Best Savings Accounts of June 2020
Kailey is an industry specialist covering bank accounts, credit cards, and all things personal finance. Her work has appeared on USA Today, CNN Money, Fox Business, and MSN Money.
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A savings account is a great way to put your money to work for you without risking it in the stock market. Some savings accounts can have an APY (annual percentage yield) that is more than 20 times the national average APY of 0.06%. If you're interested in growing your savings, the following key features are what we think makes for a great account:
- High APY: An APY above 1% is good, but even higher rates are possible with The Ascent's top picks.
- No monthly maintenance fee: It's commonplace for market-leading savings accounts to not charge a monthly maintenance fee.
- FDIC insurance: Whether you're putting money aside to build an emergency fund or wanting to earn more interest, security is important.
Our picks of the best savings accounts below all offer these essential features, among other market-leading benefits. Check out the picks below to get started and read further to learn if a savings account is right for you.
Coronavirus considerations for savings accounts
Interest rates are changing due to the novel coronavirus and we want to ensure you have access to additional helpful resources. If you'd like to learn more about coronavirus and your money, please visit our coronavirus hub.
You probably know American Express as a popular credit card issuer, but its savings account is garnering a lot of positive attention because of its low fees and high APY, available to anyone who maintains a balance of $1 or more. Read our full review to learn more.
The UFB Direct High-Yield Savings account offers one of the highest APYs of any savings account, though only those with $10,000 or more in their account will earn this rate. If you meet this criterion, you can't do much better, especially when you consider that this account offers a complimentary ATM card to give you easy access to your funds. Read our full review to learn more.
The Vio Bank High Yield Online Savings account offers among an industry-leading APY to all account holders, and it doesn't charge monthly maintenance fees. This makes it a great fit for anyone hoping to grow savings over time. Read our full review to learn more.
The HSBC Direct Savings account's APY is enough to grab most people's attention, but if that alone doesn't do it for you, you should also know that it doesn't charge monthly maintenance fees and lets you open an account with as little as $1. Read our full review to learn more.
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How does a savings account work?
A savings account is a type of bank account that enables you to earn interest on your money in exchange for limited fund access. You can put as much money as you'd like into a savings account, but you can only make up to six free withdrawals per month by federal law. Exceeding this amount could result in extra fees.
Banks use your savings to help fund loans for their other customers. Borrowers must pay back what they borrowed with interest, and your bank passes along some of those savings to you in the form of interest on your savings account. A larger balance or a higher savings account interest rate results in more interest.
Savings accounts may have monthly maintenance fees and they usually do not include ATM cards or check-writing capabilities, so if you want to withdraw money from the account, you must do so via automatic bill pay or transfer the funds to a linked checking account.
Like other types of deposit accounts, savings accounts are typically backed by the Federal Deposit Insurance Corporation (FDIC). This protects your money up to $250,000 per person per bank against bank failure. So if your bank goes under, you won't lose all of your hard-earned cash.
What should I use a savings account for?
A savings account is a good place for money you don't need for everyday spending but want quick access to. The following use cases are best for savings accounts:
- Building an emergency fund: You should keep your emergency fund in a savings account.
- Money being saved for large purchases: You can earn interest on money set aside for a large purchase and have the flexibility to withdraw those funds whenever needed.
It's also worth considering when you should avoid a savings account.
Savings accounts are not good places for money you plan to use for everyday spending because withdrawals in excess of six per month could bring fees.
They're also not the best choice for money you don't plan to use for decades because savings account interest rates are usually lower than the return you can get from investing.
What should I look for in a savings account?
A great savings account should check the following boxes:
|What to look for||Why it matters|
|High APY||A competitive savings account should offer an APY above 1%. Yield isn't everything, but all other factors being equal, you obviously want to get the best possible return on your savings.|
|No monthly maintenance fee||It's become table stakes for savings accounts to not charge a monthly maintenance fee. Fees can eat into your profits and possibly cost you more than you're earning in interest. Check your bank's fee schedule to learn about any costs associated with the account and avoid a monthly maintenance fee if you can.|
|Flexible deposit and withdrawal options||Check with the bank to learn about the different ways you can deposit money into and withdraw it from your savings account, and make sure you're comfortable with them. You likely also want a bank with an online portal and mobile app for managing your funds remotely.|
|FDIC insured||The safety blanket provided with FDIC insurance is important, particularly since many people put money into a savings account both for safety and to grow their savings.|
Why most of the best savings accounts are from online banks
High APYs and no to low fees are essential features for a savings account. Online banks can offer higher APYs and lower fees than brick-and-mortar national banks since they don't have the overhead of managing a nationwide network of physical branch locations.
What are the differences between online banks and traditional banks?
Traditional savings accounts are offered by brick-and-mortar banks with networks of branches and ATMs across a region or the nation. Online banks provide the same services, more or less, except they don't have any bank branches.
This can be an advantage or a disadvantage, depending on what you value in a savings account. The downside to online banks is you can't visit a branch in person if you want to get live assistance or withdraw a large sum of money. The upside is they usually offer much higher interest rates. Online banks don't have the high overhead costs associated with maintaining bank branches and they can pass those savings along to you in the form of low fees and high APYs.
Here's a look at some of the key differences between savings accounts offered with traditional banks online banks:
|Comparing bank features||Online banks||Traditional brick-and-mortar banks|
|Interest rates and fees||Without the overhead of a branch network, online banks can pass the savings on to depositors with high APYs and low to no fees||Typically lower APYs than online banks and some include monthly maintenance fees|
|ATM networks||Most online banks don't have proprietary ATM networks, but they may partner with a nationwide ATM network, like Allpoint, to offer their customers surcharge-free ATMs. They might also reimburse you for any ATM fees you incur.||Brick-and-mortar banks tend to have their own proprietary ATM networks you can use without paying a fee|
|Branch access||Most online banks don't have branch access to bank in person, although some do have a small network of branches in select states.||Most have branch access nationwide and in major metros, among other cities.|
|Deposit and withdrawal options||Includes standard free electronic transfers, incoming and outgoing wires, and check deposits by mail||Includes standard free electronic transfers, incoming and outgoing wires, and check deposits by mail, in addition to branch banking access|
Is an online bank FDIC-insured?
Yes, just like traditional banks, most online banks are insured by the FDIC, including all the ones that The Ascent includes as top picks. This protects covered deposits up to $250,000 against any problem your bank might have, up to and including the complete failure of the entire banking institution.
But if you have a lot of money to deposit, you have to be careful about where you put it. All of the accounts you have in the same name at the same bank are added together to calculate the $250,000 limit. So if you have two savings accounts -- each of which has $150,000 -- then the total of $300,000 leaves $50,000 at risk above the $250,000 limit.
You can get extra FDIC coverage beyond the $250,000 limit depending on the accounts held at a single bank. For instance, you could get $750,000 in coverage at a single bank by putting money into both a joint savings account under yours and your spouses name and an individual CD in just your name. That's because the $250,000 limit is per depositor, per account category. Spreading the funds across depositors and account categories increases coverage within a single bank.
How to make deposits and withdrawals
While most online banks don't have branches you can visit, they still offer several ways to deposit funds into your savings account and withdraw them later when you need them.
You can deposit funds in any of these ways:
- Electronic funds transfer from another bank account
- Direct deposit from your employer
- Wire transfers
- ATM deposits
- Mobile check deposit through a mobile app
- Mailing checks to your online bank's mailing address
Online banks typically give you these options for withdrawing money:
- Electronic funds transfer to another bank account
- Wire transfers
- ATM withdrawals
- Debit card purchases
- Check withdrawals (usually limited to money market accounts)
- Requesting a mailed check from your online bank
It may also be worth considering that the Federal Reserve limits withdrawals from savings and money market accounts, including those at online banks, to six per account cycle. Withdrawals above that limit typically incur fees and can cause your bank to close your account.
How much can you earn in a savings account?
How much you'll earn depends on how much money you put into the savings account and the APY the account offers. To give you some idea of how much your money could grow to, consider the following table, which shows how much you'd have if you invested $100 per month in a savings account and earned various APYs.
|Time||1% APY||1.5% APY||2% APY|
Early on, the difference between a 1% rate and a 2% rate isn't all that significant. But by the time 10 years has gone by, getting a better rate has earned you $668 more in interest, and that difference grows to nearly $3,000 in earnings over a 20-year period.
More important than earning interest is that your funds are still available to you in an emergency. Even if you earn only 1% during a period of low rates, that's still a lot better than the 10% to 20% or more in interest you'd pay if you had to charge an unexpected expense to a credit card and pay it off over time. The peace of mind an savings account can give you has value above and beyond the interest you'll receive.
Do savings account interest rates fluctuate over time?
Savings account rates are variable and move in tandem with the Federal Reserve increasing or decreasing interest rates. Rates can change frequently, since the Federal Reserve Open Market Committee meets every six weeks to make rate decision to maintain, decrease, or increase interest rates.
Coronavirus and savings account rates
As the economy has slowed, the Federal Reserve has cut interest rates to spur economic growth. The downside is savings account interest rates are variable and have declined from above 2% for some banks. The Ascent's coronavirus resource hub can help if you're needing assistance on how to manage your money during the pandemic.
Savings account terminology
Here are a couple key terms you should know if you plan to open a savings account.
APY: This stands for annual percentage yield. People often use this term interchangeably with interest rate, but the two are not the same. APY takes into account how often interest compounds as well as the actual interest rate. A higher APY means more interest for you.
Compound interest: Compound interest essentially means earning interest on your interest. At first, you only earn interest on the principal. But that interest then becomes part of your new principal, so the next time, you earn interest on a larger sum, which helps your savings grow more quickly.
Monthly maintenance fee: A monthly maintenance fee is a fee your bank charges you to own your savings account. Some banks, especially online banks, don't charge this fee while others will waive it if you meet certain requirements.
Savings vs. Checking vs. CDs: Which should you pick?
Choosing the right home for your money is essential for minimizing frustration and earning the most in interest. This chart provides a quick overview of some of the key features of savings accounts, checking accounts, and CDs.
|Features||Savings accounts||Checking accounts||CD account|
|Interest rates||Savings accounts offer higher APYs than most checking accounts, and some CDs, in exchange for more restrictions on withdrawals||Typically offer a low interest rate||Depending on the CD term and bank, a CD may offer a better rate than savings or checking accounts, in exchange for restricted withdrawal options|
|Variable or fixed interest rates?||Variable||Variable||Fixed, for most CD products|
|Liquidity||Fairly high, but there are fewer withdrawal options and penalties for excessive withdrawals||High -- several deposit options and no restrictions on withdrawals||Depends on the type of CD, but typically low with penalties for early withdrawals|
|ATM card?||Possible, but rare||Yes||No|
Is a savings account right for you?
If any of these statements apply to you, a savings account with an online bank may be the perfect home for your money:
- You'd like to earn a high APY on your savings.
- You don't plan on withdrawing funds more than six times per month.
- You like being able to manage your money from wherever you are.
- You typically deposit or withdraw funds using electronic funds transfers.
- You are comfortable using email, phone, or live chat support when you need assistance.
But savings accounts with online banks aren't right for everyone. Here are a few signs one of these accounts isn't a good fit for you:
- You value in-person interactions when it comes to managing your money.
- You need to withdraw funds more than six times per month.
- You don't have reliable internet access or you're not that comfortable using the internet.
- You have special banking needs that go beyond simple deposits and withdrawals.
Alternatives to consider
One of these other bank accounts might suit you better if a savings account doesn't sound like a good fit.
CD accounts: A certificate of deposit is a special type of savings account that offers a higher interest rate than savings accounts, but you cannot touch your money for a set number of months or years, determined by your CD term. If you withdraw your money before this deadline, you will pay a penalty in lost interest.
Money market accounts: Money market accounts offer the high interest rates you find with savings accounts and CDs as well as some checking account features. Some offer ATM cards and checks so you can withdraw funds directly from this account, though you're still limited to six withdrawals per month.
Checking accounts: Checking accounts rarely earn interest, and when they do, their rates are lower than savings accounts. But checking accounts have no restrictions on withdrawals and most include ATM cards and checks for easy access.
How to open a savings account
You can open a savings account by visiting a bank branch, if it has one, or filling out its online application form. You will need to provide some personal information, including:
- Your address
- Your Social Security Number
- A government-issued ID, like a driver's license or a passport
If you are opening a joint savings account, both parties will need to provide this information.
Your bank may also require a minimum deposit to open the account. This may be different than the ongoing minimum balance required to avoid monthly maintenance fees, if your bank charges these. If you're transferring the funds from another bank account, you'll need to know its routing and account number.
You place money you don't plan to spend immediately in a savings account and it earns interest over time. How much depends on your balance and the savings account interest rate. In exchange for this interest, you agree to limit your monthly withdrawals from your savings account.
Savings account funds are FDIC-insured up to $250,000 per person per bank, so there's no risk of losing money if your bank goes under. The risk of losing money with a savings account at all is pretty slim, but it is possible if you incur a lot of fees or if your identity is stolen or a hacker gains access to your online account.
As long as you are aware of the fees your bank charges as well as methods of avoiding them and you protect your personal and account information, you should only make money with a savings account.
Your bank may have minimum balance requirements you must meet in order to own the account or earn the advertised interest rate. Failure to meet these requirements could result in additional fees or a lower interest rate.
Ideally, you should keep your emergency fund in your savings account as well as any money you're saving for a large purchase within the next few years.
|American Express National Bank||1.30%||High APY and low fees|
|CIT Bank Savings Builder||1.30%||High APY and low fees|
|UFB Direct High Yield Savings Account||1.61% for $10,000+ balances||High APY|
|Barclays Online Savings||1.30%||High APY and low fees|
|Vio Bank High Yield Online Savings Account||1.50%||High APY and low fees|
|Marcus by Goldman Sachs Online Savings Account||1.30%||High APY and no fees|
|HSBC Direct Savings||1.30%||High APY and low fees|