The best high-yield online savings accounts offer strong interest rates and great customer service, making them a popular option for savers. Studies also show online savings accounts often come with lower fees. Read More
“High-yield” is unfortunately a bit of a misnomer these days; a decade ago, interest rates were 4% and 5% among select savings accounts and money market accounts. Today, the best rates are around 1% while a fair amount are still hovering near 0%! This trend will continue until banks and credit unions need more cash from depositors.
Banking Deal: Earn 1.00% APY on an FDIC-insured savings account at Barclays.
Interest rates are important because money shouldn’t lose too much purchasing power. In a perfect world, interest rates offered by banks should beat inflation while preserving the balance without risk. I am not aware of any bank offering a savings option with ongoing interest rates high enough to beat inflation, whether measured by the government-reported CPI-U or by any other meaningful measure of consumer prices. Nevertheless, if your savings is at a brick and mortar bank earning below 0.25% APY, choose one of the better options below.
When evaluating customer service, there are two important factors to consider. The best banks offer all account maintenance and transfers through a professional, reliable, and easy-to-navigate website. Secondly, live customer service representatives should be knowledgeable, helpful, and available, although customers should have to deal with a representative infrequently if at all.
Based on my own experiences and reviews from other Consumerism Commentary readers, here are the most-recommended accounts for short-term savings. All of the listed interest rates directly below from our partners and in the table that follows are current but they are subject to change by the banks. Although I have nine accounts listed below the table of rates, you don’t need to have accounts with that many different banks. Choose one that fits you the best.
First, here is a list of the latest interest rates. Following this table, I offer a few of my own observations and opinions about savings accounts from nine popular online banks.
Barclays is a large, international bank that has been around for 300 years, and operates in over 50 different countries. Barclays offers a 1.00% APY on all deposits, with no minimum balance and no monthly fees.
At 1.05% APY, Synchrony bank offers one of the highest rates available today on an FDIC-insured savings account. With no minimum balance required and no monthly service fees, it’s one of the most popular options.
Capital One 360 offers no fees and no minimum balance requirement. Like ING DIRECT before it, Capital One 360 also has a great website and excellent customer service. So far, managing your money with Capital One 360 is just as easy as it was with ING DIRECT. Capital One 360 offers a current interest rate of 0.75% APY .
Ally Bank was selected by Kiplinger Magazine as the best savings account for 2009. Formerly known as GMAC Bank, Ally Bank provides an interest rate for their online savings account of 1.00% APY. Click here to apply.
EverBank has a variety of products including a high yield checking account, a money market account, and world currency CDs, all with top-tier interest rates. Currently, for first time account holders, Everbank’s Yield Pledge Money Market account offers a new account bonus rate of 1.11% for the first year, with an ongoing APY after that of 0.61% for account balances up to $150K. And their Yield Pledge Checking Account for first time account holders for balances up to $100,000 offers a new account bonus rate of 1.11% for the first year and the ongoing APY is tiered 0.25%-0.61% APY. Click here to apply.
FNBO Direct offers no fees and no minimum balance requirement. FNBO Direct is the online arm of First National Bank of Omaha. FNBO has an interest rate of 0.95% APY. Click here to apply.
Discover Bank offers a solid online savings account with a fast opening process; my account was opened within twenty-four hours. The current interest rate for the Discover Bank Online Savings Account is 0.95% APY.
CIT Bank was founded in 1908 in St. Louis by Henry Ittleson. Throughout the 20th century, CIT continued to grow, in all sectors. CIT Bank, an FDIC-insured institution, serves consumers and small businesses with certificates of deposit, savings accounts and custodial accounts. CIT Savings account offers 0.95% APY on all deposits between $100-$24,999 and 0.95% APY on all deposits of $25,000 and above. Click here to apply.
SmartyPig currently sports one of the better interest rates you can find online at 0.75% APY. In addition to the high interest rate, you can also convert your savings goals into gift cards and earn an additional bonus for each gift card conversion. SmartyPig is not a bank by itself, but it is a goal-oriented savings vehicle, a layer, that can be compared with other savings accounts.
HSBC Advance offers no fees and no minimum balance requirement. HSBC Advance (formerly HSBC Direct) entered the race with one of the highest interest rates ever available at 6% APY. HSBC Advance Online Savings Account has an interest rate of 0.05% APY for $15,000.
Lending Club Investing offers a significantly higher return than most banks. LendingClub is a social lending site where you can invest in loans issued to individuals and businesses. The most recent average net annualized return for notes by grade A to C is between 5.20% and 8.19%. While these investments are not FDIC insured, given the low interest rates paid by banks, LendingClub may be an alternative worth considering.
What is your favorite online savings account? Share your thoughts in the comments below.
For more banks to round out the selection, see this list of savings accounts interest rates. I have been tracking the rate changes for many years now, and this list gives you an idea of which banks have been consistently offering the highest interest rates.
Credit: iStock photo by psphotograph
Tell us: What online savings account works best for you?