The cornerstone of any good financial system starts with finding a savings account that works for you. The best savings accounts offer high-yield interest rates and don’t require you to maintain a huge minimum balance to avoid fees.
So how do you find a good one? While it may be surprising, look to online banks. My first online savings account was with a little-known Dutch bank, ING (which is an acronym for Internationale Nederlanden Groep, recently acquired by Capital One). They were orange, not a typical banking color (most prefer blues and greens here), had an acronym for their name (or was it just the name? No one knew!), and everyone was skeptical about online banking let alone an online-only bank.
Today, online savings accounts are commonplace and extremely versatile. The interest rates are much higher than what is typically seen with major banks. How do these rates compare? While we will get to the online banks soon, see for yourself, not a single one will move the needle (I was embarrassed to even type them): (list)
This prompted me to compile a list of online savings accounts with the highest interest rates. They are all FDIC insured (don’t let the phrase “online bank” scare you, they’re just like regular banks). You can confirm that by searching the FDIC’s Bank Find tool and confirming the FDIC numbers listed. These banks are presented in no particular order, but all provide value in terms of helping you build a strong financial foundation.
Table of Contents
- Ally Bank — 0.50% APY
- Capital One 360 Performance Savings – 0.40% APY
- Citi – 0.50% APY
- Discover Bank — 0.40% APY
- Barclays Bank — 0.40% APY
- Marcus by Goldman Sachs — 0.50% APY
- Alliant Credit Union — 0.55% APY
- American Express® Personal Savings — 0.40% APY
- Betterment Everyday – 0.30% APY
- Common Questions about Online Savings Accounts
Ally Bank — 0.50% APY
Ally Bank (FDIC #57803) is the online bank I use (I consider them the best online bank, which is why I use them) and I’ve been a fan of theirs for years. I opened my account shortly after they rebranded from GMAC (General Motors Acceptance Corporation) in the late 2000s.
Their savings account has a solid interest rate, no maintenance fees, and no minimum balance.
Their CD rates are also competitive, the early termination period is only 60 days on a short-term CD (versus the more typical 90 days), and they often give you an interest rate bonus if you roll your maturing CD into a new one.
They offer a free checking account with no minimum balance, they refund up to $10 in ATM fees each statement, have a large ATM network, and they have a competitive interest rate on the checking account too.
Their app is solid too. It has all of the typical bells and whistles plus a great remote deposit feature for when you have checks to deposit. If you need to deposit checks and don’t want to use the app, there are postage-paid deposit envelopes for you to use too (absolutely free).
(read our full review of Ally Bank)
Capital One 360 Performance Savings – 0.40% APY
I’ve had a Capital One 360 Performance Savings account ever since it was an ING Direct account – a testament to how good of a bank I think they are. I liked how easy it was to open new accounts and manage my money there – plus it offers a competitive interest rate. Sometimes, we list Discover higher because you get a similar rate plus some bonus cash (when a promotion is available) but Performance Savings is comparable.
Capital One 360 has the added bonus of being part of Capital One, which makes management of your bank account easy if you already have Capital One credit cards. I enjoy having a lot of different services under one login because it’s just easier to manage.
Another added bonus is that CapitalOne often offers a bonus on new accounts.
Citi – 0.50% APY
We listed Citi at the start of the post and how they had a low-interest rate but that’s for their brick & mortar savings account. It turns out that, in some states, they offer a new Citi Accelerate Savings account that has a very competitive interest rate. The Citi Accelerate Savings account is their online bank and it has no minimum opening deposit. The only downside is it is only available in 42 states.
There is, however, a monthly fee that can be easily avoided. The monthly fee is $4.50 for just the savings account (not linked to a Checking account) but you can avoid it by maintaining an average monthly balance of $500 or more. If you have both checking and savings, the fee is $10 but you can avoid it with a $1,500 combined average monthly balance in your eligible linked accounts OR by making one qualifying direct deposit or bill payment per statement period.
It is not available in every state so when you click through, you’ll have to enter your state to check eligibility.
Discover Bank — 0.40% APY
Discover, the credit card folks, also has an online bank! Discover Bank (FDIC #5649) may not be a familiar name to you but they’ve been actively insured by the FDIC since 1934!
Their savings account has one of the highest interest rates, no maintenance fees, and no minimum balance.
The checking account also has no minimum balance, access to over 60,000 ATMs in the ATM network, plus a generous reward structure. You can earn 1% cash back on up to $3,000 in debit card purchases each month, pay a bill online, or write a check that clears (up to 100 such cashback transactions a month)
Barclays Bank — 0.40% APY
Barclays is a British based international banking corporation and the online bank is part of their US subsidiary, Barclays Bank located in Delaware (FDIC #57203).
Their online savings account product has a competitive interest rate, no minimum balance to open, and to earn interest you need to keep enough such that the interest rate earns you a penny each period (so you won’t earn fractional interest, this is typical).
Barclay’s has a competitive lineup of Certificates of Deposit, with terms as short as 3-months and up to 60 months. The rates are competitive with other online banks.
Marcus by Goldman Sachs — 0.50% APY
Marcus by Goldman Sachs (FDIC #33124) is the online bank of Goldman Sachs, most well known as an investment banking firm. They do quite more than that and Marcus by Goldman Sachs handles their online bank offerings.
They currently have some of the highest interest rates for savings accounts and they have no minimum deposits and no transaction fees (there do not appear to be maintenance fees either). They were named the Best Stand-Alone Account for Savings by MONEY® Magazine ‘Best Banks’ 2016 issue, for whatever that’s worth.
Here’s a full review of Marcus by Goldman Sachs to give you a full scope understanding of their offer.
Alliant Credit Union — 0.55% APY
Alliant Credit Union is the only credit union on this list and they are NCUA insured (NCUA is the equivalent of the FDIC for credit unions, same protections and same amounts – NCUA #67955).
The account minimum to open is $5 (but they will give you $5 to open an account!). The interest rate is available if you have $100 or more in your account and there are no maintenance fees if you elect e-statements (many of the online banks do not even offer paper statements, so this is not a huge distinction). They have 80,000+ ATMs in their network.
The same terms exist for their checking account too but their interest rate on the checking account is slightly higher than many others. There is no minimum balance required on the checking account and you can get $20 in ATM surcharge refunds per month.
Why bother including a credit union? Because this credit union offers two remarkable products – a Kid’s Savings Account and a Free Teen Checking Account. They are joint accounts with perks to help teach your kids responsible money habits – a fantastic idea.
American Express® Personal Savings — 0.40% APY
You are probably more familiar with their credit cards than their savings account but American Express National Bank (FDIC #27471) has been in business since 2000, when American Express sold their previous banking division to Standard Chartered.
American Express® Personal Savings is their high yield savings product. They also have certificates of deposit as well but they do not have a checking account, you are permitted to link up to three of those from external banks.
Betterment Everyday – 0.30% APY
Betterment Everyday is the online checking and savings product of one of the oldest roboadvisors, Betterment. Betterment is most well known for its investment products and only recently started offering an FDIC insured bank account. Through a partnership with four banks, you get up to $1,000,000 of FDIC coverage (4x normal) on your savings
plus a very competitive interest rate (recent pandemics have cut this rate tremendously). You manage it all through their app (I’d argue you shouldn’t have a million bucks in cash though!) so it’s invisible to you.
It’s a decent place to park cash you aren’t using in your Betterment account, which is a nice-to-have feature to have since many other brokerages pay nearly nothing on your cash deposits.
Common Questions about Online Savings Accounts
Here are a few questions I get asked a lot when it comes to these online savings accounts.
Online savings accounts are just like regular savings accounts. The big difference is that many of the banks that offer online savings accounts don’t have physical locations you can visit. Your main point of contact is through an app or online banking.
Many of the banks also offer online checking accounts that work just like regular checking accounts. The app will usually let you deposit checks by taking a picture of the front and back. You can access your money through a regular ATM and many banks have partnerships with national ATM networks like Allpoint.
If online savings accounts are just like savings accounts without physical locations, what’s the benefit of getting an online savings account? They have much higher interest rates. If you ever look at the interest rate of a regular bank, it’s usually ridiculously low.
For example, as of this writing, the interest rate at Bank of America’s savings account is 0.01% APY. It’s basically zero and it has been for a long time. Ally Bank’s interest rate is 0.50% APY.
Online banks tend to have much lower fees too. Ally Bank doesn’t have a maintenance fee and no minimum balance. Bank of America’s Core Checking has a $12 monthly fee that is waived if you maintain a balance of $1,500 or have a qualifying direct deposit of $250+.
Yes, 100% safe. Online banks are FDIC insured and so your money is as safe in those banks as they would be in a traditional bank. Your funds are protected up to $250,000 by the FDIC. If the bank fails, the FDIC will get you your money back.
As for protection against fraud, they often have security precautions in place to prevent many of the different types of fraud. Many banks offer two-factor authentication, to confirm your identity, as well as plenty of notifications. You can set up your bank to notify you every time there is a transaction, a service not many banks offer.
There is no limit to how many savings accounts you can have but you will receive a Form 1099-INT from every bank that pays you more than $10 in interest. You may not want to deal with so many forms when it comes time to do your taxes!