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Best Savings Accounts

Maybe you can’t stop thinking about the car of your dreams, a far-flung vacation spot, or how you’re going to fund your future. However, you’re not sure what steps to take in order to make these thoughts become reality. Opening a savings account is a great place to start.

What is a savings account?

A savings account is a basic account held at a financial institution. The account holder can make regular deposits while the account accrues a moderate interest rate, usually between 0.01%-1.5% per year. While funds may be accessible through wire transfers and ATM withdrawals, account holders must limit certain types of withdrawals due to federal regulations.

Why do I need a savings account?

Consider your current financial behaviors and long and short-term savings goals. With a savings account, the following are possible (especially for new savers!):

Build savings habits. Watch small, recurring deposits to a separate account grow over time. When you set up your saving account, connect it to your paycheck, pension, or other sources of monthly income. Review your monthly budget and determine an appropriate fixed amount – even just $20 a month – to be deposited directly into your savings account.  Because this money bypasses your checking account, it tears down barriers and excuses to not save. The funds are “out of sight, out of mind.” In one year, you will have $240 plus earned interest with very little effort.

Create a safety net. You finally realize how easy saving can be through small, regular deposits to your savings account. Now, stop living paycheck to paycheck. A great first step in achieving this is building an emergency fund. An emergency fund prevents financial ruin in the face of unexpected situations such as car troubles, medical bills, unemployment and so forth. As a general rule of thumb, your emergency fund should be between three and six months worth of living expenses.

Plan for the future. Once you establish your emergency fund, think about you and your family’s financial future. Where do you see your finances in one year from now? Five years from now? Twenty years from now? Figure this out and use your savings account to move towards these goals today. Normally, these goals look like a downpayment on a home, a retirement fund, or money for home renovations, but differ depending on your preferences.

Earn interest. While interest rates on traditional savings account have dipped over the past few decades, a 0.01%-1.55% interest rate still makes an impact on your savings account balance. These accounts are also usually FDIC insured up to $250,000. This way, you can make money on your money without the risks that typically come with investing. An initial deposit, recurring deposits, and interest create solid foundations of a savings account.

Treat yourself!  Don’t forget to reward yourself as you conquer your savings goals. Putting money in your savings account is not a zero-sum game – you can save for a tropical vacation and your retirement at the same time. All this takes a strategic plan. Plan ahead, budget, deposit money into your savings account, and reap the benefits. Remember who you are saving for – you, your future, and ultimately, your happiness.

How does a savings account differ from other accounts?

For everyday transactions, having a checking account is crucial. Normally, checking accounts allow an unlimited number of transactions, including from debit cards and physical checks. The majority of checking accounts do not accrue interest. Savings accounts, on the other hand, are made for long-term savings and building interest. Because savings accounts are not for everyday transactions, funds are normally less accessible. Many accounts do not come with an ATM card and are limited in certain types of withdrawals per month.

Like savings accounts, certificates of deposit (CD) accumulate interest and are meant for long-term saving. However, CDs require account holders to commit their funds for a specific length of time, called a term length. The longer the term length, the higher the interest rate (usually between 0.05%-2.5%), and the bigger the payoff. CD account holders may not withdraw money before the end of the term length without paying a penalty. This is perfect if you have a large initial deposit that you’re certain you won’t need to access during the term length. But if you’re looking to build up an emergency fund or save for the first time, accessing your savings without penalty may be a critical factor, so a traditional savings account may be the better option.

If you’re researching best savings accounts, it’s likely you’ll come across money market accounts (MMAs) as well. MMAs feature a lower interest rate than both savings accounts and CDs, but funds are much more accessible. These accounts usually come with the ability to write checks and perform ATM withdrawals. Think of MMAs as a checking and savings account hybrid.

As you can see from the above examples, the main differences are interest rates and accessibility. Interest rate and account accessibility are inversely proportional; the greater the access to your funds, the lower the interest rate. And of course,  the lower the access to your funds, the higher the interest rate. You’ll find this tradeoff between interest rates and accessibility when you research other financial products as well.

At the end of the day, compared to other savings vehicles, savings accounts will allow you to receive an intermediate interest rate with moderate access to your funds.

Types of savings accounts

Before delving into savings account specifics, it’s important to understand the difference between the main types of savings accounts you’ll encounter: brick-and-mortar and online. Each has their own set of pros and cons. 

Type of savings account Annual Percentage Yield (APY) Pros  Cons
Brick-and-mortar 0.01-0.04%
  • One stop banking
  • Tiered interest rates
  • Relationship rates
  • Low/no fees
  • Rewards possible
  • Brick-and-mortar location
  • Lower interest rate
  • Higher minimum balances
  • Other transaction fees

Online

0.5-1.5%

  • High interest rates
  • Low/no fees
  • Zero minimum balance
  • Daily compounded interest
  • Harder to access funds
  • Mobile and online experience must be simple

 

Features of a great savings account

High Annual Percentage Yield (APY) 

High Annual Percentage Yield (APY): Although interest rates have dropped over the past few decades, they continue to be the main attraction in opening a savings account. Right now, the average APY is around 0.05% or less. The highest APY will be found in online, high-yield savings accounts or in standard, brick and mortar savings accounts with tiered or relationship rates.

Most online savings accounts offer a higher APY than other types of accounts. Their APY does not change based on daily account balances and usually falls between 0.05%-1.5%, which is significantly higher than what most brick-and-mortar banks are able to offer.

Tiered and relationship rates  

The majority of standard savings accounts from brick and mortar locations offer a 0.01% APY. If you choose one of these accounts, it is possible to get a better APY through relationship and tiered rates.

Tiered rates are based on daily account balances. For example, if your daily account balance is $5,000 you might get 0.04% APY and if it’s $10,000 you might get 0.06% APY. The increments change with each account structure and normally range from 0.01%-1.0% APY. These tiered rates are good for aggressive savers who want higher accessibility to their funds through brick-and-mortar banking. However, it’s important to note that you usually don’t see huge increases in APY until you reach a six digit account balance.

Other standard, brick-and-mortar savings accounts might offer relationship rates, which are higher APY rates based on your ability to link other in-house financial products to your savings account. While the rates may not be as high as what you’d get in a typical online, high-yield savings account, this account structure may be beneficial for aggressive savers who are loyal to their bank or want a one-stop-shop banking experience.

Low monthly fees 

Let’s say you open up a savings account with an amazing APY of 2.5%. You make small deposits and withdraw money when necessary, but start noticing fees on your account statement. This could be $10 for an expedited wire transfer, a $25 monthly maintenance fee when your account balance dropped below the threshold, and so on. Months or years of these fees add up.

If you find yourself regularly getting charged these fees, they could eventually negate any interest earned on your account. You have to ask yourself – will it be worth depositing money in my savings account if the accrued interest is less than the fees?

Monthly fees are usually $0 for online savings accounts and range from $4-25 for other standard saving accounts. Accounts with monthly fees normally offer a waiver. The waiver could be maintaining a daily account minimum, linking other in-house financial products, being under the age of 18, or being 62 years old or over.

Low transaction fees 

These come in the form of ATM fees, certain types of electronic transfers, and so on. Be sure to read the terms and fees prior to opening your savings account.

Accessibility 

Accessibility is a catch-22 for savers. You may need to access your saved funds in the case of an emergency or for everyday expenses, but it is harder to save when your funds are easily accessible. Think about your spending and saving habits and pick your account accordingly. Here are some important features to consider:

  • Mobile banking: Some banks offer free mobile apps where you can access your account, track balances, and transfer money. Key features to look for are goal setting apps, financial education, and the ability to check your credit score. If you’re thinking about opening an online savings account and expect to access your account on your phone or tablet, make sure to explore their mobile application first. 
  • Brick-and-mortar locations: Calling, emailing or instant messaging customer support doesn’t always cut it. Your savings account’s physical location allows for you to receive in-person customer support. Brick-and-mortar banking also allows you to withdraw cash without extra fees and withdraw above the federally regulated six transfers a month.
  • ATMs: Some financial institutions give bank cards that are directly linked to your savings account. Others may allow access to savings through a checking account-linked debit card. This way, you can withdraw money at your convenience. You may have to watch out for ATM fees, but some banks will reimburse these. 

Customer support 

All financial institutions that offer savings accounts have some combination of customer support, but some outshine others. Live 24/7 support is the gold standard, but some banks also offer a combination of online chat, email, and phone supports as well.

Security 

Putting your money away in a savings account is pointless unless your money is secure. Most financial institutions insure savings accounts through the FDIC for $250,000. Others offer FDIC insurance other forms of protection, such as fingerprint scanning for mobile banking or free security software for your computer.

Things to consider

Now that you know the basics of a savings account, it’s time to think about your behaviors. Ask yourself the following:

  • How do I interact with my current bank? Do I use a mobile app, online banking, in-person transactions?
  • Am I currently saving? Am I a new saver who isn’t sure of my savings behavior? Or am I a seasoned saver looking for a higher interest rate?

Now, ask yourself what you want for your financial future:

  • What are my financial goals?
  • What savings account tradeoffs am I willing to accept?

Make saving easy for yourself. Integrate savings into your current behaviors, regularly assess your goals, and make incremental changes until you achieve your savings dreams.

Best overall

Ally Bank Savings

  • High APY: 1.45% for all balances
  • Zero monthly fees
  • Great mobile app, online experience
  • Free Allpoint ATM use
  • Mobile and desktop security software included

Ally Bank Savings proves that an online, high-yield savings account can be safe and accessible.

Funds receive a slightly larger APY than what a typical online, high-yield savings account offer – 1.45%. What sets this account apart, however, is how easy it is to manage the account.

Ally offers eCheck Deposit, an ATM card, a mobile app, online banking, 24/7 live customer support, transparent fees, and free WebRoot SecureAnywhere anti-virus and anti-malware on three devices.

Best APY

Dollar Savings Direct

  • High APY: 1.80% for all balances
  • No fees or minimums
  • Only accepts checks from a linked account as an initial deposit, but can process future transfers electronically
  • Online banking available
  • 2-Step Verification for all online logins

Dollar Savings Direct offers the largest APY among all savings accounts – 1.80% for all balances. This account also boasts that it does not charge any fees.

Your Dollar Savings Direct account would be available 24/7 through an online portal that is equipped with 2-Step Verification. This feature sends a 6 digit code to your cellphone every time you log in.

Funds are not easy to access, however. Automated Clearing House (ACH) transfers could take between 2-4 days and deposits are usually available after 5 days.

Customer support is available by phone (for limited hours), mail, and email.

Best for lowest fees

Capital One 360 Savings

  • Completely fee-free
  • Moderate APY: 1.0% for all balances
  • Free use of Allpoint ATMs
  • Digital payments: offers peer-to-peer payments through Zelle, Apple Pay, Google Pay, and Samsung Pay
  • Top-rated mobile and online banking experience

While Captial One 360 Savings is not the only online bank to offer a fee-free account, it is one of the only banks that allows for fee-free ATM withdrawals, free peer-to-peer transactions, free wire transfers, and 24/7 live customer support.

Best brick-and-mortar

Citibank Savings Access Account

  • Moderate APY: Starts at 0.04%
  • Tiered rates: 0.04% if account balance is <$25,000, 0.06% if account balance is >$25,000
  • Low minimum monthly balance
  • Monthly maintenance fee easily waived
  • Must have linked Citibank Access Checking

The Citibank Savings Access Account is the best brick-and-mortar savings, especially for those who already have a Citibank Checking Account and are looking to benefit from tiered APY rates or low monthly minimum balance.

The account offers a boost in APY if your account balance is greater than $25,000. Although you can find better APY elsewhere, you might want to consider this if you already have a Citibank account or desire a one-stop-stop banking experience.

To top it off, Citibank offers mobile and online banking, thousands of ATM and branch locations, Citi Identity Theft Solutions to protect yourself from fraud, and 24/7 live support via instant message and phone.

Best mobile app

Bank of America

  • Fingerprint sign-in
  • Deposit checks, check balances, pay bills, transfer money
  • Locate banks and ATMs
  • Enable customized alerts

While Bank of America’s Reward Savings Accounts do not offer a high APY, their mobile banking experience may be a draw for some.

You are able to track your spending and budgeting. The app breaks down your spending categories to make sure you stay on track.

It also allows you to set up customized mobile alerts. You can choose to be notified about deposits, low balances, and any suspicious activities.

Best customer support

Ally Bank Savings

  • 24/7 live customer support
  • Instant message customer service
  • Secure email support

Our best savings account winner, Ally Bank Savings, also wins the category for best customer support.

One of the biggest concerns about having an online bank account is having the ability to connect with a customer service representative. Ally Bank understood this concern and planned their customer service experiences accordingly. On top of live chat and secured emails, they offer 24/7 live customer support with a call wait time feature to ensure customers wait as little as possible.

Best for beginners

Wells Fargo Way2Save Savings

  • Easy to waive monthly maintenance fee
  • Accessible funds
  • Savings programs: My Savings Plan, Budget Watch, Daily Change mobile application, and Save As You Go Transfers.

Beginner savers need to understand how they spend their money in order to create savings behaviors. This made simple with Wells Fargo Way2Save Savings.

The account offers My Savings Plan, which is an online tool to help clients plan, monitor, and reach savings goals; Budget Watch, another online tool where users can track spending, create budgets, and manage monthly expenses; the Daily Change App, a mobile app that challenges users to savings behaviors, like brown-bagging lunch for a week,  and deposits the savings into their savings accounts; and Save As You Go Transfers, which transfers $1 of funds from a customer’s Wells Fargo checking for each qualifying transaction.

While this account offers standard brick-and-mortar APY of only 0.01%, it may be worth giving up a higher APY for the financial education and games that could encourage healthy savings behaviors.

Final thoughts

If you’re looking to earn a moderate interest rate and take zero risks, while maintaining some access to your funds, you should consider opening a brick-and-mortar or online savings account.

The most beneficial savings account for your wallet is a high-yield, online account. These are great for savers who are confident in their habits and are okay with having limited access to their accounts. Some online savings accounts, however, are changing this with innovative mobile, online, and ATM experiences.