Start saving today with these high-yield bank accounts
Updated March 27, 2020
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: American Express National Bank – 1.70% APY, no minimum balance (and no fees)
Our sponsored advertiser, American Express National Bank, offers a Personal Savings account, which earns a 1.70% 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.
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.
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.
9. High Rate: CIT Bank – 1.75% APY, $100 to open
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.
10. High Rate: Citizens Access – 1.70% APY, $5,000 minimum balance amount
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 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.
15. High Rate: Prime Alliance Bank – 1.96% 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 1.96%. If your balance is below the amount, you’ll earn 1.86% 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.
16. 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.
17. 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.
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.
MagnifyMoney’s Best Savings Accounts for March 2020
To recap, here are our top picks of the Best Savings Accounts for March 2020.
The Best Savings Accounts in March 2020 Overall
American Express National Bank Personal Savings
Goldman Sachs Bank USA High Yield Online Savings
Barclays Bank Online Savings Account
Ally Bank Online Savings Account
Capital One 360 Performance Savings
Discover Bank Online Savings
The Best Online Savings Accounts in March 2020
Vio Bank High Yield Online Savings Account
Live Oak Bank Savings Account
CIT Bank Savings Builder
Citizens Access Online Savings Account
Synchrony High Yield Savings
CIBC Bank USA Agility Savings
The Best High-Yield Savings Accounts and Rates in March 2020
Fitness Bank Savings
First Foundation Bank Online Savings Account
First Foundation Bank Review
Prime Alliance Bank Personal Savings Account
Prime Alliance Bank Review
CommunityWide FCU High Rate and Funds Accounts
2.00% APY and 1.90% APY
SFGI Direct Savings Account
HSBC Direct Savings
Popular Direct Ultimate Savings Account
What should I know about savings accounts?
What is a savings account?
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.
Savings Account FAQs
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.
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.
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.
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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