements cost $7 each.

Vio Bank doesn’t provide debit cards or check writing capabilities on its High Yield Online Savings Account or any other accounts. Instead, you’ll have to make online ACH transfers. Deposits into the account may take five or more business days. You’re limited to $25,000 daily and $100,000 monthly on transfers to and from external accounts initiated by Vio Bank. There aren’t any limits on transfers initiated outside, though. You can fund your High Yield Online Savings Account by mailing a check, depositing a check on mobile or sending an incoming wire.
In addition to its online presence, Vio Bank extends itself to a mobile app, as well, which allows you to manage your accounts and make transfers on the go. It is available in the Apple App Store and Google Play Store.

5. CIT Bank – 1.75% APY, $100 minimum deposit to open account

CIT Bank

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Member FDIC

CIT was founded in 1908 in St. Louis, Mo., and is now headquartered in Pasadena, Ca. CIT’s personal banking sector also includes OneWest Bank in Southern California.

The 2.20% APY on the Savings Builder account isn’t earned outright. When you open the account, it will start earning at a 2.176% interest rate from the day you open it through what’s known as the first “Evaluation Day,” which falls a couple months after opening. On each Evaluation Day, CIT will determine whether you qualify for the 1.75% APY for the next month. You can qualify by either maintaining a balance of $25,000 or more or making at least one monthly deposit of $100 or more. Failure to meet these requirements will bump your APY down to 1.15%. Interest is compounded daily.

You’ll need at least $100 to open a Savings Builder account. It does not charge a monthly maintenance fee. You can fund your Savings Builder account through electronic fund transfers, mailed checks or wires. You can use these same methods to transfer money out of your account; just note, though, that an outgoing wire will cost $10 for accounts with a balance of less than $25,000.

The CIT Bank mobile app provides another outlet to manage your accounts, deposit checks and make transfers.

Best High-Yield Savings Accounts

If the feature you care about the most is the rate a bank offers on a savings account, this list is for you. These banks are currently offering the highest savings account rates.

1. FitnessBank – 2.10% APY, $100 minimum deposit to open account

FitnessBank

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Member FDIC

Personal goals often revolve around health and money and Fitness Bank seeks to seamlessly bring those together. Fitness Bank is a division of Affinity Bank, which was founded in 2002.

The Fitness Savings Account earns interest on balances over $100. The exact APY you earn on your Fitness Savings Account depends on your average daily step count which is calculated each month. The top rate of 2.10% APY is reserved for customers who log 12,500 steps or more. The rate drops to 2.00% APY for an average daily step count between 10,000 to 12,499; to 1.75% APY for 7,500 to 9,999 steps; and to 1.25% APY for 5,000 to 7,499 steps. Finally, the rate plummets to 0.50% APY if you’re logging 4,999 or fewer steps. When you open a new account and have at least $100, the account will have an initial APY of 2.10% until the rate adjustment date after the first full month.

You need at least $100 to open a new Fitness Savings Account. You must also maintain a $100 minimum average daily balance in order to waive the $10 maintenance fee. There is no fee for incoming wires. You can deposit money into your account through online transfers, which typically take three to five days to post.

To track your steps, you will need to download the FitnessBank Step Tracker app. Then you can link it with your Garmin, FitBit, Apple Health or Google Play.

2. BrioDirect – 1.65% APY, $25 minimum deposit to open account

BrioDirect

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FDIC Insured

For the next best high-yield savings rate, head to BrioDirect which doesn’t require any physical commitment from you. BrioDirect is an online brand of Sterling National Bank, founded in 1888, which manages and holds your accounts.

Open a BrioDirect High-Yield Savings account with just $25 to start. You’ll also need to maintain at least $25 in the account to earn the 1.65% APY. There is no monthly fee and the only other posted fees are a $10 excessive transaction charge and a $35 overdraft/insufficient funds fee.

You can transfer money between your BrioDirect savings account and other accounts using the bank’s External Transfers feature online or by calling the bank. You can also fund the account by wiring the money or sending a check. There isn’t a BrioDirect-branded mobile app, but you can use Sterling’s Personal Mobile Banking app to manage your accounts.

3. First Foundation Bank — 1.75% APY, $1,000 minimum

First Foundation Bank

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Member FDIC

Founded in 1990, First Foundation Bank is headquartered in Irvine, Ca. and has 20 locations in California, Hawaii and Nevada.

First Foundation Bank’s Online Savings account sets itself apart from the bank’s other offerings with its competitive 1.75% APY on balances $1,000 and over. Balances under that earn 1.00% APY. You’ll need to open a new account with at least $1,000 in new money, or money not already held on deposit with the bank.

You can access your Online Savings account online and on mobile to pay bills, deposit checks, transfer money and more.

4. Prime Alliance Bank — 1.71% APY, $10,000 minimum balance to earn APY

Prime Alliance Bank

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Member FDIC

Prime Alliance Bank was founded in 2004 and is headquartered in Woods Cross, Utah. This is its one location that you can bank at, otherwise reachable over the phone, email and fax.

Prime Alliance Bank’s Personal Savings account earns its competitive 1.71% APY on balances $10,000 and over. Balances between $1 and $9,999 will earn 1.61% instead, which is still a solid rate at which to grow your money. There is no monthly fee on the account.

You can access your account online and on mobile, where you can use Mobile Deposit to deposit checks remotely.

5. Customers Bank – 0.25% APY, $25,000 minimum deposit to open account

Customers Bank

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Member FDIC

Established in 1997, Customers Bank is a subsidiary of Customers Bancorp, Inc., a bank holding company in Phoenixville, Pa.

You’ll need quite a big deposit to snag the Customers Bank High-Yield Savings Account’s 0.25% APY — it requires $25,000 to open and to earn interest.

There is no maximum balance limit, though, so this may work best for individuals with higher balances. Interest is compounded monthly.

Smaller-balance savers can choose Customers Bank’s Digital Savings account. It also earns 0.25% APY, but with a $5,000 minimum balance requirement instead.

To fund a High-Yield Savings Account, you can transfer money from an existing Customers Bank account, make an online transfer or wire money from an external account or mail a check.
Customers Bank offers a mobile app available in the Apple Store and Google Play.

Best Savings Account Bonus Offers

Some banks offer cash bonuses to bring in new customers. There are often requirements that need to be met in order to qualify for these bonuses, so you’ll want to pay attention to those prior to applying. This list includes banks offer bonuses for opening a savings account.

1. Discover – Up to $200 bonus with $25,000 minimum deposit + 1.50% APY on all balances

Discover Bank

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Member FDIC

Largely known for its credit cards, Discover also offers an array of high-yield deposit accounts. With roots as the Greenwood Trust Company, founded in 1911, Discover Bank came into being by name in 2000.

You have until April 6, 2020 to open a new Discover Online Savings Account and redeem this bonus offer. If you deposit at least $15,000 into the new account by April. 20, 2020, you’ll earn a $150 bonus. Deposit at least $25,000 by the same date, and you’ll earn a $200 bonus. If you qualify, the bonus will be deposited by May 4, 2020. You can apply online or by phone.

The account itself earns at a solid 1.50% APY, and interest is compounded daily. There are no minimum deposit or balance requirements or a monthly fee.

2. Citibank – $700 bonus with $50,000 minimum deposit

Citi

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Member FDIC

Citibank got its start way back in 1812 as the City Bank of New York. Part of the larger Citigroup, Citibank offers customers deposit, lending and investing products for both individuals and businesses. Citi has a physical presence in 98 countries, including in 12 U.S. states plus Washington D.C. Citibank’s headquarters are located in Sioux Falls, S.D.

You have until March 21, 2020 to snag this huge $700 bonus offer from Citibank. To earn the bonus, open a Citi Priority Account Package and deposit at least $50,000 in new money within 30 days of opening the new account. New money means the funds must be held outside of Citibank to qualify. You must maintain at least $50,000 between the checking and savings accounts in the Package for 60 consecutive calendar days to qualify.

The Citi Priority Account Package charges a $30 monthly fee, which you can waive by keeping a combined average monthly balance of $50,000 or more in eligible linked accounts. As a premium account, the Citi Priority Account Package includes access to Citi Personal Wealth Management, relationship rates, free and unlimited checks and more. Its Interest Checking account earns 0.03% APY and the Citi Savings account earns between 0.04% and 0.15% APY, depending on your balance. Higher balances earn higher rates.

3. Citibank – Up to $500 bonus with $15,000 minimum deposit

Citi

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Member FDIC

Based in Sioux Falls, S.D., Citi traces its history back to New York City in 1812. Snag a $400 reward from Citibank by being a new customer and opening a Citibank Account Package by March 31, 2020. Deposit at least $15,000 in either the checking or savings account within the package within 30 days of opening the account. The money must be new to Citibank and kept across both accounts for 60 days. Add an extra $100 to your reward by making at least one qualifying direct deposit each month for two consecutive months within 60 days of account opening for a total bonus of $500.

The Citibank Account package includes both the checking and savings account. There is a $25 monthly fee which you can waive with a $10,000 minimum balance across both accounts. The checking account earns a 0.01% APY, and the savings account will earn between 0.04% and 0.13%, depending on your balance. Citibank offers a mobile app to access your accounts.

4. Associated Bank — $400 bonus with $25,100 minimum deposit

Associated Bank, NA

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Member FDIC

Associated Bank was founded in 1970 when three Northeast Wisconsin banks merged. It is headquartered in Green Bay, Wisc.

Earn a $400 bonus when you open both an Associated Choice Checking account and an Associated Relationship Savings account by June 30, 2020. Open the Choice Checking account with at least $100. You must also make three payments through Associated Bank Online Bill Pay or at least one direct deposit of $300 or more within 45 days of account opening. Open the savings account with at least $25,000. You must maintain a $25,000 minimum combined balance between the two accounts for 90 days to receive the reward 120 days after account opening.

Email yourself a coupon code from the offer page to bring into a branch to redeem. Your new accounts must be funded with new money not already held with Associated Bank. Associated Bank employees and customers who already have or have had a checking account or Associated Relationship Savings account at Associated Bank within the last six months are not eligible for the offer.

The Associated Choice Checking account earns between 0.01% and 0.01% APY, where higher balances earn higher rates. There is a $25 monthly fee, which you can waive with at least $10,000 in combined deposit accounts or either an HSA or investment account. The Associated Relationship Savings account earns according to balance tiers, between 0.03% and 0.25% APY.

5. Chase – Up to $350 bonus with $10,000 minimum deposit and direct deposit in a qualifying checking account

Chase Bank

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Member FDIC

Established way back in 1824, Chase is headquartered in Columbus, Ohio. It has a presence in 33 states and Washington D.C.

Another checking and savings mix-and-match bonus, you have until April 20, 2020 to open a new Chase Total Checking account. Once it’s open, setting up direct deposit will snag you a $200 bonus. Earn another $150 when you open a Chase Savings account and deposit at least $10,000 in new money within 20 business days. You must also maintain that balance for at least 90 days.

The accounts themselves aren’t too remarkable. The Chase Total Checking account charges a $12 monthly fee unless you have direct deposits totaling $500 or more, a minimum $1,500 balance at the beginning of each day or a $5,000 average beginning day balance in combined account balances. The Chase Savings account also charges a fee, $5 per month, that you can waive with a minimum $300 balance at the beginning of each day, at least one repeating automatic transfer of at least $25 or more from your personal Chase checking account or Chase Liquid® Card, a linked Chase College Checking account for Overdraft Protection, an account owner younger than 18 or a qualifying linked account. Chase provides users with a mobile app to manage accounts.

Best Savings Account Rates from Credit Unions

Some people prefer to do their banking with credit unions because of the member benefits that extend beyond the deposit accounts. This list includes credit unions that currently offer the best savings account rates for low and high depositors.

1. Digital Federal Credit Union – 6.17% APY, up to $1,000 account balance

Digital Federal Credit Union (DCU)

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NCUA Insured

Chartered in 1979, Digital Federal Credit Union is based in Marlborough, Mass. and is the largest credit union headquartered in New England by asset size. Eligibility for DCU membership is based on your family relationship to a current member, the company you work for or retired from, an organization you belong to or a community you’re a member of (where you live, worship, attend school, etc).

DCU offers its members a whopping 6.17% APY on its Primary Savings account. However, this high APY applies to the first $1,000 in your account. Everything over that will earn 0.25% APY. The account requires a $5 opening deposit and balance to maintain membership. There is no monthly service fee.

Transfers through DCU’s Payment Center impose a minimum amount of $0.01 and maximum amount of $2,500.

DCU offers account access through branches (both DCU and CO-OP), online, at ATMS and over the phone. There is no mobile app.

2. Blue Federal Credit Union — 5.00% APY, $25 minimum deposit

Blue Federal Credit Union

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NCUA Insured

Blue Federal Credit Union formed in 2016, as a merger of Wyoming-chartered Warren Federal Credit Union and Colorado-based Community Financial Credit Union. Blue has locations in Colorado and Wyoming, as well as thousands more CO-OP Shared Branches around the country.With a Blue Federal Credit Union Accelerated Savings account, it’s best to keep a maximum of $1,000 in the account. Balances between $25 to $1,000 maintain the high rate of 5.00% APY, while anything over $1,000 drops to 0.10% APY. To earn dividends at all, you must maintain a $25 minimum balance and make a transfer of at least $5 per month into the account. Dividends are calculated daily and paid monthly.Blue Federal Credit Union is accessible in person, over its 24/7 call center phone line, online and on mobile.

3. St. Mary’s Bank — 5.00% APY, $25 minimum deposit

St. Mary's Bank

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Founded in 1908, St. Mary’s Bank is headquartered in Manchester, N.H. It was the first credit union founded in America, known then as St. Mary’s Cooperative Credit Association. All its locations are in New Hampshire, but membership is open to anyone who purchases one share of capital stock for $5.

For higher-than-usual savings at St. Mary’s Bank, look to its Rainy Day Savings account. It gives a big 5.00% APY boost to balances $25 – $499. Balances between $500 and $999 earn 3.00% APY, remaining competitive, but balances $1,000 and over drop to a mere 0.05% APY. To earn interest, you must make a monthly automatic transfer of at least $25 from direct deposit or a St. Mary’s Bank checking account.

Almost quite literally meant for rainy day savings, this account limits you to one free withdrawal per month. Each subsequent withdrawal will cost $2. There is no monthly fee on the account.

St. Mary’s Bank is accessible online, over the phone, at branches and through its free mobile banking app, available for Android and Apple devices.

4. CommunityWide Federal Credit Union – 1.90% APY, $1 minimum deposit to open account

Communitywide Federal Credit Union

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NCUA Insured

CommunityWide Federal Credit Union was founded in 1967, originally known as West Washington Association Federal Credit Union, settling into its current name in 1985. Based in South Bend, Ind., CommunityWide opens membership up to employees/retirees/donors of select employer groups, relatives of qualified members and members of select charity groups.

The Funds account from CW is a unique approach to savings. You’re allowed to make a withdrawal from the account between the 1st and 5th of each month; any withdrawals outside of that period are subject to a penalty of seven days’ dividends. Complying with this account’s requirements allows you to earn at 1.90% APY, a higher rate than the credit union’s standard savings account. You need only $1 to open an account and there is no monthly fee to maintain the account.

In addition to online access, CW provides mobile access either through your browser or its mobile app available for iOS and Android, which allows for check deposit.

5. USALLIANCE Financial – 0.33% APY, $500 minimum balance amount

USALLIANCE Financial

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NCUA Insured

USALLIANCE Financial was founded in 1966 by a handful of IBM employees. Today, it opens up membership to various neighborhoods in the New York City metro area, select schools, houses of worship and members of certain community-oriented organizations.

The High Dividend Savings account earns 0.33% APY and compounds interest daily. You’ll need to open an account with at least $500 and maintain a $500 minimum balance to keep earning dividends.

While there is no monthly fee, there is a $5 withdrawal fee that applies to any movement of money out of the account, including transfers. To transfer funds between accounts, you can initiate either through USALLIANCE or from your external account. Transfers will take a few days to post.

USALLIANCE offers its mobile app in both the Apple Store and Google Play. It allows you to view all your activity, pay bills, deposit checks and more.

Savings Account FAQs

What is a savings account?

A savings account is a type of deposit account where you can stash money for any length of time, long or short. Banks and credit unions reward you with an attractive return on your savings balance — thanks to the magic of compound interest, your savings can grow steadily over time. Keep in mind that unlike checking accounts, savings accounts aren’t designed to handle frequent transactions. Due to the Federal Reserve’s Regulation D which mandates certain types of telephone and electronic withdrawals, including transfers from savings accounts up to 6 per statement cycle.

While they give customers a safe place to stash their money, savings accounts serve a different purpose for financial institutions. Banks and credit unions use their customers’ deposits to fund loans and other products. Banks charge borrowers interest on loans, which funds in part the interest you earn on your savings deposits. So when you open and fund a savings account, you’re helping your bank fund its business.

Is my money protected in a savings account?

The money you place into a savings account at a bank is generally protected by FDIC insurance, up to the legal limit. This limit applies per person, per bank, per ownership category.

For example, you would receive full FDIC coverage of a $250,000 deposit made to a savings account at ABC Bank, and you would get full FDIC insurance on $250,000 deposited in a savings account with XYZ bank.

If ABC Bank went under, you wouldn’t lose a dime of your deposit. The FDIC would either set you up with a new account at another FDIC-insured bank for the same amount as the closed account, or send you a check for the balance. However, if you had a $50,000 checking balance and a $250,000 savings account balance with ABC Bank, you would only receive $250,000 in total FDIC insurance for your accounts — with a potential loss of $50,000.

Credit unions rely on National Credit Union Administration (NCUA) insurance. The NCUA is an independent agency that maintains the National Credit Union Share Insurance Fund (NCUSIF), which funds deposit insurance payouts. All federal credit unions are insured by the NCUA. State-chartered credit unions are regulated by the state supervisory authority where the credit union’s main office is located, but they may also have NCUA insurance.

How should I use funds in my savings account ?

Money kept in a savings account is best left alone unless you absolutely need it. To maximize the return on your savings, stash most of your liquid cash flow in a savings account, and only keep the funds you need for day-to-day spending in your checking account. That allows your money to grow more efficiently — more money in a savings account means more interest earned and compounded.

Is it easy to move money in and out of a savings account?

How easy it is to move money in and out of your savings account depends on your financial institution. Typically, a transfer between deposit accounts goes through Automated Clearing House (ACH). ACH transfers should only take one to two business days to clear, often clearing immediately or within one business day. Some institutions, however, may take the full two days depending on their own rules and regulations.

Keep in mind that savings accounts have a limit of up to six certain transfers or withdrawals per month, thanks to the Federal Reserve’s Regulation D, or Reg D. This limit only applies to “convenient” transfers and withdrawals made by “preauthorized, automatic, telephonic agreement, order or instruction, or by check, debit card or similar order made by the depositor and payable to third parties.” Less convenient transactions are exempt from this regulation, including withdrawals or transfers made in person at the bank or ATM, by mail or over the phone.

Making more than six transactions per cycle will often result in an excessive transaction fee depending on the financial institution. Exceeding the limit several times can lead to the bank closing your account for good.

Do I need a savings account?

It’s safe to say that everyone should have a savings account. If your money is going to sit in a bank account, it might as well earn interest while it’s there. And if you’re going to earn interest, it’s surely best to find an account that earns the most interest possible — namely a high-yield savings account.

Even if you’re not interested in chasing the highest possible interest rate, you should still have a savings account to keep your money safe. Some people don’t trust banks and stash cash under their mattresses. But what happens if your house burns down or there’s a break-in? Stolen or lost funds are gone for good. Meanwhile, money in a savings account is kept safe by the FDIC, which even offers bank skeptics peace of mind. FDIC insurance means you’ll get your money back no matter what.

What should I consider when applying for a savings account?

If you’re not sure which account to choose, consider your savings priorities first. If you’re trying to reach a savings goal, a high-yield savings account will help you reach your goal faster than a lower-rate account.

Perhaps you want an account where you don’t have to worry about fees. There are several free savings accounts and accounts that don’t charge for excessive withdrawals that would be perfect for your needs.

Generally, though, these two features should be your top priorities when applying for a savings account. A high-yield savings account grows your money more efficiently, and not having fees taking out a chunk of those savings helps you keep it.

Is it better to have a savings account with a bank or a credit union?

If you’re looking at interest rates, there’s not much difference between the average savings accounts offered by banks and credit unions. In June 2019, the average savings account rate from brick-and-mortar banks earned just 0.28% APY, while credit unions had an average APY of 0.25%. But that doesn’t mean you won’t find competitive rates at banks or credit unions — it simply means you’ll need to shop around.

The same goes with fees. A 2018 MagnifyMoney survey of 57 rewards checking accounts from banks and credit unions indicated that credit unions tend to charge slightly higher fees than their traditional bank counterparts. However, credit unions are nonprofits, and tend to charge fairer fees than big banks do.

For many people, the choice of bank or credit union is a matter of personal preference. When you join a credit union, it means that you own a piece of the institution along with the other members. With a credit union there’s more transparency about how your deposits are being used — many people prefer to know that they are funding loans and helping other members, as opposed to paying big executive paychecks.

When it comes to physical access, banks usually have credit unions beat. Big banks have the money to spread their branches throughout the country, while credit unions tend to serve specific communities and locations. Still, credit unions very often partner with other credit unions and ATM networks to provide their members with widespread ATM access. Note that the CO-OP Financial Services credit union service organization has the second largest branch network in the United States.

Why should I open a high-yield savings account?

A high-yield savings account is an easy way to boost your savings without any extra effort on your part. Let’s say you have $5,000 in a 0.01% APY savings account, which is a typical rate from traditional, big banks. Assuming you don’t make any additional contributions, in a year, you’d earn a whopping 50 cents in interest. That’s a pretty poor rate.

Switching that $5,000 deposit over to a high-yield savings account that earns 2.00% APY would yield $100 and change in interest annually — that’s definitely a sight better than 50 cents. Additional recurring deposits, perhaps monthly, would increase your savings even more. Setting up automatic recurring deposits an easy way to turbocharge your savings.

What fees are typically associated with a savings account?

Many deposit accounts charge a monthly maintenance fee. The exact fee amount depends on the bank and specific account, but they can range anywhere between $5 to $15 a month. The good news is that there’s almost always a way to waive the fee. Typically this means maintaining a minimum monthly balance or making a certain number of transactions per month. You seldom have to worry about any monthly fees with online savings accounts.

Banks often charge for returned deposits, overdrafts, excessive transactions, expedited delivery or transfers, incoming and outgoing wire transfers, and paper statements. Avoid these things and skip the fees. If you’re worried about overdrafting your account, monitor your balance closely. There’s no need to pay $35 for overdrafting your account.

Are online savings accounts safe?

Many of the best savings accounts are available online. By operating only over the internet, banks are able to save on the cost of owning and maintaining physical branches. Banks pass those savings onto their customers in the form of the high rates you see above.

But just because they’re online doesn’t mean they’re any less secure than a well-known bricks-and-mortar bank. Reputable online banks offer FDIC insurance on your balances up to the legal limit. If you’re unsure, you can use the FDIC’s BankFind tool to double check a bank’s insurance status.

As for online security, most banks employ the same security features as the big banks, if not more. This includes network and browser encryption, firewalls, anti-virus scanning and anti-malware protection. Banks may also offer additional safety features like two-step authentication, automatic logout, fingerprint identification and proactive account monitoring. You can always check a bank’s exact safety features on its website, which applies to both online-only and brick-and-mortar banks.

Can I open more than one savings account?

You sure can. If you have a lot of cash on hand, opening multiple savings accounts can allow you to maximize your FDIC insurance. Think of the scenario mentioned above: Keep $250,000 in an ABC Bank savings account and $250,000 in an XYZ savings account. Dropping the total $500,000 in a single ABC Bank savings account would leave $250,000 uninsured.

Opening more than one savings account may also help you keep track of separate savings goals. For example, you can use one savings account to house your emergency fund which you never touch except for dire circumstances. Keeping it separate from your other accounts may make it easier for you to avoid dipping into your emergency backstop.

If you do have more than one savings account, just make sure they all earn at competitive rates.

How often do savings account rates change?

Unlike certificates of deposit, savings accounts have variable rates. This means that the bank can decrease or increase their rate at any point, often without notice. However, you can typically expect rate changes to happen on or right after the start of a month.

Deposit account rates often track the federal funds rate, which is set by the Federal Reserve. The federal funds rate establishes the rate banks and other financial institutions charge each other for lending. So when the federal funds rate is cut, banks tend to cut their own rates in response. This includes not only deposit rates, but loan rates as well. Conversely, banks boost their interest rates when the Fed raises the federal funds rate. Keep an eye on the Federal Reserve’s regular meetings to get a better sense of where the federal funds rate — and therefore your deposit rates — are headed.

Do I pay taxes on savings account interest?

If you earn $10 or more in interest in a year, then yes, your savings interest is taxable. Your bank or financial institution will send you a 1099-INT form documenting the interest you’ve earned. Using that form, you include your interest earnings with your annual tax filing. The bank will also send a copy of your 1099-INT form to the IRS.

Even if you don’t receive a 1099 from your bank, you’ll still need to report interest earned on your tax return. Plus, if you earned more than $1,500 in interest in a year, you’ll need to list out the sources of all that interest income on Schedule B of the 1040 Form.

Your earned interest is taxed according to your marginal tax bracket. If you earned $50 in interest and you’re in the 22% tax bracket, you’ll pay $12 in taxes on that interest earned.

What are the alternatives to a savings account?

Having a savings account is a crucial part of your financial life, but there are other types of deposit accounts that you can (and perhaps should) fit in.

Certificates of deposit

A certificate of deposit (CD) is a time deposit. Unlike savings accounts, which have no expiration date, CDs operate according to defined terms. Typically, CD terms range between three and 60 months, although some institutions offer terms beyond these parameters. Once you make your initial deposit, you have to wait for the term to expire — or mature — to access your funds and interest earnings.

CDs are a solid savings alternative for folks who have already maxed out their other savings accounts. They’re also good for longer-term savings goals. Opening a longer CD lets you lock in a high rate for the length of the term and not have to deal with the rate fluctuations that come with regular savings accounts.

CDs often require a minimum deposit to open, often ranging between $500 and $10,000. Any deposits larger than that are often considered “jumbo” CDs. However, there typically aren’t monthly fees to worry about with a CD.

Withdrawing money from a CD before maturity will result in an early withdrawal penalty. Remember how banks use savings accounts to fund their loans? The same is true here, except with CDs, you’re essentially making a promise to the bank that they can use those funds for a set amount of time.

For example, if you open a five-year CD, the bank expects to be able to use the funds for loans over a period of five years. If you withdraw that money after three years, the bank loses access to those assets and charge you a penalty. The penalty is often expressed as a portion of the interest earned. In this example, you might be charged 365 days’ worth of interest for making that early withdrawal. Some banks may offer “no-penalty” CDs, which tend to have shorter terms, that allow you to avoid the penalty.

Money market account

A money market account resembles a savings account more closely. It earns interest without an expiration date and limits your outgoing transactions to six per cycle. However, money market accounts can also include some checking account features like a debit card and the ability to write checks. This makes them a good alternative if you plan to dip into the account a bit more regularly, rather than using it only for emergencies.

Money market accounts tend to earn at higher interest rates than regular savings accounts. However, they also tend to require higher balances to open and then earn interest. Money markets often charge monthly fees, as well, even when they’re online.

Checking account

Checking and savings accounts are the bread and butter of your financial life. While savings accounts are meant for stashing your money away, checking accounts are designed to help you move through the world, making payments, sending transfers, getting cash and more.

That doesn’t mean that your checking account can’t earn interest, too, however. Maximize your savings by opening a high-yield checking account to match your high-yield savings account. Checking accounts don’t earn at rates as high as savings accounts, but that way, all your money in all your accounts can be growing. For more efficiency, consider keeping the majority of your funds in your savings account for better growth — then you can transfer funds over to your checking account as needed.

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