The cornerstone of every financial life is a good bank.
A good bank won't ding you with fees.
A good bank won't require a huge minimum balance.
A good bank will even give you some interest for your money.
So how do you find a good one?
Look at online banks.
My first online savings account was with a little-known Dutch bank with a funny name. 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 bank.
I loved them.
ING (which is an acronym for Internationale Nederlanden Groep) was fantastic and the bank was acquired by Capital One a short time ago. I've considered it one of the best online banks for quite some time.
Today, online savings accounts are commonplace and extremely versatile. The interest rates are all similar so to find the best you need to look at the different perks.
How do these rates compare with traditional banks? See for yourself, not a single one is even close to an online bank (I was embarrassed to even type them):
- Bank of America: 0.01% APY
- Citi: 0.04% APY
- Chase: 0.01% APY
- U.S. Bank: 0.04% APY
- Wells Fargo: 0.01% APY
- National Average: 0.12% APY (via Informa Research Services)
All the banks on this list are 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.
Discover Bank — 1.70% APY + $150 or $200
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. Plus they frequently have a bonus when you open a new Discover Savings Account. Right now that bonus is $150 or $200 depending on how much you can deposit.
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)
Betterment Everyday – 1.83% 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. 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 great place to park cash you aren't using in your Betterment account, which is a great feature to have since many other brokerages pay nearly nothing on your cash deposits.
Citi – 2.05% 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.
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.
Synchrony Bank — 1.80% APY
Synchrony Bank (FDIC #27314) is probably the least well known name on this list but they were formerly GE Capital Retail Bank, a part of GE Capital.
Their savings account is tied for the highest interest rate with no minimum balance and no maintenance fees.
They don't have a “checking” account but instead what is known as a money market account. This account pays a higher interest than similar online checking accounts and has no minimum balance and no maintenance fees either.
Their CD rates are competitive with others on this list.
Barclays Bank — 1.90% 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.
Ally Bank — 1.60% 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).
Finally, they also offer an integrated brokerage accounted called Ally Invest. This gives you access to a low-cost stock broker too that only charges you $4.95 per trade ($3.95 if you have a daily balance over $100,000).
(read our full review of Ally Bank)
Marcus by Goldman Sachs — 1.70% 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 — 2.10% 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 — 1.90% 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.