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Top Retirement Strategies to Consider

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.

What would the retirement of your dreams look like? Would you like to travel the world? Maybe you’d prefer to spend your days volunteering at a local food bank and helping others? Perhaps you’d like to move to one of the most popular retirement destinations in the U.S.?

Whatever your retirement goals may be, you’ll need a financial plan to help you get there. Social Security alone is highly unlikely to make your retirement a reality. And the average life expectancy in the United States is approaching 80 years, so you need to be planning for a longer period of retirement than has been the case for people retiring in previous generations.

We’ve asked a panel of certified financial planners (CFPs) to weigh in on the top retirement strategies they recommend to their clients. Below we discuss 11 retirement strategies that our CFPs believe everyone should consider.

11 top retirement strategies to consider

If you’re ready to create your retirement plan, here are a few ideas that could help you.

1. Start saving early

The first step toward reaching your retirement goals is to simply start saving money. Thanks to the power of compound interest, the earlier you can start saving, the better. Compound interest is nothing more than the interest that you earn from your interest. With compound interest, you earn money from the money you’ve already earned.

To give you an example of how compound interest works, let’s say you made an initial investment of $10,000 and in year one, your investment earned 5% in interest, for a total of $500.

That would mean in year two, your starting balance would be $10,500. Now let’s say that in year two you earned another 5% in interest. The only difference is that now you’d be earning 5% of $10,500. So, in year two, you’d accrue $525 in interest. That’s $25 more in interest than year one even though you earned the same rate of return.

Compound interest can have a magical effect on your retirement portfolio. But in order for compound interest to really gain steam, you need to give it time. That’s why starting early and committing to lifelong saving for retirement is so important.

Using MagnifyMoney’s compound interest calculator, you’ll find that if you saved $500 a month for over 30 years with a 7% annual rate of return, you’d end up with an account value of over $600,000.

That’s a nice sum. But what if you had just started saving 10 years earlier, for a total of 40 years instead? In that case — assuming the same 7% annual rate of return – your retirement portfolio would grow to over $1.3 million by your retirement date, more than double the total from 30 years. That’s why investing when you’re young is a good idea, especially if you want to retire early.

2. Get rid of your debt

Compound interest is great when it’s working for you. But it can work against you as well. When you only making minimum payments on high-interest credit card debt, debt balances can compound quickly.

Credit card debt

MagnifyMoney recently updated our statistics on credit card debt. Statistics show that many Americans are increasingly taking on more credit card debt. Here are two key pieces of data that were uncovered:

  • Credit card interest payments are up 49% over the last five years. Last year, Americans paid over $113 billion in interest payments, up over 12% from just the year before.
  • The average APRs on credit card accounts that were assessed interest are now 16.86%. That’s up nearly four percentage points over the last five years.

Every extra dollar that you pay towards interest is money that you’re not able to save for retirement. That’s why getting rid of high-interest debt could really jumpstart your retirement saving.

Student loan debt

For many of us, credit card debt isn’t the only kind of debt that we’re dealing with. Our research shows that nearly 1 in 5 adults carry student loan debt. MagnifyMoney’s analysis of anonymized My LendingTree users’ September 2018 credit reports (Note: LendingTree is MagnifyMoney’s parent company), the average student loan debt for each borrower was $36,314.

If you’re wondering whether to pay off your student loans early or invest the money instead, begin by considering the interest rate on your student loans. If your student loans have an average interest rate of 5%, then you have a guaranteed 5% rate of return when you pay them off early.

But the average annualized S&P 500 rate of return over the last decade has been approximately 10%. Plus, when you invest money you get to take advantage of compound interest. And if you have an available match with an employer-sponsored retirement plan, that’s an awesome opportunity that you probably don’t want to waste.

To help you get a better idea which strategy would work best for your situation, try using our Payoff Student Loans vs. Investing Calculator.

3. Set a retirement savings goal

There are two main ways to go about setting your retirement savings goal:

Save a percentage of your income

One way is to aim to save a certain percentage of your income. Fidelity says that 15% of your pre-tax income is a good starting point. But, depending on your situation and retirement goals, your personal target could be different.

Set a retirement savings number.

Another strategy is to set an actual retirement number. In other words, you decide exactly how much money you’ll need to have saved before you can quit the day job.

To calculate your retirement number, a common rule of thumb is to plan to live off a 4% withdrawal rate in retirement. Using the 4% rule, if you want to withdraw $50,000 a year in retirement, you’d need to save $1.25 million.

No matter which way you choose to set your retirement goals, realize that you may need to tweak your retirement plan over time.

Automating your retirement savings

Once you’ve decided how much you want to save on an annual basis, it may be a smart idea to automate the savings. Setting up a consistent transfer from your bank to your brokerage account helps make the savings less emotional. You just set it and forget it.

How often you set up automatic retirement savings transfers is really up to you. You may want to set up a monthly transfer. Or you may prefer to save a percentage of every paycheck.

Whichever strategy you choose, automatic transfers help you to build retirement savings into your budget from the get-go rather than waiting to see if you have money “left over” at the end of the month. The more that you can approach your retirement savings as just another bill, the easier it will be to stay on track.

4. Choose an asset allocation mix that fits your risk tolerance

The mix of stocks and bonds in your retirement portfolio should reflect how aggressive you hope to be and the amount of risk you’re willing to be exposed to. While aggressive portfolios can have higher upside potential in the long run, they can also produce bumpier rides in the short-term. And if you’re not prepared for that, it could lead to problems.

“If you take more risk than you are comfortable with, you could end up panicking and selling at the worst possible time, said Brandon Renfro, a financial planner based in Texas and a Retirement Income Certified Professional®. “Taking too much risk could cause you to literally work against yourself.”

There are many investment tools available today that can assess your risk tolerance and suggest your ideal asset allocation. And many of the top robo-advisors will rebalance your portfolio whenever one type of investment grows faster than the others.

5. Minimize investment commissions and fees

Commissions and fees on your investments may seem small now. But they can make a big difference in your retirement savings over time. Vanguard estimates that if you paid 2% in investment costs every year for the next 25 years, it cost you up to 40% in your final account value. That’s staggering.

If you use a financial advisor, check to see how much they’re charging you on an annual basis. You’ll want to pay attention to the expense ratio on your mutual funds too. And if you’re really serious about finding low-cost investments, you may want to consider index funds.

6. Use tax-advantaged retirement accounts

To encourage retirement savings, the government gives individual retirement accounts (IRA) special tax treatment. Taking advantage of these tax breaks is a smart retirement strategy.

With a Traditional IRA, your contributions will typically be tax deductible. However, you will have to pay taxes on your withdrawals in retirement. Roth IRAs are the opposite. While they don’t offer an up-front tax break, growth and withdrawals are both tax-free.

For 2019, the maximum that you can contribute to either type of IRA is $6,000 for those under 50 years old.

Traditional IRA or Roth IRA?

How do you decide which type of IRA is best for your situation? “A Roth IRA can be a good avenue if you’re young and haven’t reached your peak earnings yet,” said Kayse Kress, a CFP at Physician Wealth Services.

But there are exceptions. Kress said that contributing to a traditional IRA could lower your student loan payments if you’re on an income-driven repayment plan. And if you’re pursuing a forgiveness program like Public Service Loan Forgiveness (PSLF), it could be an even smarter move.

“If you’re going for PSLF, you want to lower your payment as much as possible to maximize your student loan forgiveness,” Kress said. “You’re saving yourself now by lowering your student loan payment and saving for later by saving in your retirement account.”

Open a separate IRA for your spouse

Already maxing out your IRA? If you’re married, you can open a separate one for your spouse, even if he or she doesn’t work.

The IRS rules dictate that your annual contributions can’t exceed your joint taxable income, but it doesn’t matter who earned the income. If you’re married, this could be a simple retirement strategy to double your tax-advantaged savings each year.

7. Contribute to your employer’s 401(k) plan

Does your employer offer a company 401(k) plan? If so, you may want to consider contributing to the plan. Employee 401(k) plans have two key upsides. First, they come with a higher contribution limit than individual IRAs. In 2019, you can contribute up to $19,000. Second, some employers offer a 401(k) match.

How 401(k) matches work

If you’re not familiar with 401(k) matching, here’s how it works. When your employer offers a match, they are saying that they’ll match your 401(k) contribution, up to a certain point.

Many employers use a partial 401(k) matching strategy. In this scenario, will match a percentage of your contributions. For instance, your employer may match 50% of your contributions, up to 5% of your salary.

With dollar-for-dollar matching, your employer matches 100% of your contributions. While dollar-for-dollar matching is a fantastic perk, it’s also less common because it can be very expensive for employers.

How to choose between contributing to a 401(k) or IRA

If your employer offers a match, that’s free money that you don’t want to leave on the table. It’s like getting an immediate 50% return or more on your money. You don’t want to pass that up.

But it’s also important to point out that some 401(k) plans can have high administrative costs. “Depending on your employer, the plan may not be the greatest,” said Sharif Mohammed, a CFP based in New Jersey.  “Sometimes it’s best to take advantage of any match that’s available and then max out your IRA options before moving back to your 401(k).”

8. Don’t ignore health care

It’s true that once you reach age 65, you’ll be eligible for Medicare. But there are certain medical costs that Medicare won’t be able to cover — optical care, dental care and long-term care are just a few examples. In fact, Fidelity says that the average couple will need $285,000 in today’s dollars for medical costs throughout retirement.

Medicare Supplemental Policies

For these reasons, buying a Medicare Supplemental Policy in retirement could be a smart move.

A Medicare Supplemental Policy (also known as Medigap) is health insurance sold by private insurers that can help pay for things that Medicare doesn’t cover. “For people that can afford it, I absolutely recommend a Supplemental Policy,” Kress said, “especially if you have specific doctors that you want to continue going to.”

A Medigap policy could help with coinsurance, copayments and deductibles as well — all which are not covered by original Medicare. To qualify for a Medicare Supplemental policy, you’ll need to have Medicare Part A and Part B. It’s also important to note that you and your spouse would each need to have your own separate Medigap policy.

For more information on Medicare Supplemental policies and where to find them, check out the Medigap guide on Medicare.gov.

Health Savings Accounts (HSA)

One way to bridge any medical expense gaps you may have in retirement is to save money in a Health Savings Account (HSA).

To be eligible for an HSA account, you’ll need to be enrolled in a high deductible health care plan. But, if you are, HSAs have the potential to offer triple-tax savings.

First, your contributions can be excluded from your taxable income. Second, your earnings grow tax free. And third, you can don’t have to pay tax on your withdrawals as long as they’re used to pay for medical expenses.

And, after age 65, you can use HSA money for any purpose without penalty. You will have to pay income tax on any distributions that don’t pay for medical costs though.

9. Take advantage of “catch-up” contribution allowances

Are you a little behind on your retirement savings? That’s ok. It’s never too late to get started. Plus, once you’re past age 50, the government allows you to put more money each year in tax-advantaged retirement accounts.

For 2019, individuals age 50 or older can contribute up to $7,000 per year in an IRA. That’s an increase of $1,000 from the regular $6,000 contribution limit. And if you’re over 50, you can contribute up to $6,000 more per year in your employer 401k plan.

10. Think about your social security benefits withdrawal strategy

You can begin taking social security income as early as age 62 or as late as age 70. You’ll receive a higher monthly payout if you delay withdrawals. But that doesn’t mean it’s always the best decision.

Some retirees simply need the income to meet their needs. Others may be in poor health and are worried that they won’t live long enough to break even. In either situation, taking social security benefits at age 62 could be the right move.

11. Get professional advice

You don’t have to figure everything out alone. You may want to schedule an appointment with a CFP to discuss your retirement strategies. A CFP will look at your entire financial situation and can help you set your retirement goals.

If you’ve found a local advisor who says they’re a financial planner, ask specifically if they’re a CFP. “Financial planner” is a term that can be thrown around loosely in the financial advisor world.

Even if the advisor claims to be a CFP, you still may want to verify their certification with the CFP Board. The CFP Board can also be a great resource for finding a CFP near you.

If you’re specifically looking for a fee-only financial planner, the Garrett Planning Network, the XY Planning Network and the National Association of Personal Financial Advisors are three great places to begin your search.

If you’d rather handle your retirement planning yourself, that’s fine. But don’t ever feel bad for seeking out professional help.

The bottom line

There are lots of ways to boost your retirement savings. But not every retirement strategy works for everyone, so consider what’s best for your personal situation. And don’t get overwhelmed by the options. Ultimately, the most important retirement strategy is the one we covered first — simply saving money.

As Kress puts it, “People worry about intricate retirement strategies, when at the end of the day, people just need to create a plan where they’re living below their means. That’s what every good retirement plan is built on.”

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.

Clint Proctor
Clint Proctor |

Clint Proctor is a writer at MagnifyMoney. You can email Clint here

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Banking

Credit Karma Savings Account Review

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.

Credit Karma is the latest fintech company to jump on the mobile banking bandwagon. The company is now offering a free high-yield savings account, which is somewhat of a departure from the product it’s most famous for: providing consumers with access to free credit checks.

Credit Karma joins a slew of firms—including SoFi and Betterment—that have recently rolled out cash management accounts of their own. Credit Karma Savings will offer a generous 1.90%  APY, and the company says it will leverage technology to keep its rates competitive. Credit Karma is partnering with a network of banks to hold your deposits and gain Federal Deposit Insurance Corporation (FDIC) insurance.

What is Credit Karma Savings?

Expected to launch later this year, Credit Karma Savings is a high-yield savings account that will be accessible through the company’s app. Credit Karma claims it will take consumers just “four clicks” to get started.

Once signed up, deposits will collect an APY of 1.90%. That’s 22 times more than the current national average of 0.09% for savings accounts. Credit Karma says it will leverage technology to keep that rate moving competitively, so that consumers won’t have to monitor rates themselves to ensure they’re getting the most for their money.

There are no fees or minimums required to open a Credit Karma Savings account, and deposits up to $5 million are insured by the Federal Deposit Insurance Corporation (FDIC). To achieve this, Credit Karma partnered with MVB Bank to provide banking services, and it will be utilizing a network of over 800 banks to hold deposits.

However, it’s important to note that the amount that is actually insured is dependent on whether you already have a balance in a partner bank and how much that balance is: “Actual insured amounts may be lower or adversely affected based on any balances you hold at a network bank,” Credit Karma said.

Credit Karma Savings vs. other cash management accounts

Credit Karma joins the ranks of other fintech companies that have recently launched high-yield savings accounts or cash management accounts for consumers, all boasting no fees and no minimum balance requirements. Here’s how Credit Karma Savings stacks up against companies with similar products.

Bank APYNumber of partner / network banks Amount FDIC insured

Credit Karma Savings

1.90%1 partner bank with network of 800+ banks$5 million

SoFi Money

1.60%7 program banks$1.5 million

Betterment Everyday Cash Reserve

1.60%11 program banks$1 million

Wealthfront Cash Account

1.82%9 program banks$1 million

Savings accounts with higher interest rates than Credit Karma Savings

Credit Karma Savings’ 1.90%  APY is certainly nothing to sneeze at, especially when looking at other fintech companies that offer similar high-yield accounts for stashing your cash. But other savings accounts—particularly those at online banks—boast even higher rates. Vio Bank, for example, currently has an online high-yield savings account with an impressive APY of 2.07% , while HSBC Direct Savings touts a 2.05% APY.

The bottom line on Credit Karma Savings

Credit Karma Savings offers a number of attractive incentives, like a competitive APY, no fees and a high maximum amount of $5 million that’s eligible for FDIC insurance. If you already have a Credit Karma account, the convenience and ease of being able to open a Credit Karma Savings account isn’t a bad perk, either. If your main goal is to rack up as much interest as possible on your savings, though, a number of online banks offer higher-yield savings account offerings.

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.

Sarah Berger
Sarah Berger |

Sarah Berger is a writer at MagnifyMoney. You can email Sarah here

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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 0.28% (as of November 2019). 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.

The savings account table below allows you to compare savings account rates offered by financial institutions such as online banks, credit unions, community banks and the big nationwide banks. The best savings account rates are published at the top of the table, and APYs decrease as you scroll down the list. Feel free to filter the results by location and investment amount for more customized results.

A savings account is a key component of everyone’s financial life. 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.

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.

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. Goldman Sachs Bank USA – 1.90% APY, no minimum deposit to open account

Goldman Sachs Bank USA

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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 1.90% 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.

2. Barclays – 1.90% APY, no minimum deposit to open account

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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 1.90% 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.

3. Synchrony Bank – 1.90% APY, no minimum deposit to open accounts

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Synchrony Bank, a subsidiary of Synchrony Financial, has been around since 1932. The bank’s history has been deeply rooted in the credit card industry, but it’s done a great job establishing itself as a top online bank over the years.

Back in 2014, having a savings account that offered a 1.00% APY was rare, but Synchrony Bank established itself by offering this rate. Since then, it has consistently offered one of the top savings account rates in the market; currently, it’s offering a 1.90% APY. There isn’t a minimum deposit requirement to open the account or earn the APY. There are also no monthly fees.

You can fund this savings account a number of ways: ACH, mobile check deposit, direct deposit, wire transfer, or a mailed check. Incoming transfers will typically take three business days to post unless you initiated the transfer after 10pm EST.

One really big perk of this account is that it comes with an ATM card — Synchrony is partnered with the Accel network for ATM access. You will be limited to withdrawing a maximum of $1,000 per day, and if you use an out-of-network ATM domestically, Synchrony will refund you up to $5 per statement cycle. Synchrony Bank has a mobile app for your convenience.

4. American Express National Bank – 1.75% APY, $1 minimum balance amount

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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 1.75% variable Annual Percentage Yield (APY), as of 11/7/2019, 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.

5. Ally Bank – 1.70% APY, no minimum deposit to open account

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Ally Bank traces its history back to 1919, when it was GMAC, a division of GM designed to help auto dealers finance and maintain their inventory. It became Ally Bank 90 years later in 2009 and now offers a range of financial products well beyond auto loans.

Today’s Online Savings Account rate may not be the highest we’ve seen from Ally Bank, but it has remained a top competitor nonetheless. Its 1.70% APY will still yield solid savings and requires no minimum deposit to get started. There’s no monthly fee here, either, which allows your savings to grow effortlessly. Ally Bank is relatively low on fees and maintains transparency around the fees it does charge — these include outgoing domestic wires, paid overdraft items and excessive transactions.

As an online bank, Ally Bank doesn’t allow for cash deposits to be made into its Online Savings Account, though you can still deposit checks remotely with Ally eCheck Deposit and make online, wire and mail transfers in and out of the account. You can also make transfers out of your account over the phone and by requesting a check. Online transfers between Ally Bank accounts are immediate, while transfers between Ally Bank and non-Ally accounts take three business days. Free next-day transfers are available to select customers depending on account tenure, account activity and transfer activity.

Ally Bank offers an extensive and helpful mobile app that allows you to make deposits, pay your bills, transfer money, find in-network ATMs and view your balances and transactions. You can download the app on various platforms including Android, iOS and Windows.

Best Rates from New Online Savings Accounts

Over the last year or so, there have been a ton of 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. Vio Bank – 2.07% APY, $100 minimum deposit to open account

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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 2.07% 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.

2. HSBC Direct – 2.05% APY, $1 minimum deposit to open account

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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 2.05% 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.

3. CIT Bank – 1.85% APY, $100 minimum deposit to open account

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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 1.85% 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 1.85% 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 1.24%. 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.

4. CIBC USA – 1.85% APY, $1,000 minimum deposit to open account

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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 1.85%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.

5. Citizens Access – 1.85% APY, $5,000 minimum deposit to open account

Citizens Access

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Member FDIC

Citizens Access is the online-only branch of Citizens Bank, a Providence, R.I.-based bank founded in 1871.

Unlike its other competitors, Citizens Access has a bit of a higher minimum deposit to open its Online Savings Account, requiring $5,000. If you can meet that threshold, you can start earning at its 1.85% APY, but balances under $5,000 will drop to 0.25% APY. Citizens Access boasts zero fees, including for monthly maintenance.

To make a deposit into the Online Savings Account, you can make an online funds transfer or deposit a check through the mail or mobile check deposit; withdrawals are made in the same ways. When moving money from your Online Savings Account, it can take two to three business days for the funds to post in the external account.

Citizens Access doesn’t have a mobile app, but the website is designed to be easily accessible on mobile, including mobile check deposit capabilities.

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 – 2.60% 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 2.60% APY is reserved for customers who log 12,500 steps or more. The rate drops to 2.34% 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 2.60% 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. First Foundation Bank — 2.40% APY, $1,000 minimum

First Foundation Bank

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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 2.40% 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.

3. BrioDirect – 2.20% 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 2.20% 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.

4. SFGI Direct — 2.27% APY, $1 minimum balance

SFGI Direct

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Member FDIC

SFGI Direct is an online division of Summit Community Bank, which provides FDIC insurance on any SFGI Direct deposits. Summit Community Bank is headquartered in headquartered in Moorefield, W.V.

Open an SFGI Direct Savings account with just $500 and start earning interest at 2.27% APY with just $1. There is no monthly fee on the account.

SFGI Direct can be accessed online. You can set up online transfers in and out of the Savings account directly within your account.

5. Vio Bank — 2.07% APY, $100 minimum deposit

Vio Bank

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Member FDIC

Vio Bank is a division of MidFirst Bank, which is based in Oklahoma City. Vio Bank deposits are considered MidFirst Bank deposits for purposes of FDIC coverage.

A new leader in the savings account space, Vio Bank offers 2.07% APY on all High Yield Online Savings balances. You just need at least $100 to open the account. There is no monthly fee, although paper statements cost $7 each.

To access a Vio Bank account, you can make online ACH transfers. Vio Bank limits transfers to and from external accounts to $25,000 daily and $100,000 monthly when initiated through Vio Bank. Transfers initiated through external accounts are not limited. You can fund your High Yield Online Savings Account by mailing a check, depositing a check on mobile or sending an incoming wire. Deposits may take up to five days to post.

Vio Bank is accessible online and through its mobile app, available in the Apple App Store and Google Play Store.

 

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 – $200 bonus with $25,000 minimum deposit + 1.80% APY on all balances

Discover Bank

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on Discover Bank’s secure website

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 Dec. 2, 2019 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 Dec. 16, 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 Dec. 30. You can apply online or by phone using the code MM1119.

The account itself earns at a solid 1.80% APY, and interest is compounded daily. There are no minimum deposit or balance requirements or a monthly fee.

2. Citibank – $400 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 1811.

Snag a $400 from Citibank by being a new customer an opening a Citibank Account Package by Dec. 31. 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.

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.

3. 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 0.05% 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 0.10% and 1.35% APY.

4. 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 Jan. 21, 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.

5. Wells Fargo – $250 bonus with $15,000 minimum deposit

Wells Fargo Bank

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Member FDIC

Wells Fargo was founded in 1852 and is headquartered in San Francisco.

Earn a $250 bonus by opening a new Wells Fargo savings account with a $25 minimum deposit by Dec. 31, 2019 and depositing at least $15,000 in new money within 10 days of opening. New money means that it must not already be held in a Wells Fargo account. You must also maintain a $15,000 minimum daily balance for 90 days after account opening.

Wells Fargo requires you to open the new savings account in a branch with a valid bonus offer code which you can find online. The offer’s scope is very limited, serving only customers in Dallas, Texas and Washington, D.C.

Wells Fargo has two savings accounts. Way2Save Savings earns a mere 0.01%APY, while the Platinum Savings account earns either 0.05% APY or 0.90% APY, depending on your balance. Wells Fargo provides a mobile app for its customers to deposit checks and manage accounts on the go.

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. CommunityWide Federal Credit Union – 2.00% APY, $1 minimum deposit to open account

Communitywide Federal Credit Union

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on Communitywide Federal Credit Union’s secure website

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 2.00% 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.

3. USALLIANCE Financial – 1.90% 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 1.90% 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.

4. American Heritage Federal Credit Union — 1.80% APY, $10,000 minimum deposit

American Heritage Federal Credit Union

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NCUA Insured

Founded in 1948, American Heritage Federal Credit Union is based in Philadelphia and serves members of the surrounding community. American Heritage membership is also open to those who are employed by a Workplace Partner or an immediate family or household member of a current or eligible member. You may also join by making a donation to the Kids-N-Hope Foundation.

The High Yield Savings Account earns 1.80% APY on balances $10,000 and over. You’ll need to open the account with at least $10,000 in the first place, and keep that minimum balance to avoid the $10 monthly fee.

In addition to its Philadelphia-area branches, American Heritage offers online, phone and mobile banking access.

5. Alliant Credit Union – 1.70% APY, $100 minimum balance amount

Alliant Credit Union

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NCUA Insured

Chartered in 1935, Alliant Credit Union is based in Chicago, Il. You can become an Alliant Credit Union member if you are a current or retired employee or member at a select organization, are an immediate family member of a current member, live or work in a select Chicago-area community or join Foster Care to Success (FC2S).

The High-Rate Savings requires at least $5 to open, but Alliant will fund it for you. You’ll need to increase your average daily balance to at least $100 to earn 1.70% APY. There’s no monthly fee with eStatements, but paper statements will incur only a $1 fee.

You can easily make online transfers between your Alliant accounts and either external or other Alliant accounts. Alliant allows you to set immediate one-time, future, or recurring transfers. Deposits into an Alliant account typically credit within 24 hours of Alliant receiving the funds. You can make an unlimited number of transfers between accounts, but the limit for same-day ACH transfers is $25,000 per day. Benefit from further convenience with Alliant’s mobile app, available for Android and iOS.

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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Lauren Perez
Lauren Perez |

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