The Internet is an integral part of the global economy, and banks of all sizes, from local banks in small towns to international and well-known banks, are jumping on the bandwagon and offering a variety of the best online savings accounts.
Exclusively online savings accounts are also starting to compete with bigger banks by offering better rates among other attractive features. I've looked at some of the best options and found that these are the top choices.
Americans aren't putting much in savings accounts. About 62% have less than $1,000 in a savings account. However, by investing in an online savings account, you can make some money off your idle cash, all while keeping more money for a rainy day, investment or house purchase.
Average savings accounts rates are currently insignificant at 0.06%, according to the FDIC. Plus, some of the top banks in the country offer minuscule rates at 0.01%. With rates like that, savings accounts are little more than a secure place to keep your money.
...some of the top banks in the country offer minuscule rates at 0.01%
Take a look at our list and see what you think. Don't take our word for it, though. Consult family and friends, do some research, and think of your own wants and needs for a savings account. Here is a breakdown of the advantages and disadvantages of our top five.
The Best Online Savings Account - In This Guide
- The Best Online Savings Accounts: Our Top Picks
- Key Considerations of Online Savings Accounts
- Compare Online Savings Accounts
- Reasons to Switch to an Online Savings Account
- Online Savings Account Rates
- Other Reasons to Switch to a Savings Account
- Other Considerations
- Tips & Advice
- Savings Account Calculator
The Best Online Savings Accounts: Our Top Picks
- APY: .95%
- Required Balance: $500
Discover Savings Account Review
- No minimum amount required to maintain the account
- Interest calculated daily and paid monthly
- FDIC insured
- No monthly fee
- Online and mobile banking
- Need $500 to open an account
- Overdraft fee
- Travelers Checks not accepted
Discover Financial Services is an established name in online banking, with it starting as a subsidiary of Sears in 1985. They offer competitive APYs and the ability to open a CD with as little as $2,500. Plus, opening an account is easy and the process can be done entirely online.
- APY: 1.05%
- Required Balance: $30
Synchrony Bank Savings Account Review
- Limited fees
- Low minimum deposit
- Solid security measures
- No dedicated app
Synchrony Bank is a company that offers savings accounts with higher than average interest rates. This is one of the top players in the online banking arena and even beats out many of its bigger competitors in a number of areas. Though you can visit a brick and mortar branch in Bridgewater, New Jersey, banking with Synchrony will probably mean the majority of your interactions with representatives will be done online. However, their customer service and easy to use makes this a viable option.
- APY: 1%
- Required Balance: $1
Ally Savings Account Review
- Interest accrued daily and paid monthly
- FDIC insured
- No minimum amount required to open or maintain the account
- $0 monthly fee
- $0 ATM fee (for Ally-owned or non-Ally-owned ATM transactions)
- Overdraft fee
- Excessive transaction fee
- Returned Deposit fee
With Ally Bank, you will get 1.00 percent interest rate, which is near the top. You can monitor your account on the go with the provided app, and the site is intuitive. But, Ally is not rated highly by the Better Business Bureau, BBB, and it charges some excessive fees such as overdraft fee, return deposit fee and excessive transaction fee. But, if you are vigilant, you can get a high rate from a company with solid customer service.
Capital One 360 Savings Account Review
- FDIC insured
- No fee for monthly maintenance, bank-owned ATM withdrawal, or non-bank-owned ATM withdrawal
- Interest accrues each day but is paid on a monthly basis
- No minimum amount required to open an account or maintain it
- Overdraft fee
- No money market account
- Savings deposits capped at $1 million
At 0.75 percent, Capital One is still higher than most major players in the industry. If you are looking to squeeze out every last penny from your account, you can probably do better, though unless you have hundreds of thousands of dollars in your account, a small increase in rates won't do much. What you get from Capital One is unparalleled support and a company that works with its customers. Furthermore, Capital One has plenty of resources, and the company actively is working on combating fraud, phishing and hacking incidents, which is great if you are apprehensive about putting your money into a savings account.
Key Considerations of Online Savings Accounts
The Best Online Savings Account
Before providing a list of the top five savings accounts, you should know what to consider and look for in an account. However, keep in mind that what you may want to consider can differ from others, and it's wise to think of your own needs for your savings account.
The best online savings accounts put the national average to shame. Look for APYs around 1%, which is around 16 times the national average.
- Balance Requirement - This is the minimum dollar amount necessary to open your account and maintain it while avoiding fees. Clarify this with the institution to avoid any unnecessary fees as they can spoil a good rate. Also, check out the requirements to get the highest interest rates. Some institutions will offer a seemingly high rate but only if you deposit a lot of money. Don't worry; there are plenty of banks out there with low minimum balances.
- Interest Rate - Double check to make sure that the institution offers a decent savings rate. Surprisingly enough, some of the major players offer paltry savings account interest rates, and it is wise to double-check and see for yourself. Be careful when looking at interest rates as some banks will give an initially high rate, and others will only give decent rates if you deposit tens of thousands of dollars. Remember, interest rates fluctuate, and you should remain vigilant when looking at the current rate. As a general rule, the bigger banks move faster to change rates, in both directions.
- Fees - Even some of the well-known and beloved banks will sneak in fees. If you want to call the bank or come into the branch, some will charge a fee. Others will have a minimum balance requirement and tack on fees. If a bank is not upfront about fees or you are unsure, it's wise to ask questions or look elsewhere as the market is competitive. Sadly, if you aren't vigilant about watching fees, a seemingly great bank can end up turning out to be a dud that costs you money.
- Extra Features - With the advent of smartphones and technology, you should choose a bank with lots of extra features. With online access, smartphone access and automated banking, you can use your account to the fullest. Without these features, you may have to trek into your bank more often than you would like, and nobody wants that. It must be noted, not all phone apps are created equally, and by reading up on reviews, you can find a feature-rich app that will help you do it all.
- BBB Rating - There are plenty of well-known and established banks out there to choose from. You also have a lot of upstarts to choose from, and some of them offer great rates. Before sending in your money, you should ensure that the bank has a decent BBB rating. Also, by reading reviews and seeing how others feel about the bank, you can avoid most issues.
- Teaser rates - If you see a rate that is too good to be true, it might just be so. Some banks, in an effort to bring in more clients, will offer a rate that shatters your expectations and excited you. But, many times, you must deposit over $100,000 or it's only for the first $500 of your deposit. Other times, the rate will only be good for a few months. If you remember the old adage, if it's too good to be true, you can avoid disappointment. Of course, if the teaser rate and normal rate are high, you can proceed to sign up for an account and take advantage of the rate for the short term.
If you are wondering what the difference is between the best online savings accounts and an online checking account, you are not alone, and it is important to know the distinction. While there are many similarities, there are a couple of major differences. With an online savings account, you are limited by the number of transactions you can make a month, usually six. To avoid any issues, it's wise to open both accounts and transfer money between the two, as needed.
Compare Online Savings Accounts
Reasons to Switch to an Online Savings Account
Stashing your savings in a piggy bank or under your mattress means missing out on both the protection and the earning potential of a savings account. With traditional brick and mortar institutions offering minuscule rates of return; however, trying to outpace inflation with basic savings can feel like a futile endeavor.
The best online savings accounts offer an alternative for customers seeking to maximize their growth potential while maintaining the safety and liquidity of their funds. Additionally, online savings accounts offer increased functionality and a range of other perks to meet the demands of today's modern world.
Online Savings Account Rates
If you are looking for the best savings account rates, online providers are often better options. Unlike Chase, Bank of America, and the other financial industry giants whose massive structures seem to take over real estate on every other block, online banks don't have to pay for pricey plots, fancy lobbies, and in person bank tellers. Instead, they pass those savings along to their customers in the form of substantially higher rates.
The average 2016 savings account rate in the U.S. is currently around 0.06 percent APY. Many online savings accounts, however, offer rates as high as 1 percent APY.
In addition to higher interest rates, online savings accounts are also subject to far fewer fees and lower, if any, minimum deposit requirements- making these higher rates accessible to all account holders, regardless of how big or small their balance.
Other Reasons to Switch to a Savings Account
Top online savings accounts have the same protections in place as other bank accounts. As long as you're working with a FDIC insured institution, your balances, up to $250,000 are protected. For increased security, change your account passwords often and never give away your personal information in an unsolicited email.
Rather than fishing through piles of bank statements and paperwork each month, online savings accounts can consolidate everything for you in a simple, electronic format. Save the hassle and the environment with e-statements.
Unlike brick and mortar institutions that keep limited business hours, making it difficult to conduct necessary transactions on your own time, online savings accounts are easily accessible- anytime, anywhere. You can check your balance online at 3am if you like. You can even set up transfers and pay your bills for the next business day. And should you like to speak to a customer service representative, many online banks offer live chat and call-in customer support 24/7.
If, like most Americans, you are pursuing increased savings goals, don't discount the value of an online savings account in helping you achieve those ends. With higher rates and fewer fees, online savings offer an alternative to traditional brick and mortar banking that can maximize your earnings while keeping your nest egg well protected.
As you can see, there are a lot of choices, and there are other things to consider, not just the interest rate. However, you should choose an account based on what you want, and here are some more considerations.
1. Local Branches
Not all major banks will have local branches in your area, and some won't even have them in your state. While banks will let you deposit money, transfer money, open an account and more, all online, if you value in the in-person experience, you may want to find a bank with local branches. To find out if there are local branches, simply navigate to the bank website and do a search yourself.
If you have ever found yourself the victim of identity fraud or had your account hacked, you know what a pain the process is. To avoid this, you should use secure passwords and usernames, and you should try and log in at home or on other safe networks. But, you can only do so much, and banks with decent security will help you quell any fears. If you are worried about a bank's security, do some research. Ideally, you should choose one with multiple levels of fraud detection, and a company that has a proactive stance against fraud is always a good choice. Remember, while you can do a lot to be secure, you will want a company that works with you.
3. Other Products
For many, it's annoying to have a bank account with one company, a credit card with another and a personal loan with another company. Coupled with checking accounts, business accounts and car loans, and it's easy to see why this is overkill. To avoid this, you can choose a bank with multiple products. Banks such as Discover and American Express have nearly every product imaginable, and this can make things easier if you are looking at opening a savings account. Otherwise, if you add another bank to your list, you are going to have more paperwork and more issues to worry about. Fortunately, most major players in the businesses in the crowded field offer all the major products you would want.
4. Accepting Checks
If you have a joint account, cash a lot of traveler's checks or you accept checks from overseas, you may have a hard time cashing your checks. Some banks won't cash them. Others will place a 10-day hold on any non-traditional checks. This can become a cash-flow problem, and not to mention, pretty annoying. If you are in the habit of accepting checks from overseas or need multiple signers on your checks, you may want to go with a bank that has a reputation for accepting checks with ease. If not, you may experience bouts of frustration when cashing checks.
5. ATM Access
If you have a savings account, ideally, you would not be pulling money out of it all the time. But, since many have zero-fee ATM withdrawals, it's wise to consider a bank with decent ATM access. Some will let you use the in-network ATMs without any fees, and other banks will even let you withdraw money from out-of-network ATMs without having to pay a fee. If you are a big ATM user and you aren't careful, you can spend hundreds of dollars a year, accessing your own money!
6. Time in Business
While there is nothing wrong with a startup business as many new banks will offer great rates, more tech and excellent customer service, you may want to do some more digging if you are looking at new banks. Some will offer teaser rates, and others will not have a proven track record. If you are chasing the highest yield, you can probably find it in a well-known, established bank. Don't worry, all banks will have decent security, and your money will be backed by the Federal Deposit Insurance Corporation or FDIC.
Tips & Advice
Before choosing an online savings account, be sure to brush up on some of the finer points of the industry by visiting our advice section. Here are some of the topics you can explore:
- Why use an online savings account instead of alternative options? Take a look at these five reasons and an online account is a good place to keep your money.
- How can you choose your ideal savings account? There are a number of factors when it comes to choosing an account. Make sure you're aware of the most important considerations.
- Why are you valuable to your bank? It's important to know how your bank sees you. Realizing you're not as disposable as you think you are may help you select the best option.
Savings Account Calculator
There are many considerations that you must keep in mind when you open a savings account. Most major players have great security, smartphone applications, and 24/7 support. But, other banks fall short in their interest rate offerings or other products. Be sure to compare the best savings account rates before choosing a provider.
If you are looking for longer term savings, take a look at our review of the best CD rates or if you are looking for retirement savings you might find better options in our review of the best IRA accounts.