Best Online Savings Accounts of 2018
The best high-yield online savings accounts offer strong interest rates and great customer service, making them a popular option for savers. In addition, studies show online savings accounts come with lower fees.
“High-yield” is, unfortunately, a bit of a misnomer these days. A decade ago, interest rates were 4% and 5% among selected savings accounts and money market accounts. Today, the best rates are around 1%, but some banks offer rates hovering near 0%! This trend will continue until banks and credit unions need more cash from depositors.
What to Look for in a Savings Account
There are so many savings account bells and whistles. And some of them are great. It can be nice to be able to automatically roll “spare change” from your checking to your savings account, for instance. And having tools to automatically track your savings account balance on your phone is also great. But these are really extras. At the core, here are the five things you need to consider when looking at a savings account:
- Interest Income
Let’s tackle these issues one by one here.
Stability: Look for FDIC Insurance
The first thing to look for in a savings account is FDIC protection. This ensures that your money will be available to you, even if the bank you choose fails. As we saw in the early 2000’s, even the banks with the best reputations can fail. So always be sure that your money is FDIC insured. Or if you choose a credit union, look for National Credit Union Administration insurance, which is similar to the insurance offered by the FDIC.
Fees: How Low Can You Go?
These days, there are so many fee-free options available that you really shouldn’t be paying for a savings account at all. But if you do choose one with conditional fees, see if you can meet the requirements for having those fees waived. Even fees as small as a few bucks a month will wear away at your savings over time.
Accessibility: Get Your Money When You Need It
Sure, you might find a bank that offers outstanding interest and no fees. But if it takes a week to transfer money from that bank to your checking account, it’s not a good place to store your emergency fund. Generally, the more likely you are to need the money at a moment’s notice, the more easily you should be able to access the money. Also, you may not want to have all your savings linked to your checking account, as that can cause unnecessary temptation to overspend.
The bottom line here is that you might need different levels of accessibility for different accounts. Maybe half your emergency fund is at a bank in town so that you can withdraw cash without ATM fees whenever you need it. Store the rest of it at an online bank with a good interest rate. It’ll take a couple of days to get your money, but not usually more than that. And then you can store savings for particular things like your next car somewhere that you can access the money within three to five days.
Interest Income: Higher Isn’t Always Better
Remember, this type of savings account is not for investing. And in today’s environment, you shouldn’t expect to find an account with stellar interest rates. The differences between banks are pretty small too, so don’t choose based on this factor alone. With that said, earning a bit of interest can offset some of what you’d otherwise lose to inflation. So do look at interest rates, especially when choosing a bank for longer-term, higher-balance savings that will earn more over time. But, of course, be sure to balance any increases in interest against potential increases in fees, which can quickly erode that extra interest income. Nevertheless, if your savings is at a brick and mortar bank earning below 0.25% APY, choose one of the better options below.
Customer Service and Tools: Look at Reviews
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.
Good customer service is essential for a bank. If you have trouble logging in online and need your money, you need to be able to get someone on the phone to fix the problem. So check around for customer service reviews for the banks you’re considering. Then, be sure to take a look at additional tools that you might find helpful. These days many banks have apps for managing your money, take check deposits from your phone, or have financial advice available for free. These aren’t make-or-break features for most customers. But they can be the icing on the cake.
Once you’ve gotten through all of these steps, you should be able to find a savings account–or two or three!–that meets your particular needs.
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 above are current, although interest rates 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.
The Best Online Savings Accounts
CIT Bank was founded in 1908 in St. Louis by Henry Ittleson. Throughout the 20th century CIT continued to grow in all sectors. An FDIC-insured institution, it serves consumers and small businesses with certificates of deposit, savings accounts, and custodial accounts. CIT Savings account offers 1.55% APY on all deposits. Click here for more details
At 1.85% 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. Click here for more details
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 1.80% APY. Click here for more details
TIAA Bank has a variety of products including a high yield checking account, a money market account, and world currency CDs. All of these accounts offer top-tier interest rates. For example, first time account holders of TIAA’s Yield Pledge Money Market account earn a new account bonus rate of 1.60% for the first year. After the first year, the ongoing APY is 1.10% – 1.50% for account balances. And their Yield Pledge Checking Account for first time account holders for balances up to $250,000 offers a new account bonus rate of 1.21% for the first year and the ongoing APY is 0.25% – 0.71%. Click here for more details
Discover Bank offers solid online savings account with a fast opening process. For example, I opened my account within twenty-four hours. The current interest rate for the Discover Bank Online Savings Account is 1.75% APY. Click here for more details
HSBC Advance offers no fees and no minimum balance requirement. Formerly HSBC Direct, it 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. Click here for more details
Marcus: By Goldman Sachs specializes in online savings accounts and certificates of deposit. A high-yield online savings account offers 1.85% APY. One major advantage that GS Bank has is that they are backed by one of the most respected financial institutions in the world: Goldman Sachs. Not only should that make your investments more secure, but it also holds the promise of expanded features and opportunities in the future. Click here for more details
Compare The Best Online Savings Accounts
What is your favorite online savings account? Share your thoughts in the comments below.