Western Alliance
Recommended for high APY (annual percentage yield)
- Deposits are FDIC Insured
- No minimum balance to earn APY
- Earn high yield on all balances
NexBank High Yield Savings
Powered by the Raisin platform
- High yield on all balances
- No minimum balance
- Powered by Raisin
Valley Direct High Yield Savings
Earn up to 5.05% APY
- No minimum balance requirements
- Earn high yield on all balances
- Member FDIC
Barclays Online Savings
Recommended for online-only within a large banking ecosystem
Earn up to 4.20% APY
- Deposits are FDIC Insured
- No account or maintenance fees at all
- Open online nationwide
How to Choose the Best Savings Account
Now that you have an idea of the best of the best available right now, deciding on a new account should feel a little easier. If you still need some help narrowing it down, here are some additional tips on how to choose a bank.
When it boils down to it, picking the right one comes down to a couple of basic considerations.
APY
The first thing to think about is how much you stand to earn. The higher your APY, the faster you’ll see your balance grow.
When it comes to savings accounts, annual percentage yield (APY) is the name of the game. Your APY is the amount of interest the bank pays you (if the account offers APY earnings).
Basically, it’s free money just for keeping cash in your account, and it’s calculated based on the amount of your deposits.
Interest is typically compounded daily and paid out monthly, and the average rate for an American bank account is right around 0.05%, though this is definitely well below what you can expect to get with HYSAs.
Savings account interest rates are loosely related to the Federal Reserve, more commonly known as the Fed, which is the US central bank that controls the overall cost of borrowing money through the Federal Funds Rate.
Fees
Even if you have an account with a great APY, excessive fees can quickly cut into your earnings.
Monthly maintenance fees, low balance fees, and overdraft protection fees can add up if you aren’t careful, so it’s important to understand all of the fees associated with any account.
This isn’t to say that you need to avoid accounts with fees entirely — the right account for you might come with some. The key is to find an account where the fees are avoidable.
For example, suppose you open a savings account that requires a minimum balance requirement of $25,000 to avoid a $25 monthly fee. Each month, you need to be sure that you maintain consistently maintain that high balance.
Traditional vs. Online
The banking industry as a whole is currently at a crossroads between traditional and modern platforms.
While big, traditional banks still control a huge majority of deposits, online banks and fintech companies continue to gain momentum as services across all industries increasingly go digital.
That said, each form of banking comes with its own set of pros and cons. Generally speaking, online banks tend to have higher APY rates and lower fees, while traditional banks add value through a wider range of banking products and in-person customer support.
Particularly for savings accounts, higher yield options are typically more readily available online.
However, the growing popularity of digital banks has already pushed some of the big banks to increase their bottom-of-the-barrel APY rates.
FDIC Insurance
Most banks are insured by the Federal Deposit Insurance Corporation (FDIC), which protects your deposits if a bank fails and isn’t able to cover them. The maximum coverage is $250,000 per depositor.
FDIC insurance is essential with any bank account, and it should come as a serious red flag if you’re considering a financial institution that isn’t member-FDIC itself or associated with a bank that is.
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Frequently Asked Questions
What banks have the best interest rates on savings accounts?
Generally speaking, the best interest rates available today are found within the online banking community.
This is because online banks, due to the lack of physical spaces and fewer employees, have significantly less overhead to worry about. These reduced costs are usually passed on to customers through higher APYs and lower fees.
As for the top APYs available right now, Vio Bank and Axos Bank are currently the top-paying. However, this can change quickly as interest rates tend to fluctuate based on how a given bank is doing and which direction the Fed is trending.
Remember that while one bank might boast the highest APY at one point, the situation can change in a matter of months or weeks.
How much interest will I get on $1000 a year in a savings account?
It completely depends on the APY that the bank pays. It’s difficult to get an exact estimate because interest rates fluctuate throughout a given year, but let’s go with Ally Bank as an example.
Suppose you deposit $1,000 into a high yield savings account with an APY of 0.50%. You can expect to earn about $5 in interest annually if your balance stays the same for the entire year.
It may not seem like a lot, but as your savings balance grows, so does your return on interest. For example, at the same 0.50% APY, a $10,000 balance earns around $50 each year, and a $100,000 balance earns around $500.
Can I have multiple savings accounts?
The short answer is yes — you can open more than one savings account, and there are no legal restrictions against doing this. But the question you should be asking is, what value is each account adding?
Keeping your savings in one place helps keep things organized, and your interest earnings will be more consistent and profitable if you focus on growing the balance in a single, high-earning account.
That said, there are valid reasons to hold multiple accounts. For example, you might want an additional account for a child or dependent, or you might want to keep your emergency fund separate from your main account. It all comes down to your personal preference.
Can you lose money in a savings account?
This is a great question that tends to come up often with high-yield accounts because it seems like there should be some risk involved when you’re earning seemingly free money.
The short answer is no. Savings accounts aren’t like investment accounts, which are subject to market volatility and rise and fall based on market conditions. Interest rates can certainly drop, which will leave you earning at a slower rate than you were before, but your balance won’t start moving in a negative direction.
However, if your bank charges a monthly service fee — and unfortunately, many big national banks do — you are technically losing money when the bank deducts these fees from your account. You’ll also want to be sure to maintain a positive account balance. If you overdraw the account, for example, you can lose money due to overdraft fees.
Furthermore, like any business, banks can fail at any time, which makes choosing an institution that’s insured by the FDIC or NCUA a necessity.
Are online banks better than traditional banks?
There’s a growing perception that the masses are ditching the old guard for more modern banking solutions. While it’s true that online-only banks are experiencing rapid growth, the reality is that traditional banking still dominates the industry overall.
Both traditional and online banks have value in their own ways, and which is better is up to you. It’s a matter of understanding what sort of banking experience you’re looking for, based on the pros and cons that come with either option.
Online banks usually have low fees and high rates but don’t have in-person support or wide-ranging account options. On the other hand, traditional banks have name brand recognition and a nationwide presence, but they also tend to nickel and dime you with fees and offer very little interest.
It’s worth looking into both types of banks and figuring out which one lines up with your needs and financial goals. There are fantastic accounts within both types of banks, but the best one for you completely depends on what you’re looking for.
