A savings account is an interest-bearing bank account that allows you to preserve your cash. Your cash is secure as long as you remain within
FDIC limits (or NCUA limits for federal credit unions).
What is a money market account?
A money market account is virtually identical to a savings account, except not bound by certain transaction restrictions
(the most significant of which is a limit of 6 outbound transactions to outside bank accounts per month).
Rates&Info does not distinguish between savings accounts and money market accounts. We list the best rates above for both products above.
How do I find the best high interest savings account?
The table above lists the best online bank accounts with high interest rates. It also lists the highest yielding money market accounts and the
best high yield savings account rates at banks and credit unions near you. By listing all of these rates on one table, Rates&Info
enables you to determine the best bank for your savings account based on not just the best high yield savings rates that are available
to you but also the convenience of a local branch.
What is the best online bank for savings?
The five most recognized online banks for savings in the US are currently Ally Bank, Barclays Bank Delaware, CIT Bank, Goldman Sachs Bank and Synchrony Bank.
All of these have low account opening requirements and low or no minimum account maintenance requirements. The rates at these banks can vary.
This table shows you which of these banks, and others, have the highest online savings account rates. Customer service levels, website and mobile app
functionality, and transfer speeds also vary widely. User reviews on other websites
may help you to determine which of these is the best for your needs.
What is the best easy access savings account? What is the best bank for savings accounts? What is the best regular savings account for me?
Many people still prefer to keep their money at local credit unions and local banks because they prefer personal (not telephonic or internet-based)
interaction with their banks, want to build a relationship with a local banker for other transactional matters, and often need cash or cashier’s checks
instantly. The table above demonstrates all of the rates in one table so that you can compare rates at these institutions with online rates. If online rates
are more competitive than those rates at banks and credit unions near you, you should consider opening a savings account at a bank with a branch near
you and tying it to an online savings account where you can keep cash above those minimum levels required by your local bank or credit union.
How do I open an online savings account?
Opening an online savings account or money market account is simple. Online banks first verify your identity through a driver’s license
or other ID and a credit pull from Experian or Equifax (usually soft). You will then need to fund the account through mailing a check or
entering an ABA and account number from an account that you may have at another bank (a funding account). Confirming ownership of the funding account
requires entering your username and password for that account or confirming the amounts of one or two small test deposits after they have arrived.
What is the best fixed-rate savings account?
Savings rates can be lowered or raised at any time by the bank or credit union at their discretion. That is the nature of the product. If you have cash that
you are extremely unlikely to require access to and seek a higher rate of return, you should consider a certificate of deposit (CD). You can compare CD
rates at online banks, local banks and credit unions here.
What is the best child savings account?
A child savings account is a great way to teach children about the importance of saving money. This is a hard lesson to teach when rates are so low
(and remain below real inflation rates)! Although some online banks (Ally and Capital One 360) offer these accounts, local banks are usually better set
up for child savings accounts. Depending on the state in which you reside, a guardian (usually a parent) is required to open the account and to oversee
the account until the age of 18 or 21. Because of the documentation required, you should consider opening a child savings account at a bank with which you or
your spouse already have a banking relationship.
The graph above shows how the average rates for online savings accounts have trended over the last several years.
Important Savings and CD Terminology
Annual Percentage Yield (APY) - The percentage amount ordinarily advertised on
interest-bearing deposit accounts (savings accounts, checking accounts and CDs). Truth in Savings
regulations require this number be reported and it reflects the total interest to be received over
a 365-day year, regardless of the bank's own method of compounding (daily, weekly, monthly, etc.).
Therefore, the use of APY creates a level playing field through which to compare returns from bank
accounts and CDs that may use differing compounding methodology.
Basis point - One percentage point of one percent. The difference between 2.00%
and 2.01% is one basis point. The difference between 2.00% and 2.02% is two basis points. The
difference between 2.00% and 2.50% is fifty basis points.
Current Yield - The percentage return on a bond or CD based on its current market
price and its original interest rate. A bond or CD for which you paid $1,000 and that pays you $60
annually would have a current yield of 6%. A bond or CD for which you paid $1,000 and that pays
you $30 semi-annually with the $30 annual payments accruing interest so that it pays $31.80 in the
second annual payment also has a current yield of 6%, but it has an APY of 6.18%.
Discount - The amount under face value paid for a security. A security trading at
99% of face value is said to be trading at a 1% discount under par. A security trading exactly at 100%
of face value is trading at par value. A CD trading above the face or par value trades at a premium.
Brokered CDs may trade at a discount or premium (and these are not recommended), but discounts or
premiums on CDs are exceptionally rare.
Hedge - An investment made to minimize the impact of adverse movements in interest
rates (or securities prices).
Issuer - The entity that issues a debt security and is obligated to pay interest
and principal. Except with brokered CDs (not recommended), bank CDs are issued only by the issuer,
its parent entity or an entity in the same corporate family. Especially with online banks, you need
to know who the parent company is as that is the issuer of CDs (and bank under whose FDIC certificate
savings accounts are held). It is important to know the issuer in order to avoid exceeding FDIC
(or NCUA) insurance limits. For example, IGoBanking, BankPurely and GiftsforBanking.com are all
trade names for a single issuer (Flushing Bank).
Laddering - A hedging technique for reducing the impact of interest-rate risk
by structuring a portfolio with different instruments that mature at different dates. CD laddering
involves protecting from the impact of a dramatic move in interest rates by buying CDs with different
Liquidity - The ability to quickly convert an investment into cash. A savings or
money market account that you can withdraw money from at any given moment without a penalty always
offers the best liquidity. Other investments that allow quick conversion to cash, such as a
No Penalty CD, can also offer excellent liquidity. CDs generally are less liquid than savings,
but may offer a certain amount of liquidity if the bank allows withdrawal with payment of a
reasonable early withdrawal penalty. Long-term bonds are generally considered less liquid
(some bonds aren’t liquid at all). Real estate investments are perhaps the least liquid
Maturity - The date on which the issuer of a security, such as a CD, is obligated
to redeem the security (exchange the security for cash in the amount of face value plus accrued interest).
Put - A right to sell a security at a certain price at a specified time, usually
given for a payment of some sort. Some consider a reasonable early withdrawal fee to be a form of a
put on a CD. No Penalty CDs have a built in put.
Secondary market - Market for issues previously offered or sold.
Zero coupon bond (or CD) - A bond (or CD) on which no periodic interest payments
are made. The investor receives one payment at maturity that includes the repayment of principal and
all interest accrued. Zero coupon CDs are rare as customers are responsible for paying interest in
the year in which it is accrued (except for rare cases of CDs of one year or less).
Zero coupon municipal bonds are more commonplace.