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Strategies to Save

Understanding the Various Types of Deposit Accounts

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

types of deposit accounts
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There’s a lot to consider when deciding where to put your money. Interest rates, account restrictions, fees, withdrawal penalties, minimum deposit requirements — all these factors can make it tricky to pick a deposit account that best suits your needs. Still, deposit accounts carry less risk than most other investment vehicles and play a role in a balanced financial portfolio, so it’s important to understand how they work and how to pick a good one.

What is a deposit account?

A deposit account is an account at a bank or credit union that allows you to safely deposit and withdraw your money. The most common deposit accounts are savings and checking. Deposit accounts fall into two major categories: demand deposits and time deposits. With demand deposit accounts, you can withdraw money at any time without gaining permission from the bank or credit union, up to the full amount of your savings.

Among the demand deposit accounts, you’ll commonly find checking, savings, and money market accounts. Deposits in savings and money market accounts generally earn more interest than those in checking.

Time deposit accounts include certificates of deposit (CDs) and IRA CDs. These are interest-earning accounts that commonly offer better rates than regular savings accounts, but you must keep your money in the account for a set time or pay early-withdrawal penalties. The type of deposit account that works best for you depends on a number of factors, including how you want to access the money and how often.

Security for Deposit Accounts

When deposited into an insured financial institution, your money is protected up to $250,000 per account by the Federal Deposit Insurance Corporation (FDIC), or up to $250,000 per credit union account by the National Credit Union Administration (NCUA). You can find out if the bank you’re considering is insured by the FDIC here.

Types of deposit accounts

Savings accounts

A savings account at a bank or credit union offers you interest on the sum you deposit. Interest may be compounded daily, weekly, monthly, or annually. Wells Fargo Bank reports that the benefits of savings accounts can vary widely based on requirements for a minimum opening deposit, monthly service fees, interest rates, and how the interest is calculated.

Savings accounts don’t offer the convenience of using cash, a credit card, or checks for purchases, but you may be able to withdraw cash at ATMs. It’s important to note that the federal government clearly wants you to use this account for savings: Federal Reserve Board Regulation D limits you to six transactions per month on “certain transfers and withdrawals” from a savings or money market account. If you exceed your transaction limit, the bank may charge you a fee, close your account or convert it to a checking account, so check with your bank about requirements and penalties.

High Yield Savings Account from American Express National Bank

High Yield Savings Account from American Express National Bank

APY

1.90%

Minimum Balance to Earn APY

$1

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on American Express National Bank’s secure website

Member FDIC

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CDs

A certificate of deposit (CD) offers a way to save money at interest rates that are usually higher than those extended to savings accounts. But this “time deposit” comes at a price: You cannot withdraw money before the CD matures without incurring a penalty.

Penalty rates vary across the industry and by CD term length, but penalties generally amount to losing some or all of the interest you earned on your investment at the point you withdraw. The interest rates are fixed over the term of the CD, which can be a few weeks, months or several years. Caution: The CD may automatically renew upon the maturity of the original deposit, so check with your bank or credit union for details.

Deposits can be insured by participating institutions up to $250,000 via FDIC (for banks) or NCUA (credit unions). Larger principals and longer terms may fetch the more competitive rates, but please, be sure you can go without access to your money for the duration of the CD term, lest the penalties you incur chew up your earnings and defeat the purpose of putting money in a CD in the first place.

12 Month Online CD - Limited Availability from BBVA

12 Month Online CD - Limited Availability from BBVA

APY

2.50%

Minimum Balance to Earn APY

$500

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on BBVA’s secure website

Member FDIC

Money market accounts

A money market account is a high-yield deposit account with an interest rate pegged to rates paid in money markets to banking institutions. Rates on these deposit accounts may or may not be higher than those offered on savings accounts, and as with savings accounts, the rates may fluctuate.

It varies by account, but you may be able to access your funds with an ATM card or checks. Money market accounts are subject to Reg D, just like savings accounts, so you will want to check with your bank about any transaction limits and potential penalties. Minimum deposit requirements for money market accounts may be higher than such requirements for savings accounts, though that’s not always the case.

Checking accounts

A checking account through a bank or credit union allows you to easily use your money through a paper check, ACH debit (automatic clearing house, which is an electronic transfer of funds), debit card, or cash by way of a withdrawal at a bank or ATM. You may even find a checking account offering a relatively small amount of annual interest, with some accounts offering upward of 1.50% APY.

Checking accounts may have a variety of fees, which can include monthly maintenance charges, although they may be waived if you maintain a minimum balance or set up a recurring direct deposit. You might be charged for money orders or cashier’s checks, and checking accounts may also limit the amount you can withdraw in a given day or per ATM visit. Writing checks or swiping your debit card for amounts you don’t have can result in costly penalties like overdraft fees, insufficient-funds fees, or returned-check fees.

IRA CDs

IRA CDs allow you to put money away for long-term savings in a personal retirement account without exposure to common risks associated with more volatile stocks and bonds. You can open an IRA CD at a brokerage or with a bank for investment within a traditional or Roth IRA.

IRA CDs share most characteristics with regular CDs, though IRA CD deposits are subject to annual IRA contribution limits. IRA CDs may renew automatically like traditional CDs, so it’s important to keep track of your CD maturity dates so you can make educated investment decisions when the CD term ends. You may also decide to create a system of CD ladders inside your IRA as a way of moving money from matured, short-term CDs into more profitable IRA CDs with longer terms.

But again, beware of early-withdrawal penalties. Not only are there penalties for withdrawing from the CD before it matures, but if you remove the funds from your IRA entirely, there is an IRS tax penalty of 10 percent on any distribution you take before you reach 59½ years of age. The IRS may waive penalties for funds applied to a first-time home purchase.

How deposit account rates work

You’re not just putting money into a deposit account to keep the funds safe — you want to be rewarded for letting the bank hold your money. Banks and credit unions use your money from deposit accounts to extend loans to other customers. The longer you leave your money and earned interest in the bank, the greater the amount of interest the account will earn in the following period. This is called “compound interest.”

Compound interest

The interest that banks and credit unions pay on deposit accounts is compounded based on the total balance. Depending on the bank and the account, interest compounds on a quarterly, monthly, weekly or daily basis. The more often interest compounds, the faster your balance grows. When looking over prospective deposit accounts, compare the annual percentage yields (APY). The APY advertised by your bank or credit union tells you the amount of interest you’ll earn in one year — the APY factors in the interest rate on the account as well as how often it compounds, so comparing APYs is the best way to compare the earning potential of different accounts.

How to decide on the right deposit account

Chances are excellent that you already have a checking and savings account. So why would you want to open another one or change banks? Compared with the interest you pay out on borrowed money, the APY you’ll commonly find with traditional savings accounts won’t excite you. If you’re looking to make the most of your conservative investments or want to earn as much interest as possible while maintaining regular access to your savings, it may be time to consider a new deposit account.

When to open a high-yield savings account

You may want to look into moving your savings into a high-yield savings account if you can get a better rate than what you’re earning with your current account. When considering a new savings account, pay attention to the following features:

  • Annual percentage yield (APY)
  • Minimum deposit to open
  • Minimum balance requirement
  • Monthly maintenance fees
  • Monthly transfer and withdrawal limits
  • Excess transfer and withdrawal fees
  • FDIC or NCUA insurance
  • ATM access

When to open a CD

CDs are a good option if you don’t need access to your money in the short term. But beware of severe penalties for early withdrawals, along with renewal and automatic renewal policies. Once your CD matures, your funds may be automatically reinvested in a new CD of the same term and at the current rate your bank offers on that term. That’s not good if it’s not the best rate available or you need your money soon.

Consider these things when looking at CDs:

  • Annual percentage yield (APY)
  • Minimum deposit to open
  • Term — in particular, how long can you go without having access to this cash?
  • Early-withdrawal penalties
  • Investment strategy — are you going to use this CD as part of a laddering strategy?
  • FDIC or NCUA insurance

When to open a money market account

Money market accounts have many of the same benefits (and restrictions) as high-yield savings accounts. Generally, money market accounts require higher minimum deposits to open than savings accounts, and in exchange for that higher deposit, you may be able to secure a higher APY. If you have a large sum you wish to keep as a liquid asset, a money market account may be your best option. Here are some things to look at when comparing these products:

  • Annual percentage yield (APY)
  • Minimum balance requirements
  • Monthly maintenance fees
  • Monthly transfer and withdrawal limits
  • Excess-transfer and withdrawal fees
  • ATM access
  • Check-writing abilities
  • FDIC or NCUA insurance

How to invest beyond deposit accounts

On their own, low-yield, low-risk deposit accounts may be too conservative in building a well-rounded portfolio. A conversation with an independent financial adviser can help you understand how best to get into the market with a diversified portfolio, given your specific goals and current finances.

If you’re holding too much in cash, you should first create a basic budget of monthly expenses. Experts recommend you keep three to six months’ worth of living expenses in a liquid account, like a savings or money market account. Once you’ve saved enough for your emergency fund, you can decide how to invest based on your risk tolerance.

Should you put a specific percentage into deposit accounts and into the stock market? It really depends on your specific needs and your comfort with risk, which is why it’s helpful to talk to a professional planner.

You may want to consider opening financial planning brokerage accounts that can balance and focus all of your investment assets, including cash, CDs, stocks, bonds,g and mutual funds. Whether you’re making your own plans, working with a financial adviser or using a robo-adviser, there are plenty of options for managing and researching investments.

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.

Gabby Hyman
Gabby Hyman |

Gabby Hyman is a writer at MagnifyMoney. You can email Gabby here

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Strategies to Save

Review: The Aspiration Account

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

The 2.00% APY has one of the highest rates in the country. If you move both your checking account and savings account into an Aspiration Account, you would be able to earn a high interest rate on your money while avoiding the risk of overdraft and enjoying the convenience of only having one account.

Aspiration is a fairly new financial services company that aims to be “the investment firm for the middle class.” In this video (that could pass for a parody if you didn’t realize they were serious), the company proclaims that it is possible to be a “capitalist with a conscience.” Lofty goals are behind the company and the products they have designed. The CEO (Andrei Cherny) was a former Clinton White House aide, and with Aspiration he is trying to take action and create a new type of financial services firm that lives up to his ideals.

All products offered by Aspiration (which includes two investment funds and a cash management account) have the same pricing model. You decide how much to pay. Yes, the fee is set entirely by you, the customer. You can set it to $0 or you can set it to any amount below $10. You can change the fee whenever you want. They provide a service and you decide what it is worth.

Aspiration is making a big bet.

With traditional banking, people are nickel and dimed every month. Make an out of network ATM withdrawal, and you could end up spending $10 in fees. Put your money into a savings account, and earn only 0.01%. By using Aspiration, you could be much better off financially than banking with your traditional bank. And you can do your own calculation and decide how much of that savings you share with Aspiration. They are hoping that you will share enough for the business to continue.

Application Process for the Aspiration Account

Opening an account used to be a bit challenging as you needed to be invited. However, Aspiration has made it as simple as ever to open an account. Simply click on the “Get Started” button on their website and enter your email address.

 

At that point, you should be directed to a page that allows you to open your account online and apply for the account.

 

Create your password, check the box to let Aspiration know you’ve read the Terms and Conditions, and click “Let’s Go!”. Since this is an online account, there will be extensive KYC (know-your-customer) and compliance questions. I was required to provide:

  • Answers to identity verification questions. These are questions generated by a credit bureau. So, you will be asked to provide your social security number, but they ensure that they won’t “run the kind of credit check that will ding your score”. You might also be asked to answer questions about your mortgage payments, car loans, and other credit bureau items to identify yourself.
  • A link to an existing bank account. This is used to provide the initial funds in the account. I put $10 into the account for a test drive. (By doing this, Aspiration also reduces its risk, because you will have gone through the compliance checks of your existing bank).

Once you finish the account opening process, it may take a few days for the account to be open and for you to receive your debit card in the mail. Aspiration has partnered with Coastal Community Bank in a way that is similar to how Simple operated. (Simple, for those who remember, was not a bank. It created the front-end user interface, but partnered with an FDIC-regulated bank).

Aspiration Mobile App

In 2016, Aspiration joined the rest of the financial industry with the launch of their mobile app. Their app allows you to view your Aspiration Account balance and transaction history, remote deposit checks using your phone’s camera, schedule transfers between the Aspiration Account and other bank accounts, pay bills, and track the impact of your spending habits. The mobile app also allows you to use fingerprint authentication to secure the data.
There are two features that stand out:

  1. Their Payments feature
  2. Their Aspiration Impact Measurement (AIM) feature

Payments

Payments is Aspiration’s bill pay feature. Not only does this feature allow you to pay your bills, but it also allows you to pay your friends. However, unlike other bill pay and money transfer features (like Zelle), Aspiration’s Payments feature sends payees a paper check with your name, address, and optional memo if you choose to include one. This feature is available at no charge to the account holder.

Since this feature is sending a paper check, you can expect the payee to receive the check within 5-7 business days from the send date. Fortunately, Aspiration doesn’t limit the number of payments that can be scheduled and they don’t limit the amount of money you can send.

Aspiration Impact Measurement (AIM)

AIM is a pretty unique feature as it allows you to see the impact you’re making on the planet and people based on your spending habits. This feature will provide you with a score that is determined by the types of businesses you frequent. The score is calculated by how the businesses treat their employees, customers, community, and environment. So, businesses are given a score and you’re given a score based on where you do your shopping.

Aspiration shares that they created AIM “so that we can all think about how our everyday spending can make the world a better place.” This may sound very “kumbaya”, but there’s no denying that they’ve created an innovative feature.

What We Like

  • Unlimited, global ATM fee reimbursement: With this account, you can use any ATM in the world and it won’t cost you a dime. Not only won’t Aspiration charge you a fee, but you will be reimbursed any fee charged by the other bank whether they are located in the U.S. or in another country.
  • Zero overdraft and stop payment fees: This is a huge perk as these are some of the “gotcha” fees that you’ll encounter at big banks.
  • Other fees are also fairly lower than big banks: Outgoing wire transfers and receiving an incoming wire transfer will only cost you 82 cents.
  • One of the best interest rates in the market: At a traditional bricks-and mortar bank, you would receive no interest on your checking account, and you would earn only 0.01% on your savings account. With this account, you earn 2.00% on your entire balance. The best online checking account in the market is currently paying 2.02%, but you need to maintain a balance to earn this APY.
  • You no longer need to have a separate savings account and checking account. With that, you no longer need to worry about overdrafts. At a traditional bank, you could end up paying $10 just to have money automatically transferred from your savings account to your checking account if you make a mistake. Because you can keep all of your money in one account, you will not need to worry about overdraft transfers.
  • All deposits are FDIC-insured, up to $250,000 per depositor.

What We Find Lacking

  • Bill pay functionality. While Aspiration does mention that they will be making updates and improvements to their Payments feature, they don’t seem to mention going away from the paper check method. While sending paper checks may be a good solution for a feature that once didn’t exist at Aspiration, it’s still not as efficient as most online bill pay features that other banks offer.

Who Could Benefit From the Aspiration Account Now?

The perfect profile for an Aspiration Account customer today would be:

  • You travel a lot, and frequently need to use ATMs that are outside of your bank’s network
  • You have a lot of cash that you keep in your account and would like to earn interest on that money
  • You are about the impact you make on people and the environment.

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on Aspiration’s secure website

Alternatives if This Account is Not Right For You

This account is going to get better over time. It won’t come as a surprise if this account starts to become much more competitive.

Depending upon what feature is most important to you, there are excellent alternatives:

  • If you want the highest interest rate, you can earn up to 2.30% with an online savings account with a moderate deposit amount requirement. You can find the best savings account here.
  • If you want to avoid ATM fees globally, but need better bill pay capabilities, you should open a Charles Schwab checking account. You can find that account, and others, on our checking account page.

This Looks Great and Will Get Better. But is it Sustainable?

One of the biggest worries we have at MagnifyMoney is the following: when something looks too good to be true, it usually doesn’t last long. The offer can last for a few years, but eventually market forces will catch up with it.

Providing unlimited reimbursement of ATM fees globally is expensive. Ally originally offered the same perk and then capped that benefit at $10 per month ($120 per year), because it was impossible for them to make money on the checking accounts otherwise. Aspiration does not have a magic formula, and eventually the business will need to make money somewhere.

Often, banks do not make money on checking accounts. Instead, these accounts serve as the foundation account and the bank cross-sells other products. Perhaps this is Aspiration’s plan.

Regardless, the product is very consumer friendly and potentially lucrative. According to CrunchBase, the business has raised over $67 million. Clearly, the business will need to raise more capital as it scales, especially given the low level of customer profitability expected. There is certainly limited risk to taking advantage of the great offer available now. At MagnifyMoney, we just hope that they find a way to make money sustainably. As Ally customers know all too well, it can be frustrating to switch accounts based upon a strong feature (unlimited ATM reimbursement), only to have that benefit taken away when it is deemed too expensive.

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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.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at [email protected]

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Reviews, Strategies to Save

American Express® Personal Savings Account Review: A Solid Choice for Online Banking

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.

American Express Personal Savings Account

This account is a great option for anyone who wants the flexibility of earning a high interest rate without the withdrawal restrictions that come with a CD.

APY (%)

1.90% Variable

Minimum Deposit Amount to Open Account

$0

Minimum Balance to Earn APY

$1

Permitted Monthly Withdrawals

6

Annual Fee

$0

FDIC Insured?

Yes

Mobile App?

No

Transfer Time

Deposits will be available within five business days.
Transfers from savings to a checking account
take one to three business days.

In an American Express® Personal Savings account, your money earns 1.90% variable APY. It’s currently one of the best rates you can earn from an online savings account. The account does not have a monthly fee and they don’t require a minimum deposit, which makes it an affordable account to open. You will have to fund your account within 60 days of applying, and the FDIC insures your deposits up to full legal limit.

How the American Express Personal Savings account works

The American Express savings account compounds daily at a variable 1.90% APY, and interest earned is credited to your account on your monthly cycle date. The rate is variable, so American Express can raise or lower the interest rate at any time without notice to you before or after the savings account is opened.

Account holders must fund the account within 60 days, which you can do by setting up a bank transfer or direct deposit to the savings account, as well as by sending a check.

What we like about the American Express Personal Savings account

  • High interest rate The 1.90% variable APY is better than what you would earn putting your money in the accounts most brick-and-mortar banks offer. While there are higher rates to be had, American Express has a good offer.
  • Automatic savings It’s easy to make saving automatic when you have an online savings account. With the American Express Personal Savings account, you can easily set up a recurring deposit to pull funds from an external savings or checking account. To make it even easier to resist touching your savings, you can even have a portion of your paycheck directly deposited to the account.
  • Discourages spending With your money in an online account like the American Express Personal Savings account, you can only get your cash after making a transfer to an external checking account to which you have debit card access. The inconvenience makes it that much more difficult to spend your savings.

What we don’t like about the American Express Personal Savings account

  • No ATM card Not having card access is great when you need to prevent yourself from spending your savings, but the hassle of setting up and making an ACH transfer from your online American Express Personal Savings account can be problematic in a pinch. (American Express says transfers will take one to three business days for funds to become available in your checking account.) If you’re worried about this, you can instead turn to an online bank like Synchrony Bank that makes it easier to access your savings by issuing an ATM card tied to your high yield savings account.
  • Variable interest rate The annual yield rate American Express is offering on this savings account is high at 1.90%, but the bank can change that rate at any time for any reason, as the rate is variable. If you’re looking for a more predictable rate of return, consider a certificate of deposit.
  • Limited withdrawals Because this is a high yield savings account, banks are limited by Federal Reserve Board Regulation D to a maximum of six withdrawals and/or transfers from your online savings account per statement cycle without penalty. With that in mind, before you decide how much you’ll put away each month, make sure it’s not more than you can afford to, so you aren’t repeatedly reaching into your savings.

How the American Express Personal Savings account compares

As indicated earlier, the American Express Personal Savings account offer is strong, but how does it compare to other savings accounts?

Institution
APY
Minimum Account Balance to Earn APY
American Express National Bank
High Yield Savings Account from American Express National Bank

1.90%

$1

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Synchrony Bank – 2.15% APY and no minimum balance

Institution
APY
Minimum Account Balance to Earn APY
Synchrony Bank
High Yield Savings from Synchrony Bank

2.15%

$0

LEARN MORE Secured

on Synchrony Bank’s secure website

Member FDIC

Advertiser Disclosure.

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With $0 to open the account, you can earn an annual yield of 2.15% on savings account balances through Synchrony Bank and there are no monthly fees.

Savings accounts through Synchrony interest is compounded daily and is credited to the account monthly. An ATM card is offered through this account and you can still easily transfer or deposit funds through an ACH transaction or online.

Goldman Sachs Bank USA – 2.15% APY* and $0 minimum to open

Institution
APY
Minimum Account Balance to Earn APY
Goldman Sachs Bank USA
High-yield Online Savings Account from Goldman Sachs Bank USA

2.15%

$0

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on Goldman Sachs Bank USA’s secure website

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Goldman Sachs Bank USA currently offers an APY of 2.15% on their Marcus Online Savings Account. You don’t need to deposit a minimum amount to open the account, but you will need to have a minimum balance amount of $1* to earn the APY. Interest on the Marcus Savings Account starts accruing the business day you deposit funds into the account. Goldman Sachs Bank USA doesn’t apply any service charges to their savings accounts.

Barclays Bank – 2.10% APY and no minimum balance

Institution
APY
Minimum Account Balance to Earn APY
Barclays
Online Savings Account from Barclays

2.10%

$0

LEARN MORE Secured

on Barclays’s secure website

Member FDIC

Advertiser Disclosure.

We'll receive a referral fee if you click here. This does not impact our rankings or recommendations

With $0 to open the account, you can earn an annual yield of 2.10% on savings account balances through Barclays. While there are no monthly fees, an account that has a balance that is less than $1 for 180 days or more may be closed by Barclays. Savings accounts through Barlcays will start accruing interest the day your initial deposit posts to your account, and interest is compounded daily. While an ATM card is not offered through this account, you can easily transfer or deposit funds through an ACH transaction or online through your account.

American Express CD Rates

These CDs are great for those who don’t have a lot of money to deposit, but the rates are slightly lower than the best CD rates available.

Term

APY

6 months

0.40%

12 months

0.55%

18 months

2.05%

24 months

2.15%

36 months

2.25%

48 months

2.30%

60 months

2.35%

CDs from American Express do not come with a minimum deposit amount. You’re free to deposit as little or as much as you want to begin earning interest on any of its CD terms. This is great for individuals who don’t have a lot of money to deposit in CDs offered by other online banks. The downside is that you won’t be receiving as high of an APY as you could at other online banks. While the rates aren’t terribly low, they just don’t compare to most of the best CD rates currently available.

How CDs offered by American Express work

American Express offers terms spanning from 6 months to 5 years. Interested is credited on a monthly basis and compounds until it matures. You can choose to have the interest transferred out of the CD and into the American Express Personal Savings Account on a monthy basis, transferred into a linked account, or mailed to you monthly, quarterly, or annually via a check. If you touch the principal, however, you’ll incur an early withdrawal penalty. The penalty is based on your CDs term:

  • For CDs with a term of less than 12 months: 90 days worth of interest
  • For CDs with a term of 12 months, but less than 48 months: 270 days worth of interest
  • For CDs with a term of 48 months: 365 days worth of interest
  • For CDs with a term of 60 months: 540 days worth of interest

If you’re able to keep your principal and interest within the CD, you’ll receive notice, either by mail or email, that your CD is about to mature in ten days. If you don’t tell American Express that you do not wish to renew your CD, they’ll automatically renew the CD with the same term unless they no longer offer that term. You can call American Express any time before your maturity date to tell them that you do not wish to have your CD automatically renewed.

Online banks vs. brick-and-mortar banks

Online banks have been having a moment not only because of the rise in mobile banking among consumers, but also because they can simply offer consumers more benefits because they don’t have to worry about as many overhead expenses as brick-and-mortar banks. An August 2017 study by DepositAccounts.com, another subsidiary of LendingTree, shows the annual percentage yield internet banks offer on savings accounts is more than four times what brick-and-mortar banks or credit unions offer. The same analysis shows annual percentage yields on internet bank savings accounts have surged 29 percent since January 2016.

Simply put, the main benefit of putting your money in an online savings account is your money does more for you. To show this, DepositAccounts provided an example, based on the average APYs in those savings categories: If a saver were to put $100,000 in a savings account and leave it alone for 10 years, they would earn $8,338.79 at an online bank versus $1,747.04 in a brick-and-mortar bank and $1,895.28 in a credit union, assuming a fixed APY.

Overall Review of the American Express Personal Savings Account and CDs

Overall, the American Express Personal Savings Account is a solid online savings option. The interest rate they offer is high and the features of the account are comparable to other online banks’ savings accounts. While there are certain aspects of the Personal Savings account that could use improvement, other online banks present the same obstacles. As was mentioned earlier, the American Express Personal Savings account is one of the best options available.

The CDs American Express offers, on the other hand, aren’t quite as good. The 6 and 12-month CDs are nowhere near the best rates offered by other online banks and the 18 – 60-month CDs fall short of the other rates offered. The only feature that makes American Express stand out from most of the other online banks is that this bank doesn’t require a minimum deposit to open an account or start earning interest. If you’re not quite ready to deposit a huge chunk of money into a locked account, you may want to start out with on of the CDs offered by American Express.

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.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at [email protected]