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Building your savings takes hard work, but a savings account with a great interest rate can help you meet your goals more easily and keep your money safe.
And doing your research pays off — the current national average savings rate is 0.07%, but you can earn 10 times that by choosing a high-yield savings account with an online bank.
Variable interest rates for savings accounts do fluctuate over time; they are set by banks but dependent upon the federal funds rate, which is determined by the Federal Reserve. The federal funds rate currently sits near zero in response to the economic crisis caused by the COVID-19 pandemic, and banks have begun to reduce savings interest rates alongside it.
That’s why it’s more important than ever to begin saving and why a high-yield savings account may be the perfect vehicle to do so. Use it to reach specific savings goals, like a home down payment or a vacation — or as an emergency fund you can dip into when you have an unexpected expense or a disruption in your income.
Here’s a rundown of some of the best savings rates on the market today, plus a few details you should know before choosing an online savings account.
Best Savings Account Rates
|Marcus by Goldman Sachs||1.05%|
|Prime Alliance Bank||1.01%|
|Live Oak Bank||1.00%|
|American Express National Bank||1.00%|
This list does not represent the entire market. To rank the high-yield savings accounts you’re most likely to be considering, we began by analyzing 32 of the most commonly reviewed and searched-for high-yield savings accounts.
Then, we eliminated any accounts that charge a monthly maintenance fee or require a minimum opening deposit of more than $10. With so many banks offering good APYs on high-yield online savings accounts, we think most people can and should stick to banks that don’t charge monthly service fees. We also eliminated any banks offering rates of less than 1.00%, a reasonable benchmark given current low interest rates. Finally, we made sure all of the institutions offering these accounts are FDIC insured, which gives greater security to your funds in the unlikely event of a bank failure.
The APYs shown above are as of July 8, 2020. They are the APYs available for the smallest balance and/or opening deposit possible. The NextAdvisor editorial team updates this information regularly, though it is possible APYs have changed since they were last updated. Also, some APYs may vary based on where you live.
How to Find the Best Online Savings Account
Finding a competitive interest rate and terms that agree with your financial plan are important aspects of choosing a savings account. But there are a few more important details you should confirm about any new savings account you’re considering:
First, always make sure your account is insured by the FDIC or NCUA and your savings total complies with insurance limits and guidelines set by those organizations (any amount up to $250,000 should be protected).
Also familiarize yourself with any monthly maintenance fees that may eat away at your interest earnings. Do your research into the fine print of your account’s terms so you can do your best to avoid fees as much as possible.
Finally, look into other benefits that may help you get the most out of your account, such as new account bonuses, ease of withdrawals and transfers, balance requirements, and of course APY.
Online Savings Account Terminology You Should Know
- Annual percentage yield (APY): The amount of interest your account earns over the course of a year. This percentage is calculated using the account’s interest rate and how often interest compounds annually.
- Compound interest: The amount you can earn on both your principal, or the money you put directly into your account, and on interest as it accumulates. As you earn interest, it’s added to your principal and itself earns interest the next time interest accrues. Many savings accounts compound interest monthly.
- Minimum required deposit: Some banks require a minimum deposit to open an account. There may be a time limit in which to deposit, so make sure you have the minimum up front before opening your account.
- Minimum required balance: Some banks may also set a minimum threshold at which your account balance must remain. If you fall below this minimum, you may be charged a fee or take on a lower interest rate.
How Online Savings Accounts Work
Savings accounts are secure accounts in which you can store your money. They may be offered by large, brick-and-mortar institutions or smaller online banks.
Savings accounts usually offer some amount of interest earned on your balance, so your money can grow over time, and they’re also relatively liquid, meaning you can move money in and out easily.
Because they don’t have physical locations and other costly expenses, you’ll generally find the best interest rates with online banks. But you’re less likely to have access to an in-person branch or representative.
Unlike checking accounts, you shouldn’t rely on your savings account to make regular transactions. Savings accounts generally limit withdrawals and transfer out of the account to no more than six per month.
In addition to making these transfers online, many banks offer ATM access for savings account withdrawals. Money market accounts, which are a type of savings account, usually even offer check-writing abilities or debit card access.
How Savings Account Interest Rates Change Over Time
Savings rates are closely tied to the federal funds rate set by the Federal Reserve, but individual banks decide for themselves when to make changes to their variable interest rates. That means the rate at which you open your account is not the guaranteed amount you’ll earn over time.
Currently, interest rates are declining, but you shouldn’t necessarily anticipate your APY changing weekly or even monthly. Savings account rates generally remain steady for a few months at a time.
Rarely, changes may occur more rapidly, such as following the Fed’s emergency decision to lower rates to near zero at the start of the COVID-19 pandemic in March 2020.
Many banks also make changes to their interest rates around the same time, so if you have multiple accounts and one makes an interest rate change, don’t be surprised if another follows suit soon after.