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Money Market Account vs. Savings Account: What’s the Difference?

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Money market accounts and savings accounts are deposit accounts that let you stash your cash and earn interest for the long term. Both types of account give a secure place to keep your money while also providing you easy access to your funds in case of financial emergency. Many money market and savings accounts offer decent rates of interest, which lets you grow your funds over time. Here’s a breakdown of the difference between money market and savings accounts.

What is a savings account?

A savings account is a deposit account that holds the money you need to save up for your financial goals. While your checking account is for everyday transactions, savings accounts are used to help you set aside funds for the long term, including retirement, education or an emergency fund.

Credit unions, banks and online financial institutions offer traditional savings accounts with varying service fees, interest rates and minimum account requirements. These are the features you can expect from savings accounts:

  • Interest: Traditional savings accounts tend to have lower interest rates: The average savings account from a brick-and-mortar bank pays 0.27% APY, while the average credit union savings account pays 0.25% APY. If you choose to bank online, you may be able to earn 1.70% APY or more.
  • Account minimums: Most savings accounts require no or very low minimum account balances, and allow you to save as much as you want. Generally, savings accounts with higher interest rates tend to have somewhat higher minimum balance requirements.
  • Insurance: Savings accounts at conventional banks and credit unions are insured up to the legal limit per account, per bank by the Federal Deposit Insurance Corp. (FDIC) and the National Credit Union Association (NCUA), respectively.
  • Service fees: Some savings accounts charge monthly service fees to maintain the account. Online banks tend to have lower fees, or even no fees at all. We always recommend that our readers avoid savings accounts with monthly service fees, since they are easy to avoid.
  • Accessibility: Some savings accounts provide a debit card or checks to give you easy access to your funds.
  • Transaction limits: No matter how easy it is to access money kept in a savings account, Federal Reserve Regulation D mandates certain types of telephone and electronic withdrawals, including transfers from savings accounts up to 6 per statement cycle. If you exceed this limit, your bank or credit union may charge you a fee, convert the account to a checking account or even close it.

What is a money market account?

Money markets accounts are high-yield deposit accounts that allow you to earn interest, but often carry higher minimum balance requirements than savings accounts. They allow you to deposit funds and earn interest on your account balance.

Money market accounts are sometimes confused with money market funds. The key difference is that money market accounts are risk-free deposit accounts, while money market funds are investment products that come with risk. Here are some of the key characteristics you will find in money market accounts:

  • Interest: Some money market accounts may have slightly higher interest rates than savings accounts.
  • Account minimums: Institutions tend to have higher account minimums on money market accounts than what you’d see on savings accounts. However, keep in mind this may not always be the case with every money market account.
  • Insurance: Banking institutions and credit union money market accounts are also insured up to the legal limit by the FDIC and NCUA.
  • Service fees: Some money market accounts charge monthly service fees. Many of these may require a minimum balance to avoid these fees.
  • Accessibility: Generally, money market accounts are more likely to come with checks or a debit card to access your funds. However, just like savings accounts, money market accounts are subject to Regulation D, which mandates certain types of telephone and electronic withdrawals, including transfers from savings accounts up to 6 per statement cycle.

What’s the difference between a savings account and a money market account?

The two main differences between savings accounts and money market accounts are interest rates and minimum balances.

Money market accounts typically have higher interest rates

While the rates with money market and savings accounts can sometimes average out to be the same, money markets can still often offer higher rates. That is usually because money market accounts can require larger deposit amounts.

As stated above, you can see the difference when you compare rates with savings accounts from brick-and-mortar banks, which can average 0.27% APY and online savings accounts that average 1.70% APY or above. But, when you compare online banks, the interest rates for savings and money market accounts are very similar. For example, Marcus by Goldman Sachs® offers 1.30% APY with its online savings account, just below the 2.00% APY offered by Capital One’s 360 Money Market account for balances greater than $10,000.

However, when you look at VirtualBank, an online banking institution, you’ll find it offers a fixed rate for its eMoney Market account. With it, Virtual Bank offers a 0.80% APY for the first year. While this may not be the best interest rate on the market, it’s higher than what you may see with brick-and-mortar financial institutions.

Savings accounts have lower minimum balance requirements

When you open a savings account or money market, you will most likely need to deposit a minimum amount of money. Each bank and credit union has requirements, but savings accounts usually have a lower minimum than most money markets. Some savings accounts don’t even require you to deposit a certain amount of money when you open an account.

For example, My Savings Direct doesn’t require a minimum deposit amount to put your money into one of its savings accounts. But MutualOne Bank requires at least $500 to be deposited for a savings account, while Citizens Access requires $5,000.

Money markets usually require a minimum deposit that can range from institution to institution, but they often tend to be higher than with a savings account. Also, to get the best rate with a money market account, you’ll usually need to have a certain amount of money in your account.

As you may remember, Capital One 360 Money Market provides a high rate of 2.00% APY. While it doesn’t require a minimum deposit when you open an account, you will not get the 2.00% APY until you have at least $10,000 in your account — anything below that will receive 0.85% APY.

When should you choose a savings account?

Savings accounts are ideal for short-term savings goals. If you have a savings goal you want to achieve in the next few years, you may want to consider opening a savings account. Because you’re limited to a few transactions per month, you may be encouraged to keep your money in savings as opposed to spending it.

Another good use for a savings account is to hold your emergency fund. If you encounter a financial emergency, you then have fast access to your cash. Since you can easily access your funds with a savings account, you can tap into them if an incident occurs.

When should you choose a money market account?

Since money market accounts tend to earn higher interest than savings accounts, they may be a good solution for achieving mid to long-term goals. For example, if you’re saving for a down payment on a home, you may see higher rates than keeping your money in a savings account or checking account.

However, it’s important to note that to receive some of the higher interest rates, you may have to meet a higher account minimum requirement. Usually, money market accounts have a higher minimums to avoid service fees and help account holders earn a higher interest rate. So, if you can meet the higher account balance requirement, you may be able to reap the benefits of an interest rate that’s higher than what traditional savings accounts offer.

Where to find a money market or savings account

Visit MagnifyMoney’s savings account marketplace to help get started on finding a money market account or a savings account. Begin by adding your ZIP code, the amount of money you want to put into your account and the length of time you want to keep your money in that particular account. You’ll be able to compare the minimum deposit amounts and APYs on different accounts to find the best option for you.

Money market and savings accounts are both solid choices for when you want to open a deposit account to put your money away. But there are some pros and cons of both accounts to take into consideration. It’s essential to do your homework on both to see which works best for your financial needs. Once you decide which account you want to open, take your time to shop around for the best rates and inquire about all fees.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Earning Interest

The Best CD Rates – May 2020

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

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The best CD rates are offered by online banks and credit unions. As of May 2020, the best CD rates offered by online banks out-yield average CD rates from brick-and-mortar institutions by as much as 0.75%. This can mean the difference of thousands of dollars in interest earnings over several years when comparing current rates.

If you’re looking for the highest yield on your savings and want the added safety of an FDIC-insured product, a high-rate CD from an online bank could be a great option.

Every week, MagnifyMoney’s elite team of financial experts compiles the best CD rates from hundreds of banks and credit unions nationwide. We’ve compared rates across the most popular CD terms – from as short as 3-months to as long as 5-years – as well as no-penalty CDs that offer extra liquidity.

Check out MagnifyMoney’s top picks for the best CD rates below.

Do you have a savings goal in mind? Tell us about it!

MagnifyMoney’s best CD rates for May 2020

To find the best CD rates, we look for the banks that consistently offer competitive CD rates month over month. This list is updated weekly and the rates are organized by 1-year rates from highest to lowest. Here are the accounts from top banks with consistently competitive CD rates:

Summary of the Best CD Rates in May 2020 Overall

Bank

1 Year APY

3 Year APY

5 Year APY

Minimum Deposit

Goldman Sachs Bank

1.60%

1.35%

1.65%

$500

Discover

1.35%

1.45%

1.50%

$2,500

Ally Bank

1.30%

1.35%

1.40%

No minimum deposit

Citizens Access

1.30%

1.35%

1.45%

$5,000

Barclays Bank

1.20%

1.20%

1.20%

No minimum deposit

Rising Bank

1.45%

1.20%

NA


$1,000

CFG Bank

1.40%

1.45%

1.55%

$500

Comenity Direct

1.35%

1.40%

1.45%

$1,500

Live Oak Bank

1.35%

1.30%

1.30%

$2,500

6 months – 6 years: Goldman Sachs Bank USA – 0.60% APY – 1.65% APY; $500 minimum deposit to open

Goldman Sachs Bank USA

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on Goldman Sachs Bank USA’s secure website

Member FDIC

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

Term

APY

Minimum Deposit Amount

6 months

0.60%

$500

9 months

0.70%

$500

12 months

1.60%

$500

18 months

1.60%

$500

24 months

1.60%

$500

3 years

1.35%

$500

4 years

1.35%

$500

5 years

1.65%

$500

6 years

1.65%

$500

3 months – 10 years: Discover Bank – 0.35% APY – 1.50% APY, $2,500 minimum deposit to open

Discover Bank

SEE DETAILS 

Discover Bank's website is secure

Member FDIC

Discover is best known for cash back credit cards. However, Discover has also quietly built a leading internet bank that offers checking accounts, savings accounts and CDs. Discover has invested in a mobile banking app and strong on-shore customer service.Although Discover does not always have the highest rate, it is very close (within basis points) across all durations. If customer service and digital tools (like apps) are important to you, Discover is an excellent consideration. Note: you can even get a CD rate with a duration as short as 3 months. However, you would be better off opening a high yield savings account if you plan on saving the money for less than a year.Keep in mind that all CD terms come with an early withdrawal penalty if you choose to withdraw money before your maturity date. If your Discover CD is less than one year, the penalty is worth three months of simple interest. If the term is between one to three years, the penalty is worth six months of simple interest. Four-year CDs have a penalty that is worth nine months of simple interest. Five year CDs have a penalty that is worth 18 months of simple interest and seven to 10-year CDs have a penalty that is worth 24 months of simple interest.

CD TermAPY
3-months0.35%
6-months0.65%
9-months0.70%
12-months1.35%
18-months1.40%
2-year1.40%
30-months1.40%
3-year1.45%
4-year1.45%
5-year1.50%
7-year1.50%
10-year1.50%
3 months – 5 years: Ally Bank – 0.50% APY – 1.40% APY; $0 minimum deposit to open (higher APY with higher deposit)

Ally Bank

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Member FDIC

Ally is one of the largest internet-only banks in the country. Ally’s former advertising campaign made it very clear: no branches = higher rates. And Ally has consistently paid some of the highest rates in the country across savings accounts, money market accounts and CDs. For savers with fewer funds, Ally is unique. There is no minimum deposit to open a CD. However, if you have more money, you’ll earn more in interest and in some case, earn a higher APY.And one of our favorite features of Ally: they often (although not always) offer preferential rates on renewal. Far too often banks give the biggest bonuses to new customers, but Ally has done a good job of rewarding its existing customers. All deposits at Ally are FDIC insured up to the legal limit.

3-months:
  • 0.50% APY (less than $5k)
  • 0.50% APY ($5k minimum deposit)
  • 0.50% APY ($25k minimum deposit)
18-months:
  • 1.35% APY (less than $5k)
  • 1.35% APY ($5k minimum deposit)
  • 1.35% APY ($25k minimum deposit)
6-months:
  • 0.75% APY (less than $5k)
  • 0.75% APY ($5k minimum deposit)
  • 0.75% APY ($25k minimum deposit)
3-year:
  • 1.35% APY (less than $5k)
  • 1.35% APY ($5k minimum deposit)
  • 1.35% APY ($25k minimum deposit)
9-months:
  • 1.00% APY (less than $5k)
  • 1.00% APY ($5k minimum deposit)
  • 1.00% APY ($25k minimum deposit)
5-year:
  • 1.40% APY (less than $5k)
  • 1.40% APY ($5k minimum deposit)
  • 1.40% APY ($25k minimum deposit)
12-months:
  • 1.30% APY (less than $5k)
  • 1.30% APY ($5k minimum deposit)
  • 1.30% APY ($25k minimum deposit)
1 year – 5 years: Citizens Access – 1.30% APY – 1.45% APY; $5000 minimum deposit to open

Citizens Access

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on Citizens Access’s secure website

Member FDIC

Citizens Access is the online division of Citizens Bank, N.A., aimed at providing more convenient access to better banking products. Both divisions are headquartered in Providence, R.I. Citizens Bank was founded in 1828 and as of September 2019, had $150 billion in assets.Citizens Access’ online CD accounts require a pretty high opening deposit of $5,000. However, all its terms earn at premium rates, making your savings more worthwhile. Citizens Access also offers an easy opening process to build a CD ladder with them. You’ll need to deposit at least $5,000 in each new CD, though.

When you fund any new Citizens Access CD within 10 days after opening, the bank’s CD Rate Pledge will apply, snagging you the highest interest rate offered by the bank for that CD term within those 10 days. Here are their rates:

CD TermAPY
12 months1.30%
18 months2.10%
2 years1.30%
3 years1.35%
4 years1.40%
5 years1.45%
1 year – 5 years: Barclays Bank – 1.20% – 1.20% APY, no minimum deposit to open

Barclays

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Member FDIC

Barclays is one of the oldest banks in the world. Although they’re based in London, they do have a U.S. presence and offer competitive rates on their CDs and savings account. Currently, they’re offering some of the highest CD rates in the market, and they have an edge over the rest of the institutions on this list: they don’t require a minimum balance to earn the APY or open an account. Deposit as little or as much as you’d like into a term of your choice and you can start earning interest as long as the account is funded within 14 days of opening the CD. Additionally, your funds are insured through the FDIC.

CD TermAPY
1-year1.20%
2-year1.20%
3-year1.20%
4-year1.20%
5-year1.20%
1 year – 36 month: Rising Bank – 1.45% APY – 1.20% APY; $1000 minimum deposit to open

Rising Bank

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on Rising Bank’s secure website

Member FDIC

This bank decided to assert itself as a top competitor in the online banking space by offering competitive rates. While most online banks have pulled back on rate offerings, Rising Bank continues to offer a top1.45% APY on its 1-year CD. However, unlike some of the top online banks like Ally Bank and Goldman Sachs, Rising Bank requires a minimum deposit of $1,000 and caps balances at $500,000 on its CDs. Aside from its rates, Rising Bank also distinguishes its CDs with the early withdrawal penalties. If you need to withdraw from the 1-year CD early, you’ll only incur a penalty that is 90 days’ worth of interest. Once this CD matures, you can withdraw the full balance to close the account. If you don’t withdraw the full balance ten days after the maturity date, Rising Bank will automatically renew your CD.

TermAPY
1 Year1.45%
18 month Rising CD1.30%
2 Year1.20%
3 Year1.20%
36 month Rising CD1.20%
2 Year Jumbo CD1.20%
1 year – 5 years: CFG Bank – 1.40% APY – 1.55% APY; $500 minimum deposit to open

CFG Bank

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on CFG Bank’s secure website

FDIC Insured

CFG Bank offers a number of attractive certificates of deposit, with term lengths ranging from 12 to 60 months. Currently, its crown jewel is its 60-month CD, with an APY of 1.55%. This CD can be opened online or in-person at a bank branch. There is a minimum deposit of $500 required to open an account and earn the APY.

CFG Bank is a privately owned and operated bank located in Baltimore, Maryland. It offers an array of personal and commercial banking products, and while CFG only has branch locations in Maryland, it offers its products online, nationwide.

CD TermAPY

12-month new money CD

1.40%

13-month no-penalty new money CD

1.35%

18-month new money CD

1.40%

33-month new money CD

1.45%

60-month new money CD

1.55%

1 year – 5 years: Comenity Direct – 1.35% APY – 1.45% APY; $1500 minimum deposit to open

Comenity Direct

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on Comenity Direct’s secure website

Member FDIC

Comenity Direct is the internet-only arm of Comenity Capital Bank – a Utah-based bank with roots dating back to 1986. Comenity Direct offers an array of certificates of deposit, with term lengths of 1-year, 2-years, 3-years, 4-years and 5-years, all featuring attractive APYs.

There is a $1,500 required minimum deposit for all CDs. Comenity Direct charges no monthly maintenance fees on its CDs, although there is a $25 fee per outgoing wire transfer, $15 fee per paper check request and a $5 fee per paper statement request. Like most CDs, there are fees associated with early withdrawal. Once your CD matures, you can choose to automatically renew it or cash out without penalty within a 10-day grace period.

CD TermAPY
1 Year CD1.35%
2 Year CD1.40%
3 Year CD1.40%
5 Year CD1.45%
6 months – 5 years: Live Oak Bank – 1.10% APY – 1.30% APY; $2,500 minimum deposit to open

Live Oak Bank

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Member FDIC

Live Oak Bank offers competitive CD rates across the board, starting with its high-yield 6-month CD. Its 1 Year CD is among the most competitive as well, with its 1.35% APY. Live Oak Bank requires a minimum CD deposit of $2,500. You’ll lost 90 days of simple interest if you make an early withdrawal from a Live Oak CD less than 24 months and 180 days of simple interest on terms longer than that.

Live Oak Bank offers a variety of financial products including personal deposit accounts, business bank accounts and loans. It was established in 2008 and is headquartered in Wilmington, N.C.

CD TermAPY

6-month CD

1.10%

1-year CD

1.35%

18-month CD

1.35%

2-year CD

1.35%

3-year CD

1.30%

4-year CD

1.30%

5-year CD

1.30%

MagnifyMoney’s best no-penalty CD rates

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

The Best No Penalty CD Rates in May 2020

Institution

APY

Minimum Deposit Amount

Goldman Sachs Bank

1.30% APY – 1.10% APY

$500

Ally Bank

1.25% APY – 1.25% APY

$25,000

Purepoint Financial

1.01% APY – 0.95% APY

$10,000

Investors eAccess

0.50% APY

$500

7 months – 13 months: Goldman Sachs Bank USA – 1.30% APY – 1.10% APY; $500 minimum deposit to open

Goldman Sachs Bank USA

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on Goldman Sachs Bank USA’s secure website

Member FDIC

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

These CDs are an excellent option if you want your money to remain liquid or if you want to invest your money into an interest-earning account for a short amount of time. One thing to note is that the 7-month no-penalty CD has a much higher rate than the regular 6-month CD (1.30% APY vs 0.60% APY). The high APY makes Goldman’s 7-month no-penalty CD a fantastic option if you want to earn interest in a short amount of time. Here is Goldman’s full list of no-penalty CD rates:

TermAPYMinimum balance to earn the APY
7-month1.30%
$500
11-month1.20%
$500
13-month1.10%
$500
11 months: Ally Bank – 1.25% APY – 1.25% APY; $0 – $25,000 minimum deposit to earn APY

Ally Bank

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Member FDIC

Unlike the other two banks that offer multiple terms, Ally Bank only offers one term on its no-penalty CD. While Ally doesn’t require a minimum deposit to open, it does reward higher balances with higher APYs. This no-penalty CD is great for low-balance individuals who want to keep their money liquid. However, if you’re okay with locking your money into a CD for 12 months, you’re better off going with Ally’s regular 12-month CD as it has a higher APY (1.30% APY vs 1.25% APY) and doesn’t have a certain balance requirement to earn that high rate.

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

TermAPYMinimum balance to earn the APY
11 months1.25%Up to $5,000
11 months1.25%$5,000
11 months1.25%$25,000
11 months – 14 months: PurePoint Financial – 1.01% APY – 0.95% APY; $10,000 minimum deposit to open

PurePoint Financial

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on PurePoint Financial’s secure website

Member FDIC

PurePoint Financial is the online division of Union Bank. Both the parent bank and this online division are backed by financial giant, Mitsubishi UFJ Financial Group (MUFG). Under the MUFG Union Bank umbrella, this institution has acquired over $130 billion in assets. As its online division, PurePoint Financial has been able to offer its customers highly competitive rates not only in CDs, but in an online savings account.

Currently, PurePoint Financial is offering an extremely competitive rate of 0.95% on its 13-month no-penalty CD. It also offers an 11-month and a 14-month no-penalty CD, but those two accounts have lower rates than its 13-month no-penalty CD. Keep in mind that you’ll need at least $10,000 to deposit into any of these CDs. If you do choose to withdraw money from this CD before the term is up, you’ll need to withdraw the full amount. You’ll also have to wait seven days after you fund the account to withdraw any of the money. Here’s a full list of PurePoint Financial’s no-penalty CDs.

TermAPYMinimum balance to earn the APY
11-month1.01%$10,000
13-month0.95%$10,000
14-month0.90%$10,000
6 months: Investors eAccess – 0.50% APY; $500 minimum deposit to open

Investors eAccess

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on Investors EAccess’s secure website

Member FDIC

Investors eAccess is the online division of Investors Bank, a large bank headquartered in New Jersey that was established in 1926. The parent bank currently has over $26 billion in assets. The online division was launched earlier this year and decided to introduce itself by offering a strong rate on its inaugural product, the eAccess Money Market account. It seems this online bank is slowly offering different deposit accounts, but one thing that sticks out is that it’s offering these new products with high rates.

Currently, Investors eAccess is offering two types of CDs: a 6-month No-Penalty CD and a 10-month regular CD. The 6-month No-Penalty CD is comes with a strong 0.50% APY. You need at least $500 to open the account and you’re free to withdraw from the principal amount after the first seven calendar days from opening the account without incurring any penalties. If you choose to withdraw the full amount (including any interest earned) before the maturity date, you won’t incur any penalties, but the full withdrawal will close the account. Regardless of how much you choose to withdraw from the account, the bank will send you the funds via an official Bank Check. The check will be made out to the account owner and mailed First Class to the address on file.

TermAPYMinimum balance to earn the APY
6-month0.50%$500

MagnifyMoney’s highest CD rates from banks and credit unions by term

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

The Highest CD Rates by term in May 2020

Time Period

Institution

APY

1 Year

Lafayette Federal Credit Union

1.61% APY

1 Year

Limelight Bank

1.30% APY

2 Year

Pen Air Federal Credit Union

1.60% APY

2 Year

First Internet Bank

1.36% APY

3 Year

United Educators Credit Union

1.76% APY

3 Year

The Federal Savings Bank

1.70% APY

4 Year

Georgia's Own Credit Union

1.65% APY

4 Year

TIAA Bank

1.55% APY

5 Year

American 1 Union

2.00% APY

5 Year

Quontic Bank

1.65% APY

Best 1-year CD rates

Best 1-year CD rate from a Credit Union: Lafayette Federal Credit Union – 1.61% APY, $500 minimum balance

1 Year Fixed CD from Lafayette Federal Credit UnionLafayette Federal Credit Union offers both variable rate and fixed rate certificates of deposit, but its crown jewel is certainly its 1-year fixed rate CD, with an APY of 1.61% APY, $500 minimum balance%. For this product, a $500 minimum deposit is required to open an account and to earn the high APY. Lafayette’s CDs will automatically renew upon maturity, unless otherwise requested by the customer.

Lafayette Federal Credit Union opens its arms to anyone who also joins the American Consumer Council or the Home Ownership Literacy Council. It offers its products online, nationwide.


SEE DETAILS Secured

on Lafayette Federal Credit Union’s secure website

NCUA Insured

Best 1-year CD rate from a National Bank: Limelight Bank– 1.30% APY, $1,000 minimum deposit

12 Month CD from Limelight BankThe online bank division of Capital Community Bank, LimeLight Bank offers a slew of CDs, ranging in term length from six months to 36 months. Its 1-year CD currently boasts a competitive rate of 1.30% APY, with a minimum deposit of $1,000. Like most CDs, there are penalties associated with early withdrawals from this account.


SEE DETAILS Secured

on Limelight Bank’s secure website

Member FDIC

Best 2-year CD rates

Best 2-year CD rate from a Credit Union: Pen Air Federal Credit Union– 1.60% APY, $500 minimum deposit

24 Month CD from Pen Air Federal Credit Union Pen Air Federal Credit Union offers a slew of certificates of deposit, with term lengths ranging from just three months to 60 months. Its 24-month CD is certainly worth highlighting, with its 1.70% APY. There is a minimum deposit of just $500 required for this account.

Membership to Pen Air Federal Credit Union is open to anyone who also joins the Friends of Navy-Marine Corps Relief Society. Although Pen Air only has physical locations in Florida and Alabama, it offers its products online, nationwide.


SEE DETAILS Secured

on Pen Air Federal Credit Union’s secure website

NCUA Insured

Best 2-year CD rate from a National Bank: First Internet Bank of America– 1.36% APY, $1,000 minimum deposit

24 Month CD from First Internet Bank First Internet Bank of America boasts a robust rate of 1.46% on its 24-month CD, making it one of the best 2-year CDs currently offered. There is a minimum deposit of just $1,000 required for this account, and there is no monthly maintenance fee.

First Internet Bank has roots dating back to 1999, and it claims to be the first FDIC-insured institution to operate entirely online.


SEE DETAILS 

Member FDIC

Best 3-year CD rates

Best 3-year CD rate from a Credit Union: United Educators Credit Union – 1.76% APY, $500 minimum deposit

36 Month FlexRate CD from United Educators Credit Union While United Educators Credit Union offers an array of CDs with varying term lengths, its 36-month FlexRate CD is where it truly shines. Currently, its 36-month CD boasts an APY of 1.76% with a minimum deposit of $500. Customers may request a rate change one time over the life of this CD.

Based in Minnesota, membership to United Educators Credit Union is open to anyone who makes a one-time donation of $5 to the United Educators Foundation.


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on United Educators Credit Union’s secure website

NCUA Insured

Best 3-year CD rate from a National Bank: The Federal Savings Bank – 1.70% APY, $10,000 minimum deposit

3 Year Promotional CD - New Money from The Federal Savings Bank The Federal Savings Bank is currently featuring promotional rates on new money for its CDs, including a 1.70% APY on new money for a 3-year CD. Its renewal rate for a 3-year CD is also generous, at 1.60% APY. There is a hefty minimum deposit of $10,000 that is worth taking into consideration, though.

The Federal Savings Bank is a veteran-owned, federally-chartered bank. While the bank only has locations in Illinois, it offers its products nationwide, online.


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on The Federal Savings Bank’s secure website

Member FDIC

Best 4-year CD rates

Best 4-year CD rate from a Credit Union: Georgia’s Own Credit Union – 1.65%
APY, $500 minimum deposit

4 Year CD from Georgia's Own Credit Union Georgia’s Own Credit Union offers certificates of deposit ranging in term length from six months to five years, but its sweet spot is its 4-year CD, which comes with a competitive APY of 1.65% on balances of $500 and up. Interest on this product is compounded quarterly.

While the credit union is based in Georgia, membership to Georgia’s Own Credit Union is open to anyone who joins Georgia’s Own Foundation or the Getting Ahead Association. Once approved, you are required to make a $5 minimum deposit to join.


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on Georgia's Own Credit Union’s secure website

NCUA Insured

Best 4-year CD rate from a National Bank: TIAA Bank– 1.55% APY, $5,000 minimum deposit

4 Year Yield Pledge CD from TIAA BankTIAA Bank offers a wide selection of CD products, ranging in term length from three months to five years. Currently, its 4-year Yield Pledge CD is doling out a generous APY of 1.55% with a minimum deposit of $5,000. There are no monthly account fees associated with this CD.

TIAA Bank is a digital-only bank offering a slew of financial products, from CDs to checking accounts. It operates as the banking component of the TIAA-CREF Trust Company.


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on TIAA Bank’s secure website

Member FDIC

Best 5-year CD rates

Best 5-year CD rate from a Credit Union: American 1 Credit Union – 2.00% APY, $500 minimum deposit

5 Year CD from American 1 Credit Union Among its arsenal of financial products, American 1 Credit Union offers an array of CDs with competitive rates. Currently, its 5-year CD is the best of its kind, with a 2.00% APY and a $500 minimum deposit.

Based in Mississippi, membership to American 1 Credit Union is open to anyone who also joins the Community 1 Cooperative, which charges a one-time, $3 fee.


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on American 1 Credit Union’s secure website

NCUA Insured

Best 5-year CD rate from a National Bank: Quontic Bank – 1.65% APY, $2,000 minimum deposit

60 Month CD from Quontic Bank Quontic Bank’s offering of financial products really shines with its 5-year CD. This CD features a strong APY of 1.65% and a low minimum deposit of $500. Interest on this CD is compounded daily and credited to your account monthly. The early withdrawal penalty is equal to two years of interest.

Quontic Bank operates mainly as a digital-only bank, with headquarters and a few locations in New York City. It offers an array of banking and mortgage products to consumers nationwide.


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on Quontic Bank’s secure website

Member FDIC

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

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

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

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

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

Questions to ask before you open a CD

1. How are CDs different from savings accounts?

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

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

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

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

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

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

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

3. What CD term length should I select?

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

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

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

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

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

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

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

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

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

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

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

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

How to find the best CD for you

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

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

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

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Best of, Earning Interest

The Best High-Yield Online Savings Accounts in May 2020

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

Written By

 

We update our lists of the best high yield, online and overall savings accounts on a weekly basis. These are variable-rate accounts, which means that the bank offering the best savings rates can change on any given-day.

The best online savings accounts offer high yields that are as much as 20 times the national interest rate for savings accounts. To top it off, they typically offer perks like:

  • No-fees
  • Low/No minimum balance requirements
  • FDIC insurance
  • Accessibility

If your bank doesn’t check off all these boxes, it may be time to open a new savings account. We’ve identified which banks consistently feature the highest rates in our reviews below.

Market update: Banks have dropped their savings rates considerably due to recent uncertainty caused by the COVID-19 outbreak. Despite interest rates declining overall, we are still seeing many of the pre-crisis top performers continuing to lead the pack in the overall best rates category.

  • 1.30% APY – Goldman Sachs Bank USA
  • 1.30% APY – Capital One
  • 1.30% APY – American Express National Bank
  • 1.30% APY – Barclays Bank
  • 1.30% APY – Synchrony Bank
  • 1.25% APY – Ally Bank
  • 1.50% APY – Vio Bank
  • 1.35% APY – Live Oak Bank
  • 1.30% APY – HSBC Direct
  • 1.30% APY – Citizens Access
  • 1.25% APY – BrioDirect
  • 1.25% APY – CIT Bank
  • 1.75% APY – Fitness Bank
  • 1.61% APY – UFB Direct
  • 1.60% APY – First Foundation Bank
  • 1.56% APY – SFGI Direct
  • 1.50% APY – Popular Direct
  • 1.45% APY – Comenity Direct
  • 1.40% APY – Rising Bank
  • 6.17% APY – Digital Federal Credit Union

Do you have a savings goal in mind? Tell us about it!

1. High Rate: Goldman Sachs Bank USA – 1.30% APY, no minimum balance (but no ATM access)

High-yield Online Savings Account from Goldman Sachs Bank USA

Our advertiser Marcus by Goldman Sachs, the consumer bank of Wall Street giant Goldman Sachs, offers a 1.30% 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 1.30% 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.

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on Goldman Sachs Bank USA’s secure website

Member FDIC

2. High Rate: Capital One – 1.30% APY, no minimum balance

360 Performance Savings from Capital OneA consistent rate leader for its deposit accounts, Capital One now offers its 360 Performance Savings. With a 1.30% 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.

SEE DETAILS 

Member FDIC

3. High Rate: American Express National Bank – 1.30% APY, no minimum balance (and no fees)

High Yield Savings Account from American Express National BankOur sponsored advertiser, American Express National Bank, offers a Personal Savings account, which earns a 1.30% variable Annual Percentage Yield (APY) as of 4/23/2020. 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.

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on American Express National Bank’s secure website

Partner Offer

Member FDIC

4. High Rate: Barclays Bank – 1.30% APY, no minimum balance

Online Savings Account from BarclaysBarclays 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 1.30% 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.

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on Barclays’s secure website

Member FDIC

5. High Rate: Synchrony Bank – 1.30% APY, no minimum balance, (and ATM access)

High Yield Savings from Synchrony BankSynchrony Bank pays a healthy 1.30% 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.

SEE DETAILS 

Member FDIC

6. Favorite Online Package: Ally Bank – 1.25% APY, no minimum balance and you can get a free checking account

Online Savings Account from Ally BankAlly 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 1.25%. 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.

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on Ally Bank’s secure website

Member FDIC

7. High Rate: Vio Bank – 1.50% APY, $100 to open

High Yield Online Savings Account from Vio BankVio 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 1.50% 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.

SEE DETAILS Secured

on Vio Bank’s secure website

Member FDIC

8. High Rate: Live Oak Bank – 1.35% APY, no minimum to open, no minimum balance to earn APY

High Yield Online Savings from Live Oak BankFounded 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.

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on Live Oak Bank’s secure website

Member FDIC

9. High Rate: HSBC Direct – 1.30% APY, $1 minimum to open, no minimum balance to earn APY

HSBC Direct Savings from HSBC DirectHSBC 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 1.30% 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.

SEE DETAILS Secured

on HSBC Direct’s secure website

Member FDIC

10. High Rate: Citizens Access – 1.30% APY, $5,000 minimum balance amount

Online Savings Account from Citizens AccessCitizens 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 1.30% 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.

SEE DETAILS Secured

on Citizens Access’s secure website

Member FDIC

11. High Rate: BrioDirect – 1.25% APY, $25 minimum balance amount

High-Yield Savings from BrioDirectBrioDirect is powered by Sterling National Bank, which is a large bank in New York with over $29 billion in assets. This online brand recently launched with a high 1.25% APY. You only need $25 to open the account and you’ll need to maintain at least this amount on a daily basis to earn the APY. This account doesn’t have a monthly service fee and can be funded via ACH, wire transfer, or check.

There are limitations to the amount of money you can transfer in and out via ACH. BrioDirect limits incoming ACH transfers to $500,000. The bank limits outgoing ACH transfers to $25,000 per transaction and a total of $125,000 per month. You are able to link as many external bank accounts as you’d like to this account. You can also initiate ACH deposits and withdrawals from other banks.

You can manage this account online or from Sterling National Bank’s mobile app.

SEE DETAILS Secured

on BrioDirect’s secure website

FDIC Insured

12. High Rate: CIT Bank – 1.25% APY, $100 to open

Savings Builder from CIT BankCIT 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 1.25% 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:

  1. Make a monthly deposit of $100 or more into this account
  2. 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.

SEE DETAILS Secured

on CIT Bank’s secure website

Member FDIC

13. Unique Bank + Highest Overall Rate: Fitness Bank – 1.75% APY, $100 minimum to open

Fitness Savings (12,500+ Steps) from FitnessBankFitness 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 1.75% 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 1.55% (which is still a great APY). You’ll earn 1.35% 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 1.15%. 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 1.75% 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.

SEE DETAILS Secured

on FitnessBank’s secure website

Member FDIC

14. High Rate: UFB Direct – 1.61% APY, $10,000 minimum balance to earn APY

UFB High Yield Savings from UFB DirectUFB Direct is a division of Axos Bank, a bank with over $9 billion in assets. This brand has been known to offer high rates not only on its savings accounts, but on its money market accounts, as well. Currently, you can earn a 1.61% APY on its High Yield Savings Account. You will need to keep a balance of $10,000 in order to earn the high rate. The account comes with a free ATM card, but you may want to contact the bank to find out which ATMs you can use without incurring a fee. The bank’s website doesn’t specify. Its disclosure does state that you will only be able to withdraw $510 on a daily basis. This account doesn’t come with any monthly fees. UFB Direct does have a mobile app that allows you to deposit checks.

SEE DETAILS Secured

on UFB Direct’s secure website

Member FDIC

15. High Rate: First Foundation Bank – 1.60% APY, $1,000 to open

Online Savings Account - New Money Only from First Foundation BankFirst 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 1.60%. 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 1.60%. 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 $20,000 and the monthly limit is $100,000. 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.

SEE DETAILS Secured

on First Foundation Bank’s secure website

Member FDIC

16. High Rate: SFGI Direct – 1.56% APY, $500 to open

SFGI Direct Savings Account from SFGI DirectSFGI 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 1.56% 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.

SEE DETAILS 

Member FDIC

17. High Rate: Popular Direct – 1.50% APY, $5,000 minimum to open

Popular Direct Ultimate Savings Account from Popular DirectPopular Direct, the online bank of Banco Popular North America, is currently offering an outstanding APY of 1.50% 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.

SEE DETAILS Secured

on Popular Direct’s secure website

Member FDIC

18. High Rate: Comenity Direct – 1.45% APY, $100 minimum to open

High-Yield Savings Account from Comenity DirectComenity Direct is the online division of Comenity Capital Bank. Comenity Capital Bank has been around since 1989 and has acquired over $9 billion in assets. Comenity Capital Bank launched this online division in the middle of April 2019 and came into the savings space with a high-yield savings account earning 1.45% APY. While you need $100 to open the account, you can earn the high rate with a balance as small as $1 and as big as $10 million.

Comenity Direct’s High-Yield Savings Account doesn’t place limits on ACH transfers. This account doesn’t have any monthly fees and the bank doesn’t charge a fee if you attempt to withdraw from this account more than six times. If you do try to withdraw from the account a seventh time within the same statement cycle, Comenity Bank reserves the right to either deny or reject the withdrawal and may even close the account.

While this is mainly a fee-free savings account, there are a few fees that may be charged if you request paper statements, a paper check withdrawal, and an outgoing wire transfer. Comenity Direct does have a mobile banking app for your convenience. This is one of the best high-yield savings accounts currently being offered, but keep in mind that this online division is brand new. When it comes to accounts with variable rates, we prefer to stick with more established banks with consistently competitive rates.

SEE DETAILS Secured

on Comenity Direct’s secure website

Member FDIC

19. High Rate: Rising Bank – 1.40% APY, $1,000 minimum to open

High Yield Savings Account from Rising BankRising Bank is a divison of Midwest BankCentre and was recently launched in February 2019. Although this internet bank is pretty much brand new, its parent bank has been around since 1906 and has acquired over $1 billion in assets. Rising Bank launched with a strong APY of 1.40%. You’ll need to deposit a minimum of $1,000 in order to open the account and you’ll need to maintain or grow this balance on daily basis in order to continue earning the high rate. This account does have a maximum balance of $500,000. A few other items to be aware of is that interest will be credited to this account every month and if you decide to close the account before the interest is credit to the account, you will not receive the accrued interest. Rising Bank has a mobile app where you can manage your account conveniently.

SEE DETAILS Secured

on Rising Bank’s secure website

Member FDIC

20. For Small Balance Savers: Digital Federal Credit Union – 6.17% APY up to $1k

Primary Savings from Digital Federal Credit Union (DCU)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.

SEE DETAILS 

NCUA Insured

MagnifyMoney’s Best Savings Accounts for May 2020

To recap, here are our top picks of the Best Savings Accounts for May 2020.

The Best Savings Accounts in May 2020 Overall

Institution

APY

Bank Review

Goldman Sachs Bank USA High Yield Online Savings

1.30% APY

Goldman Sachs Bank USA Review

Capital One 360 Performance Savings

1.30% APY

Capital One 360 Review

American Express National Bank Personal Savings


1.30% APY

American Express Review

Barclays Bank Online Savings Account

1.30% APY

Barclays Bank Review

Synchrony Bank High-Yield Savings Account

1.30% APY

Synchrony Bank Review

Ally Bank Online Savings Account

1.25% APY

Ally Bank Review

To find the best savings accounts, we look for the banks that consistently offer competitive savings rates. This list is updated weekly to stay on top of the best savings account choices for you.

The Best Online Savings Accounts in May 2020

Institution

APY

Bank Review

Vio Bank High Yield Online Savings Account

1.50% APY




Vio Bank Review

Live Oak Bank Savings Account

1.35% APY

Live Oak Bank Review

HSBC Direct Savings

1.30% APY

HSBC Direct Review

Citizens Access Online Savings Account

1.30% APY

Citizens Access Review

BrioDirect High-Yield Savings Account

1.25% APY

BrioDirect Review

CIT Bank Savings Builder

1.25% APY

CIT Bank Review

Nowadays, the best savings accounts are often found online. New online savings accounts from online banks or even established banks looking to get in on the high-yield action blow traditional savings account rates out of the water. This list is updated weekly to reflect the latest and greatest online savings accounts with consistency over the past two years.

The Best High-Yield Savings Accounts and Rates in May 2020

Institution

APY

Bank Review

Fitness Bank Savings

1.75% APY

Fitness Bank Review

UFB Direct High Yield Savings Account

1.61% APY

UFB Direct Review

First Foundation Bank Online Savings Account

1.60% APY

First Foundation Bank Review

SFGI Direct Savings Account

1.56% APY

SFGI Direct Review

Popular Direct Ultimate Savings Account

1.50% APY

Popular Direct Review

Comenity Direct High Yield Savings Account

1.45% APY

Comenity Direct Review

Rising Bank High Yield Savings

1.40% APY

Rising Bank Review

In today’s fluctuating-rate climate, the best high-yield savings accounts can change from day to day. We stay on top of them for you and list the highest earning savings accounts from this month below.

Why trust us?

At MagnifyMoney, it is our mission to inform our readers about the best financial opportunities out there. Our insights have been cited by top financial publications including Marketwatch, CNBC and the Wall Street Journal.

Our dedicated team of financial experts spends dozens of hours grading online savings accounts according to their interest rates, fee schedules, extra features, minimum balance requirements and accessibility, adjusting our rankings as banks and their offerings change on a weekly basis.

We distilled our picks from a list that included hundreds of banks, credit unions and online institutions nationwide.

Our methodology for picking the best savings accounts

To find the best online savings accounts, MagnifyMoney looks at over 6,000 financial institutions each week, from small community banks and credit unions to traditional brick-and-mortar banks to new online banks.

  1. Savings account rates: We heavily weighted the APYs offered by each bank in terms of both magnitude and consistency. Higher savings rates were prioritized over lower rates. Due to the variable rates on savings accounts, we also gave additional consideration to banks that were known to maintain competitive rates over longer periods of time.
  2. Minimum deposit and balance requirements: To ensure accessibility to all customers, we focused on banks that welcome deposits of all sizes, where the ideal banks in this category have minimum balance and deposit requirements of $0.
  3. Bank account fees: Unnecessary fees can eat into your long-term savings in a major way. Banks that offered low or no fees were given priority in this category over banks that are known to charge account maintenance fees, service charges and other surcharges.
  4. Customer service: We considered overall customer satisfaction and bank reputation when weighing each bank performance in this category. While each customer’s experience varies, we looked at relative feedback each bank received at the national level based on data sourced from consumer advocates like the Consumer Financial Protection Bureau (CFPB) and the Better Business Bureau. Banks that failed to meet minimum standards of performance were excluded.

What should I know about savings accounts?

It’s easy to take your savings account for granted, setting up automatic deposits and forgetting about it. But there’s a lot more to savings accounts that you should know.

For one, you can find consistently more competitive savings account rates at online banks than with your typical big bank. Online banks are also more fee-friendly — although there are still some legal limitations you should be aware of to avoid extra fees.

Read on to find out more about how savings accounts work, how many savings accounts you should have and more.

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

When shopping for the best savings account, your first consideration should be an account’s interest rate. If you’re going to let your money sit somewhere, you want to make it a worthwhile investment. Second, check for fees — there’s no use earning a lot in savings if that’s just going to be taken away by pesky fees. Finally, consider broadening your horizons so you can weigh all your options.

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 a 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.
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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

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

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.

Yield 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.

What are the best banks for savings accounts?

Here’s a summary of our top picks:

  • 1.30% APY – Goldman Sachs Bank USA
  • 1.30% APY – American Express National Bank
  • 1.30% APY – Capital One
  • 1.30% APY – Barclays Bank
  • 1.25% APY – Ally Bank
  • 1.30% APY – Synchrony Bank
  • 1.50% APY – Vio Bank
  • 1.35% APY – Live Oak Bank
  • 1.25% APY – BrioDirect
  • 1.25% APY – CIT Bank
  • 1.30% APY – Citizens Access
  • 1.45% APY – CIBC Bank USA
  • 1.75% APY – Fitness Bank
  • 1.60% APY – First Foundation Bank
  • 1.56% APY – SFGI Direct
  • 1.55% APY – Prime Alliance Bank
  • 1.30% APY – HSBC Direct
  • 1.45% APY – Comenity Direct
  • 1.50% APY – Popular Direct
  • 6.17% APY – Digital Federal Credit Union

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.

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.

April 2020 savings index

As the coronavirus (COVID-19) pandemic continues to place financial strains on many households, we surveyed more than 1,100 American consumers about their savings habits in April. Here’s what we found:

  • 34% of Americans added money to savings in April. That’s the second-lowest number we’ve seen in the seven-month history of the savings index, but still 3 percentage points higher than last month.
  • 1 in 5 consumers pulled money from their savings account in April, which is the highest number we’ve seen in the seven-month history of the savings index.

  • Top 6 things consumers are saving for: general savings (34%), emergencies (33%), vacation (20%), retirement (18%), new car (16%) and a new house/home repair (tied at 12%).
  • 38% of millennials saved money in April, which is more than any other age group. That’s compared with just 30% of baby boomers who upped their savings.

“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.”

Survey Methodology

MagnifyMoney commissioned Qualtrics to conduct an online survey of 1,184 Americans, with the sample base proportioned to represent the overall population. The survey was fielded April 14-16, 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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