If you have large amounts of cash in a large bank, or any bank with low savings rates, you are making less in interest than you could be and should be making. There are FDIC- insured banks that will pay you more through higher savings rates on your deposits. Take a few minutes to explore the table below that presents an unbiased list based on the best savings rates currently offered by online banks. You may be able to boost your annual interest earned from savings by more than 10X. Banks are always competing for your money. Take advantage of it!
January 19, 2017
Savings Account National Average Rate: 0.13% ?
|ONLINE BANKS||APY||Vs. Nat'l Av.||MIN|
Valid for new accounts and new money only.
|My Banking Direct||1.05%||8.40x||$25,000||
|Barclays Bank Delaware||1.00%||8.00x||$0||
|Discover Bank||0.95%||7.60x||$0||Reviews (1)|
|FNBO Direct||0.95%||7.60x||$1||Reviews (1)|
|American Express Bank, FSB||0.90%||7.20x||$0||
|Sallie Mae Bank||0.90%||7.20x||$0||
|Clear Sky Accounts||0.90%||7.20x||$1||Reviews (1)|
|My Savings Direct||0.85%||6.80x||$1||
|Colorado Federal Savings Bank||0.85%||6.80x||$2,500||
|BAC Florida Bank||0.80%||6.40x||$1,000||Reviews (3)|
|Capital One 360||0.75%||6.00x||$0||
|Bank of Internet||0.75%||6.00x||$100||Reviews|
|New Dominion Direct||0.70%||5.60x||$50,000||Reviews|
|Mutual of Omaha Bank||0.35%||2.80x||$1,000||Reviews|
|CNB Bank Direct||0.26%||2.08x||$100||Reviews|
Online banks have over the last two decades emerged to offer depositors higher rates on their online savings and money market accounts than are available in the major money center banks and in smaller brick-and-mortar banks. Since these online banks do not have expensive branch networks to maintain, they usually pass some of their savings back to depositors in the form of higher rates.
Unlike certificates of deposit (CDs) or time deposits, money in savings and money market accounts accrue interest on a daily rate. The best yielding savings rates can conceivably change from day-to-day with new online banks emerging or existing banks more aggressively seeking to raise the capital accounts. It is important to check back on BestCashCow regularly to be sure that your savings accounts continue to earn the most competitive rates, no matter what the rate environment is.
BestCashCow data has shown that high yielding online savings account rates have remained relatively stable over the past 18 months with the leading rates on any given day being between 1.05% and 1.10%. In spite of the Brexit fallout, the European recession and headwinds from the 2016 US election, the Federal Reserve remains committed to raising The Fed Funds Rate over the next year. This should cause leading savings rates to begin to move higher in late 2016 and into 2017.
All bank accounts listed on BestCashCow are insured by the Federal Deposit Insurance Corporation ("FDIC"). The FDIC is a federal government chartered institution that provides insurance to a maximum amount of $250,000 per individual per institution (or $500,000 for joint account holders). All deposits (CDs, Checking, Savings Accounts) held in the same type of ownership at a single financial institution are only insured to $250,000. However, funds held in different types of ownership (Individual, Joint, Trust, Retirement) may fall under separate FDIC insurance provisions. BestCashCow.com strongly recommends that you deposit savings in only FDIC insured institutions and that you do not exceed FDIC coverage limits. Please visit the FDIC's website to determine your coverage limits based on your circumstances.
High-interest savings accounts are always an ideal place to keep your emergency fund or any money to which still you need ready access. Your money will be safer than if you stuffed it under your mattress, and it will grow a bit, too. More affluent investors will find that keeping large amounts of money out of real estate and savings and CDs provides them with lower returns but cushions them against market crashes like we experienced in 2000 and 2001 and again in 2008 and 2009.
To see how savings and money market accounts compare with CDs or time deposits and bonds, view BestCashCow income guide here.
The differences between a savings account and a money market account are largely arcane. Some savings accounts are limited by US federal regulations to six outbound transfers per month (the bank may allow additional access for a fee). Money market accounts are technically not bound by those limitations and offer more ways access deposits by issuing checks and debit cards. Prudent consumers will compare the two interchangeably, focusing primarily on rates and service among FDIC-insured banks (or NCUA-insured, for credit unions). Consumers who maximize their use of online savings and money market accounts access these accounts through ACH transfers that are easily set up on the online bank’s website so the additional ways to access deposits that money market accounts offer are rarely valuable.
The process of opening an online savings account or money market account is usually very simple. Banks ordinary ask you a few questions to verify your identify. These questions include seeking information from a state or government issued ID, such as a driver’s license. Due to increased US anti-money laundering rules and Department of Homeland Security requirements, it is very likely that you will also be asked to produce a photocopy of your license and a picture taken from your iPhone or other smartphone and emailed to the bank will ordinarily suffice. The bank may ask for information regarding a correspondent account from which you intend to have them draw the money to provide the initial funding. You therefore will need the ABA number and account number from an existing account that you have. They will verify this account by having you log back in to confirm the amounts of one or two small deposits to your correspondent account before they draw the funds from this account. Finally, many banks do a “soft” credit pull from Experian, Equifax or some other credit rating agency. While your credit rating will ordinarily not be affected, the application process may involve your answering questions about where you have lived, loans you may have had, past employers or cars you may have owned. Many people do not enjoy providing the amount of personal information required over the internet; therefore, some of the larger online banks have 24-7 customer service to guide you through the process. You can see the experiences of others with a given online savings bank that you are considering by reviewing the comments left in BestCashCow’s table above.
No. Online banks often offer higher savings and CD rates because they have lower expenses from not having to maintain brick-and-mortar locations. You should also check rates at local banks and credit unions. Unlike other websites, BestCashCow.com compiles all of these rates, listing them in an unbiased manner that shows the proximity of each bank or credit union to you. Please access these rates using the tabs above.
Even though rates are at levels that are historically very low, there is competition for your money. Like any active marketplace, there are buyers and sellers of goods and services at different prices.
Begin your search with the table here on BestCashCow.com that you have found. In addition to checking online savings rates, you should also check local bank rates and local credit union rates using the tabs above.
If you are unlikely to require access to your cash for some time, you may also consider certificates of deposit (CDs). While CDs have penalties for early withdrawal that may even eat into your principal, the rates on 2, 3, 4 and 5 year CDs are ordinarily significantly higher than savings rates. CDs also offer the certainty of rate stability for the term of the CD. Several sections and articles on BestCashCow can also help you to identify your proper cash allocation between savings and CDs.
Even a difference of a couple of basis points (hundredths of percentage points) can really add up over time, especially on large sums of money. You may wish to familiarize yourself with the BestCashCow Savings Booster Calculator in order to understand the importance of compounding interest at higher rates on your savings over time.
If you are too lazy to access the BestCashCow Savings Booster Calculator or to both with the magic of compounded earnings, here is the plain and simple truth.
“APY” stands for annual percentage yield. Savings rates are displayed in terms of APY to indicate the effective annual-interest return, including the compounding of interest, of the course of a single year. $100,000 deposited in a savings or CD account with a 1.20% APY will earn $1,200 in the course of the year, but monthly interest in the first few months may be less than $100 a month (this also depends on the number of days in the month). Hence, the APY rate is ordinarily a couple of basis points above the real interest rates. Unlike with a CD, your actual APY in a savings account or money market account may vary if the rate changes.
Here are some common reasons people hold off:
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