I remember a time when the best online savings accounts paid annual yields of 4% to 5%.
Those days are long gone.
Thanks to the low-rate environment, it’s not a surprise that for the past several years my clients have been griping about how their savings accounts are pay next to nothing, even from the best high interest savings accounts.
Once you factor in fees that some banks charge, it might feel like you are paying the banks just to keep your money with them.
Does this sound familiar?
As painful as the interest situation is, looking for a top savings account to stash away some cash for a future financial goal or an unexpected emergency should be part of your financial strategy. But it can be hard to get excited if you don’t feel like you are earning any interest on your money.
Top 6 Banks to find the Best Online Savings Account
All the banks on my list are great places to stash your cash. However, my top savings account pick is is Capital One 360.
1. Capital One 360 Savings Account
I’ve had an account with Capital One 360 Savings longer than I have with Ally. That’s because Capital One 360 (formerly ING Direct) was one of the first reputable online banks to exist. Capital One 360 is easy to use, secure, and you can connect your account to your other accounts, including your Capital One Investing account.
Here’s what you get with Capital One 360:
- Extremely competitive interest rate. The difference in rates between Capital One 360 and other banks is so small most people wouldn’t notice. If you aren’t seeking absolute best interest and are looking at the bigger picture, keep reading.
- No minimums. Like Ally, you won’t be hit with any minimum balance fees nor will you have to send a ton of money to open an account. You can open an account with as little as $1.
- Easy deposit options. Opening an account is easy — you just link a checking account from another institution like you would with any other bank. Then you transfer your funds over. You can also set up an automatic transfer. This is a great way to save up for your short-term goals. If you know you need to save $1,000 for a trip, you can set up your Capital One 360 Savings Account to withdraw $200 each month from your checking account for the next five months.
- Easy access and management. Capital One 360’s user interface is one of the best around. One of the unique things Capital One 360 offers is “sub-accounts” where you can open up mini-accounts to hold your saving goal money. So you can have a main Savings Account, but have mini-accounts for Vacation Fund, Emergency Fund, and so on.
- Other account options. You can start with a savings account and grow your finances with ING. They offer a robust set of accounts ranging from checking to savings to CDs, mortgages, and investing.
If you compare Ally and Capital One 360 you won’t find much difference in interest rates. Capital One 360 has been around longer from an online banking standpoint, and they are definitely trustworthy. Open an account with Capital One 360 today.
2. Compass Bank BBVA
3. Ally Bank
Ally Bank is one of my favorite banking institutions. (Yes, we bloggers are a weird bunch and have favorite banking institutions while the rest of the world goes about their normal lives.)
Why do I love Ally so much? Let me quote myself from an article earlier this year, Best Online Checking Accounts:
Ally Bank was built on the premise of getting rid of all the crazy fees that normal banks charge while giving customers great rates and great customer service.
I mean, seriously? How can you not love that? A bank that is fighting to end banks gouging customers will get my vote every time. In the linked article above I told you how great Ally’s checking accounts were, but the saving options are great, too.
Here’s what you get with Ally:
- High yield interest rate. You won’t earn more interest with a reputable online bank.
- No minimums. At all. That means no minimum deposit, no minimum balance requirement. No minimum balance fees. In fact, you can open an account with as little as $1.
- Easy deposit options. You can fund your account or add additional deposits via easy online transfer from your current bank, mailing in a check, wire transfer, or simply scanning in your deposit.
- Easy access and management. The user interface is top-notch and you’ll be able to transfer funds to and from your other bank easily.
- Other account options. You can start with a savings account and grow your finances with Ally. They offer a robust set of accounts ranging from checking to savings to CDs and IRAs.
Ally is built on not gouging customers for every penny they’ve got. That’s a great bank, and one of the reasons I use this bank in addition to Capital One 360. Open an account with Ally Bank today.
4. Discover Bank
The product offerings are similar with Discover, but I really like Discover’s online CD. The rates on the CDs are very nice compared to some other players in the industry.
Here’s what you get with Discover Bank’s Online Savings account:
- Great interest. To attract customers, Discover often has some of the highest interest rates available.
- Several account options. You can start with a savings account and expand to an online certificate of deposit, IRA CDs, or a money market account.
- Low minimums. This is the only place that you might downgrade Discover on a bit. The other institutions on this page require no minimum or a super low deposit to open an account. Discover requires a $500 minimum deposit. However, there are still no minimum balance requirements or fees for going below $500, so it isn’t much to worry about once you get your account open.
If you are interested in creating a CD ladder to reach a goal or as part of your emergency savings strategy, Discover is a great place to start.
5. Synchrony Bank
Synchrony has gotten very competitive in offering the some of the highest interest rates for deposits. They do not offer as many products as many of the other online banks, but they put their focus on what they are good at — vehicles for saving.
Here’s what you get with a Synchrony online savings account:
- High Interest – Synchrony is dedicated to being competitive on interest rates to attract new clients.
- Low minimum – It only requires $30 to open an account and you avoid a $5 monthly fee by maintaining a balance of $30 or higher.
- Easy Access – Many of the online banks only let you do transfers. Synchrony also has a debit card option to make accessing your cash easier.
- No Balance Dependence – Some banks increase your interest rates the more money you put in. Synchrony gives you the same interest rate no matter how much or how little you put in.
6. American Express High-Yield Savings Account
Just like Discover, American Express, the credit card company that offers fantastic cash back now has a banking arm that offers great interest on your account.
Rates are currently very competitive with some of the larger, well known online banks. Account access is not as sophisticated as you see with other banks, but you don’t need that sophistication if you are just looking for a solid place to keep some of your cash. If American Express Savings offered a full suite of financial products like mortgages and checking accounts on top of the savings account and CD, I would be more concerned about the website. But this is a pretty basic product: deposit money, earn interest, watch it grow.
AMEX also has a 36-month CD that you can drop your money into to earn a slightly higher rate of return. However, the difference is so small that I can’t recommend locking your funds up for 3 years. (If you elect to close a CD before its maturity date you pay back 3 months of interest. That’s dumb.)
Here’s what you get with AMEX’s High Yield Savings Account:
- Great interest. To attract customers, American Express often has some of the highest interest rates available.
- Simple options. You have two account options: high-yield savings and certificate of deposit. Two simple choices rather than an array of confusing options.
- No minimums. You don’t have a minimum balance requirement, and you don’t get hit with a fee for letting your balance get too low.
Whichever way you go, you’ll end up with American Express’ renowned customer service to back you up. You probably won’t need it, but it is always nice to know it is there.
7. CIT Bank Savings
If you are looking for a bank to just store some of your cash in for a rainy day, CIT Bank is a great choice. CIT Bank focuses on CDs and savings account, and also IRA options.
You might think, “Why would I go with a bank that just does that instead of one with more options like online checking?”
That’s an understandable question. CIT Bank is in the upper tier of interest rates for all of these institutions, and in some cases comes out ahead of everyone else. On top of their high interest rate they also offer a bonus rate tier for customers that have more than $25,000 saved with them. Essentially, it is a loyalty bonus. Not many banks reward you for being extra loyal.
Aside from the great interest, I think it is sometimes a good thing to limit your account options at a bank. If you open up an account with checking, savings, CDs, investment, and so on it can get tempted to pull money out of the savings or CD to refill your checking account quickly. Having them separated requires more financial discipline at the cost of a little bit of convenience. I think the extra interest you are earning is worth it.
Here’s what you get with CIT Bank:
- Upper tier high yield interest rate with high deposit bonus tier. If you deposit a lot of money with CIT, you won’t find a better interest rate anywhere else online.
- Low minimums. CIT does have a minimum of $100. That’s measly. And honestly, with any of the banks on this page if you saved just $100 you’re going to earn a whopping $1 interest max in the first year. You need to save more money, but CIT requires $100 to get started.
- Easy deposit options. You can fund your account or add additional deposits via easy online transfer from your current bank, mailing in a check, or wire transfer.
- Easy access and management. The user interface is easy to use. You’ll be able to transfer funds to and from your other bank easily.
If you are looking for a place to store some cash for a rainy day and want to earn a great interest rate in the meantime, definitely take a look at CIT Bank.
A New Option: Digit.co
Another interesting savings option is Digit.co. This is a bank that uses an algorithm to determine how much money to transfer from your checking account into savings every few days. By tracking your income and spending habits, Digit.co can determine how much extra money should be going into savings. Digit promises that it’s automatic transfers won’t overdraw your account. The interest paid is very small, but it does exist. This is an account for people who want to save without needing to think about it.
Getting access to your money is easy; it’s all done through text. You text simple commands to change how much you save, to check your balance, and to withdraw to your own account. Most of the time, once you text that you want to withdraw, the money is there in the next day or two. This is a great account for saving up for a night out each month, or for other entertainment.
Consider your savings account needs, and do your research. With the right approach, you can get the most efficient use out of your money.
What to Look for in a Top Savings Account
There’s no need to let your money sit in an account that doesn’t pay any interest at all. That’s one of the worst things you can do with your money because the value of your money will slowly go down due to inflation. You need to generate some interest to combat inflation just to maintain the spending power of the money you have. However, even the highest yield savings account is unlikely to beat inflation.
Then again interest isn’t everything. There are other considerations as well when choosing from among the top savings accounts.
Interest – High Yield
For me, interest comes first. Generating interest helps protect your money from inflation. Even if inflation is really low, getting some small interest on the side will help you bolster your account over time. Interest isn’t the only important factor, but it never hurts to have someone paying you to store your cash with them.
Don’t get too caught up in chasing yields, however. Most of the time, the difference between accounts isn’t enough to prompt you to move your money every time a bank comes out with a newer, higher yield.
Having great customer service is another key aspect of a great savings account. If you earn a little bit more interest at one bank but the customer service is awful you will probably regret it. I like to stick to firms that have solid reputations or that I’ve had previous experience with.
The accounts on this list all offer good customer service and a good user experience.
You want easy access to your funds. If you have to jump through a lot of hoops to pull money out of your emergency fund during an unexpected setback, it defeats the purpose. Other considerations when you look at savings account access:
Do you have to go to a physical branch? Or can you transfer funds online using your smartphone? What about ATM access? Can you withdraw money at ATMs across the country for free, or at least get reimbursed for the fees you do pay? Access can be a tiebreaker when you are comparing two very similar banks.
Understand the Purpose of Your Savings Account
Saving for future purchases and expenses is one of the best things you can do to stabilize your financial situation. Rather than using credit spending (and winding up in debt if you don’t pay off the balance each month), identifying your spending goals and saving up can help you buy the things you want — without ruining your financial future.
You should also understand that keeping an emergency fund available for a rainy day can be a good idea. What happens when the car needs repairs or you need to replace the dryer? An emergency fund can protect you from the need to borrow in order to meet these unexpected expenses.
While a high-yield account would be nice, it’s important to recognize that your savings account isn’t meant to help you build wealth so you can fund your retirement (learn more about investing for retirement through a Roth IRA). Rather than expecting high yields from your savings account, here’s how to think about it:
Liquidity: One of the biggest advantages of a savings account is the liquidity. Because it’s cash, it’s instantly available for you to use. You don’t have to sell shares and what for the proceeds of the sale, or jump through hoops to get your money. It’s available immediately.
This is what makes a savings account ideal for an emergency fund. You know you can get to the money immediately if you need it. The liquidity also makes it great for access your money for a short-term savings goal. You know that you will be able to pay with your savings account when you need to, or you can use the money to instantly pay off your credit card after you’ve used it to book your vacation (and earn the points).
Safety: The other reason to incorporate a savings account into your financial strategy is so that you can keep the money safe. You don’t have to worry about losing your vacation money in the stock market when you keep it in a savings account. You know the money is there when you need it for an emergency with your savings account. Plus, if your account is with a federally insured institution, you don’t have to worry about losing your money if the bank fails.
Stop thinking of your savings account as a place to help you grow your wealth, and instead think of it as a way for you to protect your assets and keep your long-term financial situation from deteriorating due to debt. You can also think of your savings account as a way to help you save for short-term goals. As long as you incorporate a savings strategy along with an investing strategy that allows you to build wealth over time, you should have a balanced approach to your overall financial plan.
Whether you are saving up an emergency fund or just preparing to spend money on a nice vacation next year, you need a great savings account to hold your money. Here are my favorite places to wring as much yield as possible out of your savings account.
***Please note that some of the links above are affiliate links which means I get paid a small commission if sign up through my link.
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