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Strategies to Save

Saving for a Baby: How Much it Costs to Have a Baby and How to Start Saving

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.

Saving for a Baby
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The topic of money can cause stress when planning to start, or expand, a family. According to the most recent report from the U.S. Department of Agriculture, it’ll cost $233,610 to raise a child born in 2015. The big-ticket expenses detailed in the report are housing, food, child care and education, although this doesn’t include the cost of college.But before you get sticker shock and decide not to have a family, read on. Early financial planning can help you manage the costs of raising a child.

How much does it cost to have a baby?

How much does it all cost is the million-dollar question for expecting parents. The answer can vary due to your circumstances.

“Getting ready to have a baby has really taught me that anything and everything can happen,” said Stanton Burns, a CFP and owner of Oakview Wealth Solutions in St. Charles, Mo. Stanton is expecting his first child and said the biggest cost at the beginning is medical bills, especially if there are complications.

Young families who are experiencing other major life events such as getting married or buying a home can find medical bills particularly cumbersome.

“Nobody shared with me the cost of having a baby from pre-pregnancy to afterbirth. That was all very surprising to me for baby No. 1,” said Angela Furubotten-LaRosee, a CFP and founder of Avea Financial Planning. To avoid any surprises, Furubotten-LaRosee, based in Richland, Wash., recommends asking questions and staying informed throughout pregnancy and delivery.

Here’s a breakdown of common costs you should be aware of when saving for a baby. Insurance may help you cover some of these expenses.

The cost of childbirth

Before-birth costs: There are prenatal appointments, ultrasounds and other health-related expenditures for the mother and child that may come up as they’re needed. In vitro fertilization (IVF) and other fertility treatments may be necessary as well. The average cost of IVF is $12,400 per cycle, according to the American Society for Reproductive Medicine. Beyond health care, there are items such as cribs, car seats and bottles you may need to buy.

Birthing costs: The cost of birthing a child may range from $2,000 to more than $20,000 depending on where you’re giving birth, the type of birth site (birthing center, hospital or somewhere else) and if there are complications during delivery. A 2015 study by the International Federation of Health Plans found the U.S. average for normal deliveries to be $10,808. Healthy pregnancies with normal deliveries generally cost the least amount of money. Cesarean sections with complications can cost more. Some of the cost may be covered by insurance.

Afterbirth costs: After the birth, follow-up appointments, immunizations, formula, diapers and child care costs are ones to factor into your budget. These costs will also vary depending on the health of the mother and baby.

The cost of adoption

Adoptions can cost relatively lower if you adopt from foster care. Expenses may be reimbursed through federal and state adoption assistance services in this scenario. If you opt for a private adoption agency, the cost could range from $20,000 to $45,000. This may include fees for counseling, child care during the transition, legal fees and other expenses for preparation and placement.

The cost of child care

Child care is an expense you should plan for very early, even before delivery, because of the logistics and costs. “Some places have a waiting list [of six months to a year], which is something you need to get ahead of if you plan to send your children to day care,” Burns said. According to the annual Care.com Cost of Care survey, “the average weekly cost for an infant child is $211 for a day care center, $195 for a family care center and $580 for a nanny.”

Start looking for options early to compare costs and secure your child a spot at a place you trust. To help with expenses, you may be able to claim the child and dependent care credit. The tax credit ranged from 20% to 35% of eligible care expenses. You may also be able to take advantage of a dependent care flexible savings account (DCFSA) option, which is an account with tax perks offered by some employers. A tax professional can help you devise a tax plan that’s most beneficial given your household size and income.

Understand how much your insurance will cover

The medical expenses listed above for you and the child may be offset by insurance depending on your health care plan. Reviewing your coverage should be at the top of your priority list.

Know the type of plan you have. Understand what’s covered (prenatal and postnatal) and know how your copays, deductibles and coinsurance work. Your provider may be able to give you a rough estimate of how much birth will cost given your health, delivery plan and medications.

Make appointments with the right doctors. Double-check that the providers you plan to use are covered by your insurance plan. Some plans only cover a specific group of doctors. Other plans allow you to see doctors out of network, but it costs you more.

Know how a high-deductible health plan (HDHP) impacts your wallet. High-deductible plans are ones that offer lower premiums. The trade-off is that you have to pay more before insurance kicks in. “If you end up racking up [medical] expenses, you may be paying a lot more out of pocket than you could have with a traditional plan that has a higher premium and lower deductible,” Burns said.

Burns recommends considering your insurance options before having a baby to see which type of plan will benefit you the most. Look at traditional plans to see if there are potential savings. If you have a HDHP, putting money away for medical bills is something you should also prioritize for out-of-pocket expenses. You can use a health savings account (HSA) to save for medical bills. We’ll talk about the HSA below.

What if you don’t have insurance? You may be able to qualify for health care through the marketplace at HealthCare.gov. Families who earn between 100% and 400% of the federal poverty level may qualify for subsidized costs. You can find out if you qualify here. Families who meet low-income limits may also be eligible for Medicaid and the Children’s Health Insurance Program.

Review your savings options

There are several accounts you can consider when saving for a baby. You’ll want to save up for prenatal costs, delivery expenses and other baby needs as they grow. Some of these saving methods even have tax benefits.

Put away cash in an HSA if you have an HDHP. HSA accounts are only for high-deductible insurance plan holders. HSAs are triple tax-exempt, according to Burns. “You can put money into this account tax-free, it can grow tax-deferred and you can take money out of it without paying taxes either,” Burns said.

Your account must be used for qualifying medical related expenses such as prescriptions, medical care and dental care. You can carry over a balance in your HSA from year to year. Funds can be used for you, your spouse and dependents. The maximum you can deposit into an HSA for 2018 is $3,450 for individuals and $6,900 for families. Learn more about HSA accounts here.

Save in a medical flexible spending account (FSA). FSAs are accounts typically established by your employer to help pay for medical costs. Money contributed to the account by you or your employer is not taxed. Money from the account is meant to reimburse you for eligible medical expenses. The 2018 contribution limit for the FSA is $2,650 per year. Unlike the HSA, there’s a use-it-or-lose-it policy for the year unless your plan has a grace period or carryover provision. Learn more about the medical FSA here.

Use a DCFSA. The DCFSA is another account offered by some employers where you can put in pretax dollars to cover eligible child care expenses for children younger than 13. Eligible expenses may include before- and after-school care, baby-sitting and nanny expenses, day care and summer camp. If you are married and filing a separate return, you may be able to contribute up to $2,500 per year in this account. The contribution limit is $5,000 per household.

Open up a high-yield savings account. For other savings, a simple high-yield savings account could be the right place to put money away. A regular high-yield savings account doesn’t have the same tax perks, but you can get a higher return on your cash.

“The interest rates of most brick-and-mortar banks that you’ll have in your town aren’t that great. [An interest rate of] less than half a percent is what I’ve seen, but there are some online savings account options that offer higher,” Burns said.

Here are some of the best savings accounts to consider while you’re saving for a baby:

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.

We'll receive a referral fee if you click here. This does not impact our rankings or recommendations
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
Ally Bank
Online Savings Account from Ally Bank

1.90%

$0

LEARN MORE Secured

on Ally Bank’s secure website

Member FDIC

You can check out some of the other best online savings accounts here. Account APYs on some of the highest yield savings accounts range from 2.15% to 6.17%.

Make a family leave plan with your employer

Coming up with a family leave plan is another factor to consider when weighing your financial options. You need to know how long your job will allow you to be on leave and how much you’ll get paid.

“[Some employers] say they’ll give you family leave of, let’s say, three months, but they’re only going to pay you for the first three weeks,” Burns said. Having a spouse go unpaid after having a baby can cause financial strain. Adjust your budget beforehand and bump up your savings to make up for any loss in income you may experience.

Save for education costs

Education costs may not be at the top of your mind when you’re waiting for the water to break, but the earlier you plan, the less financial burden you’ll encounter when it’s time for your children to go off to school. “Every dollar saved is one less dollar borrowed,” Furubotten-LaRosee said.

Savings may not cover the entire cost of tuition or college, but at least it’s something. “You could save in a traditional brokerage account. Because it’s long term, you have 18 years to invest in some blend of stocks and bonds that you’re comfortable with,” Furubotten-LaRosee said.

Here are a few accounts to consider:

Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts: The UGMA and UTMA are both custodial accounts you can use to invest money for your child. Accounts may be made up of mutual funds, stocks and bonds. UTMA accounts can also be used for real estate. You can generally contribute up to $15,000 per year per child without worrying about the gift tax. Couples can contribute up to $30,000 per year per child. The child typically gets access to the funds when they’re between 18 and 21, depending on the state where the account is opened. The money doesn’t have to be used just for school.

529 plan: A 529 plan lets you prepay tuition or set up an investment account with tax benefits for education expenses. Depending on your state, the contributions you make into the savings account may be tax deductible. The withdrawals may also be tax-free as long as the money is used for eligible education expenses. Eligible education expenses include tuition, computers and equipment, room and board, and fees. Up to $10,000 per year from a 529 plan may also be used to pay for tuition at a public, private or religious elementary or secondary school.

Each state has different programs, so you should educate yourself on the type of program offered and its tax perks, Furubotten-LaRosee said. Unlike the UGMA and UTMA account, there are penalties if your child doesn’t use the money for school. The child may pay state and federal taxes on the money, plus a tax penalty of 10%.

There’s a lot to think about when saving for a baby. Adding another person to the family is a lifestyle change. Take a look at your spending and budgeting habits to make room for upcoming expenses for the child, and review the options above to make a smooth transition.

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.

Taylor Gordon
Taylor Gordon |

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor 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.

LEARN MORE Secured

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.

promo-checking-wide-v2

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]

Advertiser Disclosure

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

LEARN MORE Secured

on American Express National Bank’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

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.

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 2.15% 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

LEARN MORE Secured

on Goldman Sachs Bank USA’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

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.

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Brittney Laryea
Brittney Laryea |

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