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: CIT Bank has a 1.80% APY on their Money Market Account. $100 minimum deposit required and all deposits are FDIC insured up to the $250,000 per depositor maximum.
Advertising Disclosure – The savings offers that appear on this site are from companies from which DoughRoller receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). DoughRoller does not include all savings companies or all savings offers available in the marketplace.
Table of Contents:
Best Savings Account Deals
- CIBC US: Earn 1.45% APY with no minimum balance
- CIT Bank: Earn 1.75% APY with just a $100 deposit required to open an account. (Savings Builder)
- Barclays Bank: Earn 1.60% APY with no monthly maintenance fee and no minimum balance to open.
- Citi: Earn 1.70% APY with no minimum deposit required.
- American Express National Bank Member FDIC: Earn 1.60% Annual Percentage Yield (as of 04.03.2020) with no minimum balance.
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.
American Express National Bank member FDIC currently pays 1.60% APY (as of 04.03.2020) for it’s online savings account product. American Express has NO monthly minimum or deposit requirement and the interest rate is paid on balances of at least $1. This is my online savings account of choice.
This short review was prepared by DoughRoller. The opinions expressed in this short review are ours alone and do not reflect the view of American Express National Bank nor American Express Company.
There is a $1,000 minimum deposit to open but no minimum balance requirement to earn the interest rate.
CIT Bank sports one of the highest savings account rates available at 1.75% APY with their new Savings Builder account. To earn the 1.75% APY, you need to either make a deposit of $100 per month OR maintain a balance of $25,000. Initial opening deposit minimum is just $100.
Capital One 360 is the bank a lot of my family uses. Both of my teenage children have Money accounts, and my wife and I have checking accounts. The interest rates are extremely competitive, there are virtually no fees, and the website is extremely easy to use. In addition, I use the Capital One 360 iPhone app to check balances, make transfers, and deposit checks.
Discover Bank: Discover Bank offers a very competitive savings account rate at 1.50% APY. There is no minimum balance requirement to open an account. Interest is compounded daily, and there are no monthly fees.
FNBO Direct, better known as First National Bank of Omaha offers online savings accounts, CD’s and fee-free bill pay for all its customers. This is the bank that I personally use and even though the APY isn’t the best on this list, the online interface and customer service is top notch. FNBO Direct is an excellent choice. It currently pays 1.00% APY.
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. Visit www.LendingClub.com for more information.
High Yield Options From Our Sponsors
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 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.
- High-yield savings accounts generally do not impose monthly service fees.
- Excellent vehicles to hold funds with no immediate need.
- 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.
- Rates are comparable to those being paid on high interest CDs, but the funds are much more liquid.
- Many of the online banks that offer high-yield savings accounts are moving toward becoming full-service banks. You may be able to do all your banking with the same online institution.
- Online banking has become the rule, rather than the exception, making it likely that online banks–and the higher interest rates they pay on savings–will eventually replace low yielding traditional brick-and-mortar banks.
- All funds on deposit with high-yield online bank savings accounts are protected by FDIC insurance for up to $250,000 per depositor, per bank.
- Like all types of savings accounts, high-yield savings accounts limit transactions to no more than six per month.
- Many high yield online banks don’t offer checking accounts, forcing you to maintain a checking account through a low interest local bank.
- If you’re self-employed, you’ll most likely be required to maintain business banking through a local bank. However, you may be able to move excess funds into a high-yield savings account.
- 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 has 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.