Are you looking to start or grow a business? Opening a business savings account can offer federal protection for the funds you deposit (up to $250,000) and provide a source of liquidity should inevitable expenses arise. You can earn interest while setting aside money for capital improvement or income taxes. A commercial savings account can add credibility to your business, arm you with a business debit card and help your cash flow.
The best way to choose an account that fits your needs is to start by comparing the annual percentage yield offered by banks and credit unions. Then look for benefits that might make the account attractive based on your needs. Is there a monthly maintenance fee or a minimum deposit to open? Does the bank provide ample access to ATM and online account services?
Deciding which business savings account is best for your needs can be a difficult process, but hopefully this roundup of our picks for best savings accounts will help give you a head-start.
The best business savings account rates — March 2020
1. First Internet Bank, 1.61% APY, No minimum balance, ATM services
First Internet Bank offers an FDIC-insured savings option for businesses with a good 1.61% APY on any balance amount. You only need $100 to open the account. There is no minimum balance to deposit or maintain the account to earn the APY.
While it only costs $100 to open your business savings account and you must maintain an average daily balance of $4,000 to avoid a $5 monthly maintenance fee.
Unlimited deposits can be made each month and six transfers or withdrawals are allowed without charge. Keep in mind that the FDIC only insures up to $250,000. So, if you deposit more than $250,000 into the business savings account, the excess deposit amount will not be insured by the FDIC.
The First IB ATM cards are offered to sole proprietors only. There is no charge for ATM transactions or electronic statements. Founded in 1999 by the First Internet Bancorp, First IB offers remote banking in all 50 states.
Fine print: Only six preauthorized, automatic, PC, or telephonic transfers are allowed each month. This restriction is common among most of these institutions, however, First Internet Bank will charge you $5 per item if you go beyond the allotted six.
2. Dedicated to Businesses: Live Oak Bank, 1.00% APY, No minimum balance
Live Oak Bank awards a 1.00% APY on its business savings account, which is eight times the national average. There is no minimum opening balance or deposit required to open a business savings account.
The business savings account is open to deposits of up to $5 million and is free of monthly maintenance fees. You may make up to 6 withdrawals from your Live Oak Bank Savings account per statement cycle, including pre authorized, automatic and telephone transfers. After that there’s a $10 fee per withdrawal. Live Oak Bank, established in 2008, holds assets of $2.12 billion.
The bank is in Wilmington, N.C., and is a member of the FDIC. Learn more about business savings at Live Oak Bank.
Small Print: The bank may verify credit and employment history at its discretion, meaning you may receive a pull against your credit report.
3. Digital Federal Credit Union (DCU), 0.90% APY, $25,000 minimum balance
The Digital Federal Credit Union offers a solid 0.90% APY rate through its Business DCU Ltd Savings Account with a minimum $25,000 balance. This account features unlimited free deposits and no charge for the first withdrawal per month. However, withdrawals after that are $25 each.
Businesses participating in the DCU Ltd Savings Account receive 24/7 online banking, mobile banking through the DCU Mobile Banking App, access to DCU ATMs, deposits, transfers or balance verification. Created by the Digital Equipment Corporation in 1979, DCU is the largest credit union in Massachusetts by assets. Federally insured by NCUA, DCU is based in Marlborough, Mass.
Restrictions on joining: To join, you must meet eligibility requirements within the field of membership for employers, organizations, participating communities or condominium associations.
Capital One is currently offering a business savings account with a 1.25% APY. This account doesn’t have a minimum balance requirement and doesn’t come with any monthly fees.
While this account doesn’t come with ATM access, Capital One makes it easy to transfer funds to either another one of their accounts or a linked account of your choosing. You can easily set this up through their online banking platform or mobile app. Their mobile app also allows you to deposit checks. Keep in mind, however, that you’ll be limited to depositing $5,000 per month into the business savings account. You’ll also be limited to making six withdrawals per month due to Federal regulations.
5. Goldwater Bank, 0.75% APY, $100 minimum amount to open
Goldwater Bank is an online institution with a highly competitive rate on their business savings account. With a minimum deposit of $100, you can open their Savings Plus Business account and start earning an APY of 0.75%. Once you open the account you only need a balance of $0.01 to continue earning the APY.
6. Community Bank of Pleasant Hill, 0.02% APY, No minimum balance
With its 0.02% APY, the Business Premier Money Management Account at Community Bank of Pleasant Hill offers highly competitive rates to explore. You need only put down $25 to open the account and maintain a minimum balance of $10,000 to avoid a $10 monthly service charge and $4 paper statement fee.
ATM access is offered surcharge-free when using ATMs in the MoneyPass® network. Community Bank began operations on Dec. 6, 2006, and is a member of the FDIC. Members can search for partner ATMs online or through mobile access.
Fine print: Just watch out for hefty withdrawal fees. You can make free withdrawals on the second and fourth Wednesdays of the month; on other days, there’s a $25 withdrawal fee. If you plan to make regular in-person withdrawals, this probably isn’t the best account for your needs.
Axos Bank, formerly known as BofI Federal Bank offers one of the top APY rates in our nationwide survey of business savings accounts. The bank’s Business Premium Savings Account with a high-yield 1.06% APY can be opened with a $25,000 minimum deposit.
There is no monthly maintenance fee for the account and no average daily balance requirement.
Axos Bank also makes it easy to access your funds when you need it. Customers have ATM access to their accounts along with free online banking. However, ATM withdrawal limits are $1,010 per day and there’s a daily purchase limit of $5,000. BofI is an FDIC-insured bank based in San Diego and publicly traded online. Other products include Business Interest Checking and Business Money Market accounts.
8. Presidential Bank (Maryland), up to 0.50% APY, $5,000 to open, ATM services
Presidential Bank’s Commercial Premier Savings account offers 0.50% APY for balances up to $35,000, making it a decent — if not extraordinary — bet for business owners.
Business customers are not required to maintain a minimum balance on the account in order to receive all ATM privileges. So long as you use one of their ATMs you won’t incur fees, but there is a $0.75 ATM fee for non-network ATMs. Free online banking, mobile banking and ATM card come with the account.
Established in 1985, Presidential Online Bank was one of the first lenders to offer online banking. Located in Bethesda, Md., it currently lists assets in excess of $550 million.
9. Northpointe Bank, 0.40% APY, $25,000 minimum balance
The Business Savings account at Northpointe Bank currently pays out 0.40% APY if you deposit and maintain a balance of $25,000. However, you only need $1,000 to open the account and you can start earning 0.20% APY with that balance. If your balance increases anywhere between $2,500 and $24,999.99, the APY will increase to 0.25%. If your balance increases to $100,000, the APY will further increase to 0.50%. There are no monthly fees with this account.
The Business Base Share Savings account at Andrews Federal Credit Union offers a 0.10% APY. You can open the account with as little as $5 and there is a $100 minimum balance requirement to earn the APY.
The account comes with free online banking, free eStatements and a debit card. Transactions are free at Andrews Federal & CO-OP ATMs. However, there is a $25 charge for withdrawals that result in overdrafts.
Founded in 1948 in Suitland, Md., Andrews Federal Credit Union has assets over $1.5 billion and offers a range of banking services to 120,000 members worldwide.
Restrictions on joining: $5 fee to join the credit union. Open to field of membership including nationwide membership eligibility through the American Consumer Council.
To come up with this list, we first used data from DepositAccounts.com, which tracks rates on a range of deposit accounts across thousands of banks in the U.S. Note: DepositAccounts is also owned by MagnifyMoney’s parent company LendingTree.com.
We eliminated any institutions that were given a health rating below a B by DepositAccounts. We also weeded out any credit unions that have very restrictive membership requirements. From there, we chose the top 10 business savings accounts with the highest APY. And lastly, all the banks on our list offer FDIC or NCUA insurance.
Business savings accounts vs personal savings accounts
Business and regular savings accounts may offer many of the same features ,such as 24/7 online banking, free electronic reporting, debit cards, fund transfers and ATM machines.
The trade-off in choosing a business account is that you’ll get services focused on business planning and spending in exchange for a less-desirable APY.
When you compare the interest earned on a business savings account with the best APY rates offered on savings accounts, it may not look like opening a business account is a wise strategy. The top business savings account APY right now is 1.40%. The top APY among personal savings accounts is 1.50% with no minimum deposit and ATM access. You can weigh the services, charges and minimum account fees between the top business and top personal savings accounts to decide which is best for you.
There are other benefits to offset any differences in earnings, particularly if your business is incorporated. It’s considered sound business practice to separate your personal saving and checking accounts from your business saving and checking accounts. A business account can help you manage cash flow, accounting, recordkeeping and working capital. At income tax time, separate accounts can help you differentiate business from personal expenses.
Paired with a business checking account, your business savings account can add professional branding, since all payments and correspondence with clients will bear your business name.
Or you can create savings in your business account to pay quarterly income taxes or purchase equipment.
Finally, business savings accounts are secure when you open accounts with banks and credit unions that are insured up to $250,000 per account by the FDIC or the NCUA.
North Shore Bank of Brookfield, Wis., says that a business savings account can boost your credit ratings and make it easier to obtain a business loan, since the lender can see you have an account dedicated to your company.
Choosing the right business savings account
When evaluating a financial institution for your business, there’s more than just finding a good APY.
Many of the banks on our Top 10 list look great on the APY front but carry fees that can eat into any of the returns you might make. Particularly, watch out for fees for ATM or bank withdrawals, monthly service fees and ATM fees.
The Small Business Administration (SBA) has identified the key factors to consider when searching for the right bank or credit union. These include:
Customer service reputation
Access to branches or no-surcharge ATMs
Benchmarks to have fees waived
Automatic FDIC insurance
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.
The best checking accounts offer competitive rates, rewards and easy access to cash without any fees. If you’re looking for the best online checking account for your banking needs, take a look at our top picks for April 2020.
Every week, MagnifyMoney’s elite team of financial experts review offers from over 12,000 banks and credit unions, highlighting the best checking accounts offers we can find. We analyze each account for the following features:
Competitive interest rates
No monthly account fee or minimum balance requirements
No ATM fees and ATM-fee reimbursements
Bonus and cash-back offers
Special features for students and small businesses
Here are MagnifyMoney’s top picks for the best checking accounts in April 2020:
Why we picked it: Through a partnership with BBVA, Simple offers a great checking account with attractive budgeting features and a competitive APY. This account is great for those looking for a traditional checking account without unnecessary fees and stocked with benefits like interest and free ATM access.
What to watch out for: While you can earn a decent APY on the funds in your Protected Goals account, Simple doles out a dismal 0.01% APY on funds that are not in your Protected Goals account, a sub-account designed for money you set aside for savings. It’s also worth noting that fees may apply to ATMs outside of its Allpoint ATM network, and there is a Visa fee of up to 1% if the card is used internationally.
Best High Yield Checking Account – Consumers Credit Union Rewards Checking
Why we picked it: We have crowned the Axos Bank Rewards Checking account as the Best Free Checking account not only for its attractive features, but for its consistency, too.
The Axos Bank Rewards Checking account has consistently offered competitive APYs — even as earning rates drop at other banks. This account also offers all of the bells and whistles that the best standard checking accounts have been known to include, like ATM fee reimbursements and no overdraft fees.
What to watch out for: The Axos Bank Rewards Checking account is a tiered, interest-earning variable rate account. So, in order to earn the 1.25% APY, you must meet the following requirements:
Receive monthly direct deposits totaling $1,000 or more
Use your debit card for a total of 15 transactions per month minimum of $3 per transaction)
If you don’t meet those requirements, you will receive a reduced APY from what is advertised. There is also a $50 minimum balance required to open this account.
Why we picked it: If you’re looking for a basic checking account that gets the job with no fees or frills, the BBVA Free Checking account is a product worth exploring.
This checking account provides you with the basic checking necessities, with no monthly fees. Additionally, it gives you the ability to customize your account further for additional charges. For example, an extra fee of $2 a month will give you unlimited cashier’s checks.
What to watch out for: With the BBVA Free Checking account, there is a $25 minimum balance required to open an account and a potential overdraft fee of $38.
Best Checking Account Bonus – Wells Fargo Everyday Checking
Why we picked it: Wells Fargo’s Everyday Checking account is currently offering an attractive bonus offer, expiring July 31, 2020. Upon opening a new Wells Fargo Everyday Checking account and depositing a minimum of $4,000 in qualifying direct deposits within 90 days of opening, you’ll receive a $400 bonus.
This offer is only available to new Wells Fargo checking and savings customers in Denver, Houston, Miami, Orlando, Fla., Phoenix and Seattle. You also must not have received a bonus for opening a Wells Fargo consumer checking or savings account within the past 12 months.
What to watch out for: This account requires a $25 initial deposit to open. You should also be aware of the not-so-obvious fees associated with this account, which include a $2.50 fee for cash withdrawals at non-Wells Fargo ATMs in the U.S ($5 outside of the U.S.) and a $35 overdraft fee.
Best Rewards Checking Account – Discover Cashback Debit
Why we picked it: The Discover Cashback Debit checking account is a standout account, with no fees and access to over 60,000 ATMs.
What really earns this account the title of Best Rewards Checking account, though, is the fact that it offers 1% cash back on all debit card purchases, up to $3,000 per month. This is a unique perk among checking accounts, and if you prefer cash back to earning interest, this could be the account for you.
What to watch out for: There aren’t too many surprises with this account, just be aware that fees for non-Discover ATMs may apply.
Best No-ATM Fee Checking Account – TD Bank Beyond Checking
Why we picked it: TD Bank’s Beyond Checking account is a great option for those who prioritize fee-free access to ATMs.
With this account, not only do you receive fee-free ATM access to TD Bank’s network of ATMS, but if you maintain a minimum daily balance of at least $2,500, TD Bank will reimburse you for any fees incurred at out-of-network ATMs. As the cherry on top, this account also doles out a little bit of interest.
What to watch out for: Be aware that the 0.05% APY is available only to accounts with a minimum daily balance of $50,000. Accounts with balances between $10,000 and $49,999 receive an APY of just 0.03%, while balances under $10,000 receive an APY of just 0.01%. There is also a $35 overdraft fee associated with this account.
Best Business Checking Account – Axos Bank Business Interest Checking
Why we picked it: Axos Bank’s Business Interest Checking account stands out among other business checking account products for a myriad of reasons, most notably its surprisingly low fees.
Additionally, Axos Bank throws in a number of freebies with its Business Interest Checking account, from ATM fee reimbursements to free checks, making it our pick for the Best Business Checking Account.
What to watch out for:Transactions are $0.50 each after the first 50, and there is a $100 minimum opening deposit required for this account.
Best Checking Account for Students – Chase College Checking
Why we picked it: The Chase College Checking account is a great option for students, as it waives its monthly service fee for those between the ages of 17 and 24 who have proof of a student status, for up to five years while in college.
With widespread ATM access, the ability to pay friends with QuickPay or Zelle and a robust mobile app, this account checks all the boxes for college students.
What to watch out for: For this account, you’ll need to show proof of student status. Also, there’s a $2.50 non-Chase ATM fee and $34 overdraft fee associated with this account.
Best Joint Checking Account – Ally Bank Interest Checking
Why we picked it: Ally Bank’s Interest Checking account features minimal fees, variable interest and added perks like up to $10 in ATM fee reimbursements every month.
All of Ally Bank’s banking products support joint ownership, and you are allowed up to four owners on the account without any additional fees, making this an easy pick for our Best Joint Checking account.
What to watch out for: There’s not much to watch out for with this account, just be aware of the $25 overdraft fee.
A checking account is a bank account for your day-to-day spending needs. They typically come with a debit card, which allows you to make purchases and provides quick and easy access to cash, making it a safer option than carrying cash. Many checking accounts are also offered with paper checks.
Unlike savings accounts, checking accounts typically have no transaction limits, making them the most liquid option for your money aside from holding large amounts of cash. Checking accounts are also FDIC-insured which adds peace of mind.
There are many free checking account options out there. Some options — especially those offered by online banks — are free accounts that even offer extra features like interest and rewards. Keep in mind that many banks will still feature things like inactivity fees, minimum balance requirements or paper statement charges for their “free checking” accounts.
If you’re paying monthly maintenance fees, minimum balances fees or even third-party ATM fees, it’s worth it to do some research, as there are other accounts out there that will give you more bang for your buck and won’t nickel and dime you for it either. Shop around to find the best free checking account for you.
Yes, many checking accounts earn interest, although the amount offered is typically far less than rates offered by savings accounts or money market accounts.
If you’re looking for the best high-yield checking account, many smaller banks and credit unions offer Kasasa checking accounts, which are essentially free checking accounts that offer higher interest rates, so long as you meet a few monthly requirements.
Checking accounts are used for your everyday spending needs and generally don’t carry interest (however high-interest checking accounts do exist); by contrast, savings accounts usually carry higher interest rates and are meant for you to save money over the long-run.
Keep in mind that savings accounts will typically restrict access to your cash to around six withdrawals per month while checking accounts allow you almost unrestricted access to any cash you hold in the account.
It’s a good idea to maintain a free or no-fee checking account for day-to-day use. Generally speaking, the best checking accounts allow unfettered access to cash and carry no monthly fees, ATM-fees, or other account surcharges.
Almost every checking account offered by major banking institutions is insured by the FDIC, which provides an accountholder with up to $250,000 in federal deposit insurance in the event the underlying bank runs into trouble.
As with any other deposit account, it’s easy to find out whether your checking account has FDIC coverage. You can check to see if your financial institution has FDIC insurance by looking for the “Member FDIC” tag that often appears at the bottom of the bank’s marketing materials.
FDIC insurance covers deposits in checking accounts, savings accounts, CDs and money market accounts, up to $250,000 per ownership category per person within a single financial institution. Credit unions receive deposit insurance from the National Credit Union Administration (NCUA), up to $250,000 per owner, per insured credit union, per account category.
One checking account should suffice for most shoppers. However, there may be instances where you’d want to open multiple checking accounts to help keep your finances organized or separated for different purposes.
For example, many small business owners have their own business checking account to segregate their professional finances from their personal finances.
Some parents may even want to open separate student checking accounts to help teach their kids or budding college students financial responsibility and keep track of their finances.
Keep in mind that you can also open joint checking accounts, which make it easier for couples and those who share their lives to also share finances and track spending. With a joint account, two or more people share ownership, and can deposit and withdraw funds from the same checking account.
A second-chance checking account is a type of checking account available to those who might not otherwise qualify for a traditional checking account due to their credit or ChexSystems history.
It may be worth exploring a second-chance checking account if your banking history might have been blemished by closing an account with a negative balance or outstanding fees.
Typically, second-chance checking accounts have lower spending limits, fewer features and may charge monthly maintenance fees. However they exist mainly to assist people who are determined to get their financial lives back on track. Once you’ve had the chance to rebuild your credit history, you may be able to trade back up for a standard checking account.
What should I look for in a checking account?
When shopping for a checking account, keep in mind that their main purpose is to provide a convenient and safe place to stash the x you use for your daily spending. With that in mind, factors such as safety, ease of use and minimal costs should be top-of-mind. You want features like zero fees, a wide ATM network, Federal Deposit Insurance Corporation (FDIC) insurance and overdraft protection. Some checking accounts offer interest or other rewards — these accounts are your best bet.
Find an account with few or zero fees
There are many checking accounts that charge little to no fees. Online banks, in particular, offer checking accounts with zero fees, as they are able to save on the operational costs that burden brick-and-mortar banks. Some checking accounts even offer unlimited ATM-reimbursements or a monthly allowance for reimbursable ATM surcharges.
Since many checking accounts offer little to no interest, it’s even more critical to opt for an account with minimal fees. Common checking account fees include:
Minimum balance fees
Even if you’re using a high-yield checking account, why pay your bank fees for access to your own cash? It’s a good idea to check for bank fees when shopping for a checking account. If your checking account has any monthly balance or spending requirements, make sure you stay within those limits to avoid any unnecessary fees.
Pair your checking account with a high-yield savings account
You might want to pair your checking account with a high-yield savings account if you’d like to maintain your day-to-day spending but stash away a portion of your cash to earn a higher rate of return in longer-term savings.
This is also a great option for those who don’t want to be tempted with the ability to easily spend their savings on everyday needs.
If this is what you’re looking for, start by finding a checking account that fits your daily spending needs, is easily accessible and FDIC-insured. You can then track your spending and set up regular deposits into a separate, high-yield savings account for any excess cash you don’t spend. Keep in mind that not all savings accounts are created the same, and it’s worth shopping around for the best rates when it comes to your savings account.
If you want your money to do more for you with less maintenance, online checking is the way to go.
Resist the urge to hoard cash in a checking account
With easy access, low fees and the safety of FDIC insurance, it can be tempting to use checking accounts as a place to hoard all of your cash. However, checking accounts generally offer much less interest than high-yield savings accounts which makes them a poor store of value.
Keep in mind that deposit accounts will typically pale in comparison to any returns you can reap from investing your extra money in the market. It’s a good idea to keep just enough in your checking account to cover your daily needs, meet any minimum balance requirements and avoid any possible overdraft charges. To get the most out of your money, consider storing any cash you don’t need in a separate high-yield savings account or CD.
There are two main reasons your money would be better off not sitting in checking:
#1 You could miss out on higher interest rates
Interest rates on checking accounts are generally pretty pitiful. Even when they seem high (perhaps 0.60% or even 1.00%), there can be a lot of hoops to jump through in order to secure that interest rate. Instead, consider putting your money into one of the nation’s best savings accounts,best money market accounts or CDs. Your money can easily earn 1.00% or more with those accounts.
#2 You don’t want to give fraudsters access to your life savings
Fraud is another reason you may want to keep a minimal amount in checking. Bank fraud is so prevalent you’ll likely get smacked by it at some point. For credit card users, it isn’t as worrisome because the money charged to a credit card isn’t coming directly out of your bank account and credit issuers commonly offer zero fraud liability protection. On the other hand, debit card fraud means a crook gains direct access to your account and can be draining your actual funds in real time. By not keeping a ton of money in checking, you can reduce the damage a thief can do.
If your card is stolen and you report it to your bank within two days, you can be responsible for up to $50 of unauthorized charges. Waiting longer than two days can make you responsible for up to $500 in unauthorized charges. Additionally, if you notice any unauthorized charges on your account statement, you have 60 days to tell your bank to avoid liability for following transfers. Even if your bank reimburses you for the funds, it’s still a hassle to spend days — even weeks — without having access to that money.
Other Options Besides Checking Accounts
Consider a cash management account
Cash management accounts are a relatively new type of money management account that has become increasingly popular. These accounts are a hybrid of both checking and savings accounts while offering features common to both.
Cash management accounts can offer the convenience and liquidity of checking accounts, plus the interest earnings of high-yield savings accounts. Some cash management accounts feature separate checking and savings accounts under one banner, with instant and unlimited transfers between the two. Others comprise a single account featuring both a competitive interest rate and unlimited liquidity.
Before you go running for the best of both worlds, it’s important to note that not all cash management accounts offer the same FDIC-insurance carried by checking or savings accounts offered by most major banks. This can subject you to some level of risk that you might not necessarily face with a typical FDIC-insured checking or savings account.
Consider hybrid savings/checking accounts
In today’s competitive savings rate atmosphere, some banks are offering the best of both a checking and savings account in the same product, like the Simple Checking Account + Protected Goals Account, our top pick above. These hybrid accounts offer the flexibility of a checking account by including a debit card and avoiding the six-transaction limit of savings accounts. Some accounts might also offer the ability to write checks through the account (however, Simple does not).
Even better, these hybrid accounts also offer the high-yield competitive rates of a savings account (think above 2%!). Opening this kind of account can prove to be a great addition to your savings profile, especially since most checking accounts tend to offer unremarkable rates. Simple goes even further by helping you save towards a specific Savings Goal instead of just earning a high interest rate — although saving at least $2,000 towards that goal enables that high rate.
Of course, money market accounts are already known as hybrid-like accounts with high interest rates. But without limiting your transfers and transactions to six per cycle, these new checking/savings hybrid accounts (or cash management accounts, as they might be called) are able to set themselves apart from money market accounts. Money market accounts also tend to require much higher balance limits and charge monthly service fees, unlike these new accounts we’re starting to see.
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.
The best online savings accounts provide consumers with interest rates that are, on average, 1.47 percentage points higher than the rates offered by traditional brick-and-mortar banks as of March 2020. Every week, MagnifyMoney’s elite team of financial analysts reviews and compiles the best savings account offers from dozens of online banks.
If you’re still skeptical about switching to an online bank, consider the facts:
Online savings accounts offer higher rates, and you often end up saving on the cost of the account. With lower overhead costs, online banks typically charge lower fees.
Your funds are just as safe stashed with an FDIC-insured online bank as they would be with the bank branch on Main Street.
Many online banks offer round-the-clock customer support and online chat features that make it easy to resolve issues 24/7, without ever needing to visit a branch.
Our weekly picks of the best online savings accounts with high yield rates are featured below:
1. High Rate: Goldman Sachs Bank USA – 1.70% APY, no minimum balance (but no ATM access)
Our advertiser Marcus by Goldman Sachs, the consumer bank of Wall Street giant Goldman Sachs, offers a 1.70% APY on deposits. There isn’t a minimum balance requirement to earn the APY and there are no transaction fees. Upon opening the account, you can deposit funds via electronic transfer, wire transfer, or deposit by check. You can get access to your funds via electronic transfer or wire transfer.
Goldman has been investing heavily in Marcus, its online consumer bank. Marcus is already offering some of the best savings accounts and personal loans in the market, and further expansion is expected. The savings account has consistently been paying one of the highest rates in the market. With a 1.70% APY, you can get one of the highest rates in the market from a well-known brand. The maximum deposit is $1,000,000 and deposits are FDIC insured up to the $250,000 limit.
Marcus is accessible both online and via the Marcus mobile app, available only in the Apple App Store.
2. High Rate: American Express National Bank – 1.60% APY, no minimum balance (and no fees)
Our sponsored advertiser, American Express National Bank, offers a Personal Savings account, which earns a 1.60% variable Annual Percentage Yield (APY) as of 3/25/2020. The account charges no monthly fees and requires no minimum deposit, making it an affordable account to open. You must fund your account within 60 days of applying for the account, and the FDIC insures your deposits up to $250,000. Overall, the account is a great option for anyone who wants the flexibility of earning a high interest rate on a sum of money you’ve stashed away, minus the withdrawal restrictions of a certificate deposit.
on American Express National Bank’s secure website
3. High Rate: Barclays Bank – 1.60% APY, no minimum balance
Barclays is a large, old British bank, based in London and with more than 325 years of history. Although Barclays is huge in the United Kingdom, it is a challenger brand in the US. Barclays offers savings products with highly competitive rates. These deposits are used to fund their rapidly growing American credit card business. The online savings account has a 1.60% APY with no minimum balance to open and no monthly fees. Your deposits are FDIC insured up to the legal limit. The Barclays website has a good look and feel. And you can have the confidence of keeping your money with one of the world’s largest and oldest universal banks.
4. Favorite Online Package: Ally Bank – 1.50% APY, no minimum balance and you can get a free checking account
Ally is a bank without branches that had been consistently paying high interest rates on savings accounts. While Ally is still offering rates way above what brick-and-mortar banks are offering, it seems this online bank no longer wants to be seen as the online bank with the most competitive rates. The current APY on Ally’s savings account is 1.50%. Although Ally has dropped its rate significantly, we still favor this online bank. It doesn’t require a minimum balance to earn the APY and, even better, you can open a free checking account (also with no minimum balance requirement). This makes access to your savings account incredibly easy – because you can transfer funds online (or via the app) and have immediate access via checks, debit cards and ATMs. With an Ally account, you will have access to their full suite of expanding (and market-leading) products such as CDs, money market account, checking account, and IRA accounts.
5. High Rate: Capital One – 1.50% APY, no minimum balance
A consistent rate leader for its deposit accounts, Capital One now offers its 360 Performance Savings. With a 1.50% APY on all balances and no monthly fee, you get a chance to boost your savings uninterrupted. There are no minimum balances required to open or maintain the account, either.
Capital One is able to offer higher rates and lower (to no!) fees on this online savings account compared to traditional in-branch offerings. Still, you can head to a Capital One branch or Capital One Café to open a new 360 Performance Savings account, if you prefer. You cannot use an ATM to withdraw or deposit funds, but you can visit a branch, call the bank or make your own online transfer. You can access all accounts on your mobile device through the Capital One app, as well.
6. High Rate: Discover Bank – 1.50% APY, no minimum balance
Discover Bank is famous for its credit cards. But it also has an online consumer bank. The savings account pays 1.50% APY. There is no minimum deposit or balance requirement, opening this savings opportunity to all kinds of savers. Discover doesn’t charge a monthly fee, either, nor an excessive transaction fee.
Discover provides customers with on-the-go access through its mobile app, which includes mobile check deposit.
7. High Rate: Vio Bank – 1.75% APY, $100 to open
Vio Bank is the online division of MidFirst Bank, a national private financial institution with over $16 billion in assets. Vio Bank was recently created and is not yet as established as Marcus, Barclays, American Express, Synchrony, and Ally Bank. However, this online bank launched its High Yield Online Savings account with a strong APY (at the time of its launch) and has been consistently competitive since it launched. It’s currently offering an outstanding 1.75% APY on all balances. You only need $100 to open the account. You can fund the account via ACH.
There are a few limitations to keep in mind: incoming ACHs take anywhere between two to five business days to post and the online bank may place a hold your ACH for two or three business days. When you’re ready to transfer funds out of the account, you’ll be limited to $5,000 per outgoing ACH. You’ll also be limited to transferring an aggregate monthly total of $20,000 via outgoing ACHs. As is with every other savings account, you’ll also be limited to making six withdrawals per monthly statement cycle. The good news (aside from the high APY) is that Vio Bank doesn’t charge a monthly maintenance fee. Vio Bank also has a mobile banking app where you can conveniently manage your accounts on-the-go. Also, its website is mobile friendly so it should be fairly easy to do your online banking from a smart phone, as well. We think this online bank is very promising and hope it continues to offer one of the best savings account rates in the nation.
8. High Rate: Live Oak Bank – 1.75% APY, no minimum to open, no minimum balance to earn APY
Founded in 2008, Live Oak Bank offers a great spread of financial products, including its high-yield Online Savings account. The Online Savings account earns 1.85% APY on all balances. Plus, interest is compounded daily for faster savings. There’ s no minimum deposit requirement to open, either, nor a monthly fee to worry about.
In addition to online access, Live Oak Bank offers a mobile app.
CIT is a very large bank that you probably never heard of. It has more than $50 billion of assets and makes loans (and leases) to middle market companies and small businesses. To fund those loans, CIT operates an internet-only bank that pays some of the highest interest rates in the country.
While CIT isn’t as big as other online banks, they’re currently offering a very healthy APY of 1.75% on their Savings Builder account. You only need $100 to open the account, but you’ll need to meet one of two requirements to earn the high rate. We really like the options that CIT Bank has put in place to earn this high APY. The two ways to continue earning this high rate are:
Make a monthly deposit of $100 or more into this account
Maintain a daily balance of $25,000 or more
Even better: there aren’t any monthly maintenance fees and interest compounds daily. Deposits are FDIC insured.
Citizens Access is the online division of Citizens Bank. This division was recently created to provide the best savings rates to consumers. While the online division is brand new, the bank its backed by isn’t. Citizens Bank has been around for a while and has grown to have over $122 billion in assets. While you need to deposit and maintain a minimum balance of $5,000 to earn the 1.70% APY, you’ll be funding an account that comes with no fees. If your balance happens to fall below $5,000, the APY will drop to 0.25%. One downside to this online-only bank is that they don’t currently have a mobile banking app. This means that you’ll have to do all of your banking through their website. Luckily, their website is mobile-friendly.
11. High Rate: Synchrony Bank – 1.50% APY, no minimum balance, (and ATM access)
Synchrony Bank pays a healthy 1.50% APY. There is no minimum balance requirement and no monthly fee. In addition to the great rate, you can get an ATM card. Most internet-only banks require you to transfer funds electronically, which can take a few days. If you ever need quick access to your funds, the ATM card makes access easy. You might not recognize the Synchrony brand in the banking space, but it is a large, well-capitalized business. Synchrony used to be a part of General Electric (GE), and was spun out as a separate company. Unfortunately, the digital experience is not the best, but they now have a mobile banking app.
12. High Rate: CIBC Bank USA – 1.45% APY, $1,000 to open
CIBC Bank USA is the U.S. division of a Canadian based bank. This division was established in 1991 and has since acquired over $27 billion in assets. Currently, CIBC Bank USA is offering an online-only Agility Savings account with a competitive APY of 1.45%. You’ll only need $1,000 to open the account. While there isn’t a monthly maintenance fee, you may be charged $10 if you make more than six transactions per statement cycle. CIBC Bank USA does have a mobile banking app, but make sure that you download the app for the U.S., not Canada.
13. Unique Bank + Highest Overall Rate: Fitness Bank – 2.10% APY, $100 minimum to open
Fitness Bank is unique and new online bank. It’s a division of Affinity Bank, which has been around since 2002 and has acquired over $318 million in assets. Affinity Bank decided to launch a concept like no other to reward actively fit individuals with the highest APY currently available. While most institutions choose to offer tiered rates based on balance amounts, Fitness Bank offers tiered rates based on the average number of steps you take on a daily basis. To earn the high 2.10% APY, you’ll need to take an average of 12,500 steps or more per day. If you only take an average of 10,000 to 12,499 steps per day, you’ll earn an APY of 2.00% (which is still a great APY). You’ll earn 1.75% APY if you take an average of 7,500 to 9,999 steps per day. Taking an average of 5,000 to 7,499 steps per day will qualify you for an APY of 1.25%. Finally, if you take anywhere between 0 to 4,999 steps on average per day, you’ll only earn 0.50%.
Fitness Bank will track your steps by requiring you to download its Step Tracker app. The bank will then calculate your average steps from the previous month to determine which tier you qualify for. Once the bank determines which rate your activity qualifies you for, you will continue earning that rate for an entire month until the bank recalculates your activity. The activity requirement will be waived for the first month so that you can get your app all set up and start logging in some steps. For this first month, you’ll automatically earn the 2.10% APY.
In terms of actual money, you will need at least $100 to open the account and you’ll need to maintain this balance to waive the $10 monthly maintenance fee. The bank does impose a limit on the amount of money you’re able to transfer in and out of the account via ACH. You cannot transfer more than $15,000 per day in or out of the account. You also cannot exceed more than six certain withdrawals or you’ll incur an excessive withdrawal fee of $10 for each additional withdrawal. In addition to the Step Tracker app, Fitness Bank has a mobile banking app to manage your account.
14. High Rates on two savings accounts: CommunityWide FCU – 2.00% APY or 1.90% APY, $1 minimum to open
CommunityWide Federal Credit Union was established in 1967. Anyone can become a member of this credit union by joining Habitat for Humanity Helpers, Marine Corps. League of St. Joseph Valley, or Michiana Goodwill Boosters. You may also qualify through your employer or a relative who’s an existing member.
Once you become a member of CommunityWide FCU, you’ll be able to open one of two unique savings accounts: High Rate Account and Funds Account. These accounts act like a hybrid between a savings account and a CD since the credit union only allows you to withdraw from these accounts during a specific time period.
The High Rate Account currently earns 2.00% APY. You only need $1 to open the account and earn the APY. While you can deposit money into the account anytime, you’ll only be able to withdraw from the account within the first five (5) days of each quarter. If you withdraw money outside of this window, you’ll incur a withdrawal penalty that is equal to 30 days dividends.
If withdrawing money once a quarter isn’t feasible for you, you can open the Funds Account instead. This account allows you to withdraw money within the first five (5) days of each month. The minimum to open and earn the APY is still $1, but the APY drops to 1.90%. If you withdraw money from this account early, you’ll incur a penalty that is equal to 7 days dividends. These accounts are unique as they really help you save money while still giving you flexibility to withdraw within a certain timeframe.
on Communitywide Federal Credit Union’s secure website
15. High Rate: First Foundation Bank – 1.75% APY, $1,000 to open
First Foundation Bank officially launched in 2008, but its leadership has been in the financial services industry since 1990. This bank was established by the same group that leads the Keller Group, a wealth management firm. The bank has grown to acquire over $6 billion in assets. In October, this bank launched an Online Savings Account with a high APY of 1.75%. You’ll need to have a balance of at least $1,000 in order to open that account and you’ll need to maintain that amount in order to earn the high APY. If your balance falls below $1,000, the APY will drop to 0.10%. This account doesn’t have a monthly service fee.
While Regulation D applies to this account, First Foundation Bank will provide an ATM card if you request one from the bank. The bank will reimburse ATM fees from other banks and ATM operators up to $20. There is a limit to the amount of money that you can withdraw. If you’re withdrawing from an ATM, the bank sets a daily limit of $500. The daily point-of-sale limit is $1,500. If you’re transferring money online or via ACH, the daily limit is $5,000 and the monthly limit is $10,000. If you need to transfer more than the preset limits, you’re able to call the bank and request that they increase the limit. The bank allows you to maintain the account online and through their mobile banking app.
16. High Rate: SFGI Direct – 1.71% APY, $500 to open
SFGI Direct is Summit Community Bank’s online division. They currently have more than $2 billion of assets and is privately owned by Summit Financial Group, Inc. SFGI is FDIC insured through Summit Community Bank, so deposits are protected up to the legal limit. They are currently offering a good rate of 1.71% on balances of $1 or greater. You’ll have to deposit a minimum of $500 in order to open the account, but you can’t make an initial deposit greater than $25,000. After you make your initial deposit, you’re able to add as much money as you’d like to the account. While they do offer a good rate on an online savings account, their online experience is lacking. Their website feels dated and they don’t appear to have a mobile banking app.
17. High Rate: Prime Alliance Bank – 1.71% APY, $10,000 minimum balance amount
Prime Alliance Bank was established in 2004 to provide financial assistance to local businesses and residents. However, through its online banking platform, it’s now able to reach more customers while keeping that local bank service. Today, it’s grown to acquire over $455 million in assets.
While the bank’s Personal Savings Account doesn’t require a minimum amount to open the account, you will need to have at least $10,000 in the account to earn the high APY of 1.71%. If your balance is below the amount, you’ll earn 1.61% APY. This account doesn’t have a monthly service fee. You’re able to request an ATM card and withdraw as much as you need from an ATM, but the account is limited to six certain withdrawals and transfers due to federal regulations. You’re able to maintain the account online or through the bank’s mobile app.
18. High Rate: HSBC Direct – 1.70% APY, $1 minimum to open, no minimum balance to earn APY
HSBC Direct is the online division of financial giant, HSBC Bank. Based on the amount of assets HSBC Bank has acquired to date, it is the 14th largest bank in the U.S. While HSBC Direct may sound like a new player to the online banking game, this division was actually around prior to the 2008 financial crisis and offered extremely competitive rates. After the financial crisis, the bank renamed the online division to HSBC Advance and slowly started to decrease its online savings account rates, much like other online banks were doing around that time.
Fortunately, HSBC has decided to reenter the online banking space. Since the initial launch in July of 2018, the bank has consistently increased its HSBC Direct Savings Account rate from 1.70% APY to 1.70% APY. You only need $1 to open the account and the APY will be applied to any balance below $2 million. You may fund the account via ACH transfer and the account can be opened online. You will have to deposit new money to the account, which means that you cannot be a member of the HSBC Group in the United States. The account doesn’t have a monthly maintenance fee and all deposits are FDIC insured.
19. High Rate: Popular Direct – 1.70% APY, $5,000 minimum to open
Popular Direct, the online bank of Banco Popular North America, is currently offering an outstanding APY of 1.70% on their Popular Direct Ultimate Savings Account. You’ll need $5,000 to open this account and you’ll have to maintain a daily end of day balance of $500 to avoid the $4 monthly service fee. This account does not come with an ATM card. In order to access your money, you would need to transfer funds to and from an existing checking account via an ACH transfer, which can take a few days. Your deposits are FDIC insured. Popular Direct has a mobile banking app and provides account holders with access to online banking.
20. For Small Balance Savers: Digital Federal Credit Union – 6.17% APY up to $1k
Digital Federal Credit Union (DCU) currently offers a nice account for people who are just starting to save. You can earn an APY of 6.17% with their Primary Savings Account. You will only earn that rate on deposits up to $1,000. Once you have more than $1k, you should consider other accounts on this list. It is a credit union – and your deposits are insured by the NCUA up to the legal limit. Anyone can join the credit union by donating to one of their participating organizations such as Reach Out for Schools, which has a membership fee of $10. You’ll be able to join one their participating organizations when you go to open your account with DCU. DCU is also part of a nationwide CO-OP network that allows their members to have access to shared branches and surcharge-free ATMs throughout the U.S.
The definition of a savings account is a deposit account that earns interest and allows six “convenient” withdrawals per statement cycle. This limit applies to telephonic transfers, preauthorized and automatic transfers and withdrawals and transfers made by check, debit card or another similar method. Savings accounts are offered by traditional brick-and-mortar banks, online banks, credit unions and other financial institutions.
Deposits held in savings accounts at banks are typically insured by the Federal Deposit Insurance Corporation (FDIC), while credit union deposits are insured by the National Credit Union Administration (NCUA). When looking for the best savings account, always choose an institution insured by either the FDIC or the NCUA. This protects your savings account with the backing of the U.S. Federal Government in the event that your bank fails.
How do savings accounts work?
Savings accounts are interest-bearing deposit accounts that hold your money safely and securely with a financial institution. They are liquid, meaning you can withdraw your money at any time you choose. However, due to the limitations of the Federal Reserve’s Regulation D, savings accounts only allow six convenient transfers and withdrawals per statement cycle. Exceeding this limit will typically result in a fee for each additional transaction.
While almost all savings accounts earn interest, the earnings may vary depending on what type of bank you choose. Historically, we’ve seen online savings accounts out-yield traditional brick-and-mortar banks.
When should I use a savings account?
Savings accounts are most often used for general savings, and they’re a much better choice than keeping all of your money in a checking account. A high-yield savings account lets your money grow by earning a strong interest rate. Still, it’s always best to keep a financial cushion in your checking account, to cover expenses and avoid overdrafts.
You can use a savings account to house your emergency fund as well as any cash you don’t need to cover your monthly spending habits. Savings accounts are highly liquid and easy to access when you need them — certificates of deposit (CDs) and investment accounts are much less liquid — but still earns more interest than regular checking accounts.
Separate savings accounts are a great way to meet multiple financial goals. For example, you could save funds for future college tuition costs in one high-yield savings account, and money for your next vacation in a separate online savings account.
How to find the right savings account for you
Compare offers to get the best savings rate. Use our savings account comparison tool to calculate how much you could earn with different accounts. You can filter by ZIP code and size, which can help large-balance savers find better options than no-minimum options.
Don’t forget about fees. Snagging the highest interest rate isn’t always your best bet. You also want to ensure the whole account helps you earn consistent returns. For example, a high-rate online savings account might reset to a lower APY after an introductory period. Perhaps the best rate requires a balance that’s too high or too low for your needs. And watch out for monthly fees that could eat into your savings.
Compare options beyond banks. It’s easy to keep a savings account with the bank your family has banked with for generations. But you could be missing out on incredible savings by ignoring online banks and even credit unions. Online banks traditionally offer substantially higher savings account rates than brick-and-mortar banks. They’re easier on fees, too. For their part, credit unions can also be competitive rate leaders, especially for CDs.
What are the different types of savings accounts?
Financial institutions offer a few different varieties of savings accounts. For instance, a money market account is technically a type of savings account under Regulation D, but it’s often marketed under its own name.
Certain labels are applied to savings accounts to differentiate features or ownership types. For example, an online savings account is just a standard savings account that’s available online. Likewise, a high-yield savings account is simply a standard savings account that earns a high interest rate.
Differences in account ownership do not change the way savings accounts function — withdrawal limits and interest rates remain the same. That said, there are a few details worth highlighting when it comes to savings account ownership types:
Individual savings account: This is a savings account for one person. No one else can access funds saved in the account unless the savings account holder authorizes it.
Joint savings account: With a joint savings account, two or more people share equal access to funds saved in the account.
Custodial account: These accounts let a designated custodian manage funds for the benefit of a minor, who then assumes ownership of the account when they turn 18 or 21 years old, depending on the state. Common custodial accounts are associated with UGMA (Uniform Gift to Minors Act) and UTMA (Uniform Transfer to Minors Act) agreements.
Payable on Death (POD) account: This type lets the account owner choose beneficiaries who inherit the funds saved in the account after the owner passes away.
Determining which is the best savings account for you can be a difficult decision and will depend on your individual needs. However, there’s no real limit to the number of savings accounts that you can open; take some time to shop around to find a savings account that combines the highest rates, greatest convenience and still fits your unique needs.
Should I get an online savings account?
An online savings account is your best bet for obtaining the highest interest rate available. Online banks lack the costs associated with maintaining brick-and-mortar branches, and they generally pass the savings onto you in the form of better interest payouts. And like we’ve said, if your money is going to sit in an account, you might as well make it worth your while by growing it at a competitive rate.
Online savings accounts generally feature superior accessibility. Online banks are laser focused on offering the best possible and most user-friendly app experiences. There’s often 24/7 customer service, and they tend to provide very good ATM access. When shopping for the best savings account to suit your needs, make sure you include a good mix of online banks offering high yields, brick-and-mortar banks and credit unions in your search.
Can savings accounts lose money?
If your account balance remains below the FDIC or NCUA deposit insurance threshold, there is virtually no way to lose money kept in a savings account. Federal deposit insurance guarantees that you will not lose money — up to the legal limit — in the event of bank or credit union failure. If your bank or credit union were to fail, federal deposit insurance guarantees that you get your money back, either in the form of a check or a new account at another insured bank.
You can, however, lose money to fees if you’re not careful. Many savings accounts, especially at traditional brick-and-mortar banks, charge a monthly fee that can dent your savings just for owning the account. For those looking to avoid fees, we’ve found that many online savings accounts have reduced or eliminated their fees entirely.
Do savings account interest rates change?
Savings account interest rates are variable, meaning they can change at the discretion of the institution offering them. This is in contrast to fixed-rate savings vehicles, like CDs, which have set rates for predetermined periods of time.
Institutions tend to reserve the right to change their rates at any time, without warning. Luckily, there are institutions that notify you of upcoming changes, especially if it’s a substantial rate change. Each institution’s level of transparency and communication is something to consider when shopping around for the best savings account.
What impacts savings rates?
Institutions typically alter their rates in response to changes in market interest rates, which are in turn driven by the federal funds rate set by the Federal Reserve. The federal funds rate influences the rates banks lend money to each other. When the Fed increases the federal funds rate, financial institutions respond by increasing the interest rates they offer on deposit accounts. When the federal funds rate falls, interest rates decrease.
If you’re not keen on tracking the federal funds rate, changes to the APY on your savings account may come as a surprise. Luckily, chances are that if you keep your deposits with an online bank, you’ll still get the most competitive rates regardless of a Fed pause or rate decrease. Online savings accounts outperform most brick-and-mortar rates any day.
What are the typical fees associated with savings accounts?
The main fee you should look out for when shopping for any bank account is the pesky monthly service fee. These fees are charged for simply owning an account, and can range from as little as $5 to as much as $25, depending on the institution and the account. Luckily, the industry-leading best online savings accounts are free of monthly service fees.
Another common fee associated with savings accounts is the excessive transaction fee. This fee is charged each time you go over the legal limit of six transfers per statement cycle, and usually runs around $10. Some institutions, like Synchrony, do not charge an excessive transaction fee; however, they will close the account if an account holder makes excessive transactions more than occasionally.
You should also watch out for a paper statement fee. Technically this is not a monthly service fee, but many institutions charge you on a monthly basis if you choose to receive paper statements in addition to electronic statements. Some online savings accounts have done away with paper statements altogether; check with your bank to confirm their terms and conditions.
Should I have a savings account at the same bank as my checking account?
You certainly could choose to keep your savings account at the same bank as your checking account for convenience’s sake, but that doesn’t mean you should. Your savings deserve the best interest rate available, which earns you the highest possible return. If you keep your checking account with a traditional brick-and-mortar bank, you’re not likely to find the best savings account rates at the same institution.
To get the best return on your savings possible, open a high-yield savings account. These accounts are most often found at online banks, but a handful of brick-and-mortar institutions have started offering high-yield online savings accounts that outearn their regular savings accounts by a mile.
It’s not that there aren’t any advantages to keeping a savings account at the same institution as your checking account — you do get slightly quicker transfers between the accounts, and you can see both accounts in a single app dashboard. If these benefits are important to you, check out Ally Bank, Discover Bank or Capital One 360. They offer competitive rates on both savings and checking, and Capital One 360 also has the benefit of branches in select states.
What other high-yield savings options do I have?
Money market account: A money market account features the same transaction limitations as a savings account, thanks to Regulation D. Money market accounts generally come with a debit card and checks, unlike most standard savings accounts. Money market accounts also tend to require higher minimum deposits and balances, and are more likely to charge a monthly fee than a savings account.
Checking account: A checking account is a highly liquid deposit account designed for handling your everyday expenses. They don’t typically earn any interest — when they do, they feature lower rates than savings accounts. Unlike savings accounts, there are no transaction limitations on checking accounts.
Certificates of deposit:CDs are a fixed-rate, fixed-term savings account. Each CD has a set term, typically between three and 60 months. Once you make your opening deposit, you cannot withdraw your money until the CD term ends. Should you make what is known as an early withdrawal, you’ll face a penalty — typically a portion of the interest earned on the account. The interest rate remains the same for the length of the term, unlike savings account rates, which are variable.
Mutual funds: A mutual fund is an investment vehicle, not a deposit account. Mutual funds invest in stocks, bonds or other assets, and allow you to diversify your investment portfolio.
Important savings account definitions
A savings deposit is defined by the Federal Reserve’s Regulation D as having two distinct features: a reservation of right clause and a monthly limit on the number of “convenient” transfers or withdrawals.
Of these two features, the monthly limit on “convenient” transfers is most strictly observed. You are limited to six preauthorized and automatic transfers, telephone transfers and withdrawals and transfers made by check, debit card or a similar method. Going over this limit results in a fee per transaction.
Transfers and withdrawals that are not limited include those made in person at the bank, by mail, by using an ATM or over the phone when the withdrawal is disbursed via check mailed to the you.
Interest is the yield you earn on your savings deposit, otherwise known as the principal balance. It’s the profit given to you by the bank in exchange for your savings deposit, unlike the interest you owe on a loan.
Rate of interest
The rate of interest is the percentage your money earns in a savings account in one year. This is also referred to as the simple interest rate. Simple interest is different from annual percentage yield (APY), which is explained below.
Compound interest refers to the process by which interest earnings are added back into the principal balance in a savings account, which “compounds” the growth rate of your money. Interest can be compounded — or added back into the principal balance — daily, monthly, quarterly, semiannually or annually.
This process lets your interest earn interest. For example, daily compounding means your principal balance earns interest today, the interest is then added to the principal and that new higher balance earns slightly more interest tomorrow, and so on.
Annual percentage yield (APY)
Savings accounts are typically marketed by referencing their annual percentage yield rather than their simple interest rate. Annual percentage yield takes into account the extra impact of compounding interest over the course of one year. An account’s APY is always higher than the simple interest rate.
The yield rate is how much your savings balance will increase over a given period of time. Unlike simple interest, yield rate operates according to a specified time period. Unlike APY, yield rate is not tied to an annual calculation, so it can represent returns over a number of months or years, for example.
Minimum balance requirement
Many savings accounts have minimum balance requirements, or the amount of money you must keep in your account. Minimum balance thresholds are often required to earn interest or waive a monthly fee.
Your money is safe in a savings account as long as you bank with a reputable, insured institution. Your money is protected in case of bank failure by the FDIC for bank deposits or by the NCUA for credit union deposits.Your money should also be protected by safety measures taken by each institution, like firewalls, encryption, antivirus and anti-fraud detection and more. If you want to know more about the systems your bank has in place, you can typically find the information on their website or by giving them a call. It’s a good idea to take safety and privacy into account when shopping for the best savings account.
Deposit accounts aren’t listed on your credit report and they’re not subject to hard credit pulls, unlike when you apply for and use loans or credit cards. The activity in your savings account won’t affect your credit score, nor will the number of times you open a savings account.That doesn’t mean your deposit accounts go unmonitored. ChexSystems is a reporting system that tracks your banking activity. Most banks use ChexSystems to check your banking history for any previous overdrafts, negative balances, account closures and the like. If you do have a rocky banking history, this could make it more difficult for you to open future bank accounts. Still, opening multiple accounts won’t count against you.
You usually can open two or more savings accounts at the same bank, depending on the bank’s own policies. Each account will have its own account number. This tactic can be good for separating different savings goals.Oftentimes, banks can offer more than one type of account which can fit different needs. However, this doesn’t mean that you’ll get the best rates at the same bank. It’s still a good idea to shop across multiple banks to find the best savings account that suits your needs.
You can make ACH transfers and wire transfers from a savings account. If your account includes a debit/ATM card or checks, you can also make payments via those methods.Still, don’t forget that savings accounts are limited to six transfers and withdrawals per statement cycle. If you exceed these limits, you run the risk of incurring excessive withdrawal fees or having your savings account closed altogether.
Most savings accounts don’t include a debit or ATM card, which limits your ability to make in-person purchases. However, you can set up an ACH or wire transfer with your savings account number and bank routing number to send money for a purchase.
The federally imposed six-transaction limit on savings accounts applies to what are considered “convenient” transfers. These include preauthorized and automatic transfers, transfers made over the phone and withdrawals and transfers made by check or by debit or ATM card.You can withdraw money from your savings account an unlimited number of times when made at the bank in person, at an ATM or over the phone if the withdrawal is sent to you via check.
The choice between bank and credit union is largely based on personal preference.
Credit unions tend to be more community-focused than banks. You’re a member of a credit union, not a customer, so credit union members often have a say in credit union governance matters and elections. Plus, credit unions are often based around a specific geographic area, so you can build relationships with employees and fellow members.If it’s high-interest savings accounts you’re after, an online bank is probably your best bet over a traditional bank or credit union. Online savings accounts typically offer the highest rates around and their digital presence makes it easy to access your funds at any time during the day.If you’re still looking for high-interest rates, and aren’t afraid to lock away your cash for long periods of time, take a look at our recommended selection of the best credit unions which tend to offer some of the most competitive CD rates across the board.
You have to pay taxes on your savings account (and other deposit accounts) if you earned $10 or more in interest per year.Your bank will send you (and the IRS) a copy of Form 1099-INT if you meet or exceed this interest earnings threshold. If you don’t receive a 1099-INT from your bank, but earned $10 or more in interest, you’ll still need to report the earnings on your tax return.
Interest earnings are considered regular income for tax purposes. If you earned more than $1,500 in interest, you’ll need to detail the sources of that income on Schedule B of Form 1040.
Online banks don’t incur the costs of maintaining brick-and-mortar branches. These costs include rent, building maintenance, staff salaries and the cost of keeping physical cash safe. Without these expenses weighing them down, online banks reap big savings — savings they then pass on to their customers in the form of high interest rates
You may wish to open multiple savings accounts if you’re an individual with over $250,000 in savings. The FDIC and NCUA insurance only cover your bank accounts at the institution level. If you have an amount that exceeds the $250,000 insurance limit, you should spread your money out between multiple banks.This means that even if you have multiple savings accounts at the same bank, they would all be subject to the same $250,000 insurance limit. However, if you were to open multiple savings accounts across different institutions, you would be guaranteed up to $250,000 at each bank. This would allow all your money to be FDIC- or NCUA-insured.
Technically, there’s nothing stopping you from opening as many savings accounts as you want. However, this can get pretty cluttered and you can lose track of all your finances easily if you’re not careful. Make sure you’re getting the best savings rates for each account you open by shopping around.
Online savings index February 2020
Our online savings index tracks the monthly performance of a basket of online savings rates relative to a basket of savings rates from brick-and-mortar institutions.
Despite four Fed rate increases in 2018, savings yields at brick-and-mortar banks were pinned at less than 0.1%. Meanwhile, average yields at online banks soared, peaking above 2% in early 2019.
The spread between rates at online banks and brick-and-mortar banks widened considerably in the period between August 2017 and June 2019, then compressed somewhat in late 2019.
March 2020 savings index
In the midst of the coronavirus (COVID-19) pandemic, we surveyed 1,520 American consumers about their savings habits in the month of March. Here’s what we found:
Overall, 31% of Americans added or plan to add money to their savings account this month. That’s the lowest number we’ve seen in the six months we’ve conducted this survey.
Our survey also found that a similar number of consumers didn’t take money out of their savings at all. Savings habits remain unchanged for 35% of respondents who neither added nor withdrew funds from their account.
The number of Americans saving for emergencies increased sharply. Nearly one-third (32%) indicated they’re working on an emergency savings fund, which is a 45% increase from last month’s numbers. Of course, consumers may not all be adding to their emergency fund, but it’s definitely a start.
About 1 in 6 Americans (16%) don’t have any savings, leaving their finances in a precarious state during the global health pandemic.
More millennials (ages 24 to 39) and Gen Z (ages 18 to 23) saved money this month compared to their older counterparts. Nearly 4 in 10 (38%) of millennials and Gen Z, respectively, added money to their savings, compared to 31% of Gen X and 23% of baby boomers.
“The importance of having an emergency savings fund has become especially clear as the global health emergency has started to cause massive job losses,” said Ken Tumin, founder of DepositAccounts.com. “However, it’s concerning that 1 in 6 Americans don’t have any savings, making them especially vulnerable during this time of economic uncertainty. It’s never too late to start saving, and consumers who have the ability [to], should strongly consider stashing any amount they can in an FDIC-insured online savings account during this unprecedented pandemic.”
MagnifyMoney commissioned Qualtrics to conduct an online survey of 1,520 Americans, with the sample base proportioned to represent the overall population. The survey was fielded March 18-19, 2020.
We defined generations as the following ages in 2020:
Gen Z are ages 18 to 23
Millennials are ages 24 to 39
Gen X are ages 40 to 54
Baby boomers are ages 55 to 74
Silent Generation are ages 75 and older
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