Online savings accounts are one of the best places to stash your cash. Also called high yield savings accounts, you earn some of the highest available interest rates for a savings account, and you get the convenience of online account management and easy transfers to and from your existing bank accounts.
Recently, a reader e-mailed me asking where to find the best online cash accounts. So here is my list of some of the top-paying online savings account offers.
Deal of the Day: Chase is now offering a $200 cash bonus when opening a Total Checking® Account. No minimum deposit and all deposits are FDIC insured up to the $250,000 per depositor maximum. Learn More
Best Savings Account Deals
- Chime: Earn a high rate on your savings.
- American Express® High Yield Savings Account - Member FDIC: No minimum balance required and no minimum deposit required to open.
- CIT Bank: Just a $100 deposit is required to open an account. (Savings Builder)
- Chase Savings℠: Currently offers one of the best savings account bonuses you’ll find online, a $150 cash bonus
- Barclays Online Savings: No monthly maintenance fee and no minimum balance to open.
- Discover Online Savings Member FDIC: No monthly maintenance fees and no minimum balance required.
Online Savings Account Details
Because of their convenience, security, and favorable interest rates, online savings accounts are perfect for emergency funds or other short-term savings. Interest rates on these savings accounts do change, and here are some of the highest yield account offers to make the most of your money.
Chime: you’ll earn an APY that is better than most online savings accounts right now. You’ll have access to not only a savings account, but also a spending account and debit card. Plus, Chime gives you some pretty great features, such as being able to get paid up to two days early with direct deposit. SpotMe®- which is like overdraft protection but better, spending roundups – where your purchases can be rounded up to the nearest dollar and the difference is deposited into your savings, and a lot more. If you’re looking for a savings account that offers a lot more than just that, Chime might be an option to consider.
Chime SpotMe® Disclosure - Eligibility requirements and overdraft limits apply.
Chime Disclosure - Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank or Stride Bank, N.A.; Members FDIC.
1Chime cannot guarantee when files are sent by the IRS and funds can be made available.
^Early access to direct deposit funds depends on payer
Chime APY Disclosure - 1The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is effective as of November 1, 2021. No minimum balance required. Must have $0.01 in savings to earn interest. 2The average national savings account interest rate of 0.06% is determined by FDIC as of November 1, 2021 based on a simple average of rates paid (uses annual percentage yield) by all insured depository institutions and branches for which data are available. Visit https://www.fdic.gov/regulations/resources/rates/ to learn more.
American Express® High Yield Savings Account: One of the best savings account rates you can find today comes from American Express® National Bank - Member FDIC. The American Express® High Yield Savings Account offers a top-notch interest rate and requires no minimum deposit to open. There is also no minimum balance required to earn interest.
American Express also offers a wide variety of credit card and other deposit products (like CD's) if you'd like to do much of your banking/spending with just one provider.
Aspiration: earn high interest on your savings with an Aspiration Plus online account. Set up an account and unlock up to 1.00% APY (Annual Percentage Yield is variable). If you spend $1,000 in the first 60 days of opening an account, you’ll receive a $200 welcome bonus, plus you’ll be giving back to the planet at the same time. Aspiration prides itself on its purpose-driven missions, including debit card roundups to plant trees, fossil-fuel-free deposits, and pledged donations to charity.
Read More: Aspiration Review
CIT Bank sports one of the highest savings account rates available with their Savings Builder account. To earn their highest APY available, you need to either make a deposit of $100 per month OR maintain a balance of $25,000. The initial opening deposit minimum is just $100.
If you find it difficult to meet the required $100 a month deposit, you may want to consider a CIT Money Market account or no-penalty CD. Both of these accounts offer restriction-free interest.
Discover Online Savings: Discover Bank offers a very competitive savings account rate and there is no minimum balance requirement to open an account. Interest is compounded daily, and there are no monthly fees.
Discover Bank also offers a wide range of credit card products, CDs, and a very sweet cashback debit account that offers cashback on every purchase.
Citi Accelerate Savings: Citibank offers a high APY on their Accelerate Savings Account. The account is FDIC insured up to $250,000 (including principal and accrued interest) and I can tell you from personal experience that the Citi mobile app is a breeze to use.
Citibank also offers the opportunity to earn up to $1,500 bonus when opening up their Accelerate Savings Account. Combine the two and take advantage of a great savings and checking offer.
Barclays Online Savings offers one of the highest savings rates available today, topping out at 5x the national average. There are no monthly maintenance fees and no minimum balance requirements. The Barclays website also features a savings goal tool. It enables you to save a specific amount for a set goal.
Barclays also offers a suite of credit cards and CDs should you need more!
Chase Savings℠: Chase Savings doesn’t offer as competitive of an APY as the others on this list - but they do offer something a bit different--a bonus. Right now, Chase is giving new Chase Savings customers a $150 bonus on cash deposits of at least $10,000 within the first 20 business days, assuming you keep it there for a full 90 days.
So, in effect, you’re getting a 1.5% APY on your money, which knocks most of the other banks on this list out of the water right now. Plus, you’ll have the safety, security, and expertise of J.P. Morgan Chase -- one of the nation’s largest banks -- on your side. If you have a bit more to deposit, this is definitely an option to consider.
The information about Chase Savings℠ has been collected independently by DoughRoller.net. The details have not been reviewed or approved by the bank.
Savings Account Alternatives
If you are looking for higher returns, LendingClub may be the answer. LendingClub is a social lending site where you can invest in loans issued to individuals and businesses. The current average return is above 9%, and some loans carry interest rates as high as 20%. While these investments are not FDIC insured, given the low interest rates paid by banks, LendingClub may be a great alternative.
What Are High Yield Savings Accounts?
According to the Weekly National Rates and Rate Caps issued each week by the FDIC, the average interest rate currently being paid on bank savings accounts is a paltry 0.09%. A high-yield savings account is one that pays an interest rate substantially higher. Many banks offering high-yield savings accounts are paying close to 2.00% APY and sometimes higher, which is 20 times more than the average national rate.
Though some high-yield savings accounts are offered by well-recognized banks, they’re more typically available through lesser-known banks. These banks specialize in high-yield savings vehicles, that include high-yield money market accounts and certificates of deposit, in addition to high-yield savings accounts. Some even offer high-yield checking accounts, though the interest rates don’t come close to those offered on savings.
In most cases, high yields are being paid by banks that operate either mostly or entirely online. This is not a coincidence. When a bank operates primarily online, it doesn’t need to maintain the network of bank branches and employees required by more traditional banking institutions. The absence of banking infrastructure and staffing enables them to pay higher rates of return. In fact, online banks are low-cost operations that pass the savings on to their customers in the form of substantially higher interest rates.
And for the same reasons they’re able to pay higher rates (lower operating costs), they generally charge lower fees. For example, high-yield savings accounts generally have no monthly maintenance fee.
Some well-known banks will also offer high-yield savings accounts from time to time. They may do this as a way to draw in new customers. But the accounts offered by these banks often come with stiffer terms, like larger minimum initial deposits and required balances. That’s why you need to thoroughly investigate any offers for high-yield savings accounts you’re considering.
How to Use High Yield Savings Accounts
The best use for high-yield savings accounts is to hold the money you don’t have an immediate use for. A good example is an emergency fund, which is a largely static account (or at least it should be). Still, another is a targeted savings account. This is an account intended for a specific spending purpose, like saving for an upcoming vacation, a wedding, or the down payment on a house or car. The money needs to be safe and liquid for the intended purpose, but also needs to earn more interest than you’ll get with traditional bank savings accounts.
For many consumers, the best strategy may be to maintain a checking account and a small savings account--for overdraft purposes--at a local bank. This will give you the convenience factor with short-term funds. But any excess money can be invested in high-yield savings accounts with an online bank. When needed, the funds can usually be transferred to the local bank checking account within a day or two by electronic transfer.
If you’re a business owner, you may need a similar arrangement. You may need to work with a local bank for your business banking while keeping the majority of your savings in a high-yield account with an online bank.
Pros and Cons of High Yield Savings Accounts
High interest rates, up to 20 times (or more) higher than what you can get in a typical local bank savings account.
Funds can easily be transferred electronically into your regular checking account, and many online banks that offer high-yield savings accounts also offer checking accounts.
High-yield savings accounts generally do not impose monthly service fees.
Like all types of savings accounts, high-yield savings accounts limit transactions to no more than six per month.
Some high-yield savings accounts require a large minimum initial deposit, and may have ongoing balance requirements to maintain the high rate.
High Yield Savings Accounts vs CDs
The basic difference between high-yield savings accounts and certificates of deposit is that one has a specific term, and the other doesn’t.
Certificates of deposit can range in terms from three months to five years. During that term, the interest rate paid on the certificate will be fixed and guaranteed. They’re sometimes referred to as time deposits because your money will be tied up for a specific period of time.
By contrast, high-yield savings accounts can be accessed at any time, and are sometimes referred to as demand deposits since the funds can be withdrawn on demand. Interest rates on high-yield savings accounts, unlike CDs, fluctuate based on prevailing interest rates. In a rapidly changing interest rate environment, the yield can fluctuate on a continuous basis. The initial rate on the account is never guaranteed, except for a very short introductory period, if one is offered.
Apart from interest rates, liquidity is also a fundamental difference between the two. Once again, with a high-yield savings account, you can withdraw your funds at any time. And while you can withdraw funds from a certificate of deposit early, you’ll have to pay a prepayment penalty. That penalty may be high enough to offset any interest you earned on the certificate.
High-yield savings accounts may also offer debit card access, and in some cases, limited check writing capability. CDs offer neither since depositors are discouraged from accessing their certificates early.
High Yield Savings Accounts vs Money Market Accounts
Over the years, the differences between high-yield savings accounts and money market accounts have been gradually evaporating. Money market accounts at one time paid higher interest, but with rates on high-yield savings accounts rising they can be comparable to money markets.
Since there are so many banks, the differences between the two accounts may mostly be a matter of how the individual bank sets up each type of account. For example, a given bank may allow debit card access to a money market, but not a savings account.
The biggest tangible difference may be in the minimum deposit required. Generally speaking, that will be higher on money markets than it will be on high-yield savings accounts. For example, a bank may impose a minimum initial deposit--and an ongoing minimum balance requirement--of $5,000. The same bank may require only $500 to open a high-yield savings account, with no ongoing minimum balance requirement.
One feature both high-yield savings accounts and money market accounts have in common is limited account transactions. Under Federal Regulation D both accounts are generally limited to no more than six transactions per monthly statement cycle.
Bank policy on exceeding the number of transactions depends on the institution. Virtually all will charge an excess transaction fee, ranging from $5 to $15, if you exceed the six transaction limit. But many banks will allow that only on a limited basis. If you consistently exceed the limit, or if you exceed a bank imposed monthly limit, your savings account or money market may be converted to a checking account by the bank.
Are the interest rates paid on high-yield savings accounts guaranteed?
No, though they may be guaranteed for a certain limited period of time, like 60 days or 90 days. Unlike CDs, savings accounts don’t offer guaranteed rates for extended terms. Rates will adjust based on the general interest rate market environment. However, the general trend has been that many banks offering high-yield savings accounts have consistently paid rates near the top of the market for several years.
Are high-yield savings accounts better than Cds, since they are more liquid?
It really depends on the intended purpose of your savings. For example, in the case of an emergency fund, a high-yield savings account is the superior choice over a CD. Since an emergency could happen at any time, you’ll need to be able to access the funds on short notice. You can do that with a high-yield savings account, but a CD will require a prepayment penalty. On the other hand, if you’re saving money for the down payment on a house, and you’re afraid that interest rates may fall, it may be better to lock in current rates for several years with a CD.
Can I open a high yield savings account in the name of my business?
Some banks offering high yield savings accounts do make them available to businesses. But you’ll have to check the specific policy at each bank. Not all banks allow high-yield savings accounts to be opened in the name of a business, while others may make a determination based on the business organization. For example, a bank might freely grant a high interest savings account if you’re a sole proprietorship, but not if your business is incorporated.
Do high-yield savings accounts charge fees, like monthly service fees?
Not generally. They’re able to forgo service fees for the same reason they can pay higher interest than traditional banks. Their operating costs are just lower, eliminating the need for service fees. However, most do impose an excess transaction fee, if you exceed the six transactions per month limit under federal Regulation D.
Why don’t more local banks offer high-yield savings accounts?
Since traditional banks need to sustain a large network of branches and employees, they can’t afford to pay high interest rates even if they want to. But still another reason is that they don’t have to. Customers often choose a bank based on location. That is, they’re most likely to choose a bank that has a branch close to home. For many people, convenience is more important than return on investment. That means local banks don’t need to compete based on interest rates.