This Online Savings Account Has a 5.55% APY. Should You Open One?

Just when I thought the good savings rates were coming to an end, out jumps one of the best rates on a bank account I've come across: a 5.55% APY for a high-yield savings account at My Banking Direct. If you've been holding out on today's best savings account rates for a lucrative deal, this one might be it. But before you apply, let's delve into the fine print and see what the savings account requires.

A superb rate for a regional bank

First off, this excellent savings rate from My Banking Direct comes with no strings attached. Unlike other banks, which may require you to deposit a massive amount to snag the best annual percentage yield (APY), this account earns 5.55% on any balance (minimum deposit to open is $500). Although the fine print claims this account has a tiered APY, you will currently earn 5.55%, even if your daily balance is $1.

Secondly, this account comes with no monthly maintenance fees. That's right. You don't even have to meet monthly minimum balance or deposit requirements to waive a fee. In short, this is truly a free savings account that lives up to the name.

Speaking of online banks, it's prudent to note that My Banking Direct doesn't have brick-and-mortar locations. Although it's technically an online service to Flagstar Bank, which has branches in several states, you can't access your account at these branches. If you're someone who likes in-person consultations -- or branch access to your money -- this account won't be right for you.

But if you can handle banking online, you can snag one of the highest APYs on the market for a high-yield savings account.

Before you open an account at My Banking Direct, consider this first

Although this is a great rate for a savings account, take heed of how interest rates might be changing. Rates on savings accounts are loosely connected to the Federal Reserve's federal funds rate. Generally speaking, when the Fed rate changes, banks and credit unions typically adjust their rates accordingly. While the central bank hasn't touched the fed rate since July 2023, many experts predict rate cuts later in 2024.

If the central bank cuts rates in 2024, we'll likely start seeing a rate dip on most savings accounts, including this one from My Banking Direct. Unlike certificates of deposit (CDs), savings accounts have a variable rate, meaning your bank can change it at any time. You might earn 5.55% today on your savings. But six months from now, your rate could be reduced to something less competitive.

One way to freeze today's most competitive rates is to deposit your money in a CD. Unlike savings accounts, CDs have fixed rates, which cannot be changed after they're opened. While CDs have risks (like early withdrawal penalties), they can lock in rates before they change. If you want to stay with My Banking Direct, take a look at its 5-month CD. It has a competitive rate of 5.50% APY and minimum opening deposit of $2,500. While that APY is competitive, you might want to look at other top CD providers for better rates on longer terms.

All in all, if you're looking for a high-yield savings account, it'll be hard to beat this deal from My Banking Direct. Snag it now while you still have a chance, and earn high interest for money you've already saved.