Savings Account Comparison | The Best Savings Accounts
There are a lot of savings accounts out there. So many that your head can start to hurt by comparing them all.
But at the end of the day, all you need are the best savings accounts to consider.
I did the work for you and narrowed the list down to a handful.
I’ve weeded out the ones that tricked me into a teaser high interest rate and then dropped it a month later. I’ve omitted the ones that have horrible customer service or websites so poorly designed you can’t figure out how to do anything.
What you are left with are the absolute best savings accounts out there.
Be sure to scroll down past the savings account comparison as there is important information about bank savings accounts in general you need to know.
This information will help you make the best decision for you.
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Other Top Savings Accounts
I know the best option isn’t best for everyone.
So here are a few more top picks to help you make saving money more easy and fun.
Savings Account Features | What You Need To Know
Before you open a savings account, you need to know some key terms and features so there aren’t any surprises.
Here are the basics to get you started.
Savings account: A savings account is a dedicated account for you to deposit money into and keep for the long term. Whereas a checking account has you make deposit and withdraws frequently, savings accounts should only have deposits on a regular basis. And due to federal regulations, most banks limit withdraws from savings accounts to 6 per statement cycle.
Interest: This is the money you earn on your savings balance. In most cases, the interest accrues, or adds up, over the course of the month and is then credited to your account at month end.
Compound Interest: Compound interest is the money you earn based on your savings balance. It is called compound interest because you also earn interest on the interest you earn. In other words, as your balance grows larger, the amount of interest you earn will grow in size as well.
Compounding Period: There are different compounding periods banks use to accrue interest. Most accrue interest daily or monthly. The more frequently interest is compounded, the more interest you will earn. The best banks compound interest daily. Be sure to read the fine print so you understand the compounding period of any savings account you are considering. If two banks are paying the same interest rate, but one is compounding daily while the other is compounding monthly, you will earn more interest with the account that compounds daily.
Annual Percentage Yield (APY): This is amount of interest you can expect to earn in a year and is expressed as a percent. It is based on the interest rate and how often interest is paid out during the year.
Frequently Asked Questions
Below are the most asked questions I get when it comes to savings accounts.
If you have a question, it is most likely answered here.
Are savings accounts worth it?
Having a savings account is an important part of your financial house.
With a savings account, you have money to cover any emergencies that arise. You can also use savings accounts for long term, or irregular expenses.
For example, if your auto insurance is due every 6 months, you can take the annual amount and divide by 12. Then make it a point to save this amount each month in a dedicated savings account.
Why get an online savings account?
Online savings accounts pay a higher rate of interest.
By earning a higher rate of interest, your money grows faster. They are able to offer a higher interest rate because they do not have the overhead costs like traditional banks do.
They don’t have physical locations they need to pay for and maintain. As a result, less of the bank’s money goes towards operations, so they can pay you a higher interest rate.
Other than higher interest, why else should I consider an online savings account?
Another great reason to use online savings accounts is the ability to have multiple sub-accounts.
This allows you to have your money saved separately in individual accounts for each goal you have.
For example, you could have a savings account for your emergency fund, another account for your auto insurance premiums, and yet another for holiday gifts.
For me, we have 9 separate saving accounts. We like it because we can log in and see exactly how much we have saved for each goal at any time.
Does a higher interest rate on high yield savings accounts matter?
Earning a higher interest rate on your savings does matter in the long run.
For example, if you have $10,000 in savings and are earning 0.50% in a savings account at your local bank, in 1 year you earn $50 in interest.
If you had the same amount in a high interest savings account, in 1 year you would earn $225 in interest. Over the course of 15 years, the difference is over $3,000!
Can you lose money in a high yield savings accounts?
The money you save in a high yield savings accounts will never lose value. The only way your account balance decreases is if you are charged account fees or withdraw the money from the account.
Is my money safe in an online savings account?
All credible banks offer FDIC insurance on your money. This means that up to $250,000 of your money is protected if the bank were to fail.
However, it is unlikely that a bank will fail. Many times a struggling bank will be bought by another bank and your account will be transitioned. With that said, it is possible for a bank to fail, but you are protected by the FDIC insurance.
Are local banks not a good place to have a savings account?
Local banks are great for convenience.
Especially if you use the ATM a lot, since you won’t be charged a fee. But when it comes to savings account, most online banks are better.
This is because they can pay a much higher interest rate. With that said, if you find a higher rate online, ask your local bank to match it. Some banks are competitive and will match an online savings account interest rate.
What banks have the best interest rates on savings accounts?
There are a lot of banks that offer the best interest rates on savings accounts.
However, not all of the highest interest banks are ones you want to do business with. Some have you jump through hoops to get the advertised rate.
For example, you might need to have a minimum amount in the account, plus have a direct deposit as well.
Others only advertise the highest possible rate you could earn. In the fine print you see that you need $50,000 to earn this rate.
Any amount under this earns virtually zero interest.
And there are new online banks that offer the highest yields just to attract customers. Then in a few short months, the interest rate is no longer competitive. They do this because they know most customers will just stay instead of doing the work to transfer their accounts.
Finally, some have bad website designs or poor customer service. As a result, I only list the best online banks that I know and trust. I’ve used every one of them and still use some today. Because I know how they work, I am comfortable recommending them.
Do savings account interest rates change?
Interest rates do change periodically.
The most common time for change is after the Federal Reserve changes the interest rate it charges banks to borrow and lend money. But what you need to know is that interest rate changes don’t happen all of the time.
Most times they stay the same for months. However, if the Federal Reserve is aggressively changing interest rates, you could see the rate change on your savings account every couple of months.
Is my savings account interest taxable?
The interest you earn on your savings account is taxable.
However, if you have money saved at your local bank account, you probably never get a form from the bank to report your interest income. This is because if you earn less than $10 in interest, you don’t have to report it.
But when you open a high yield savings account, odds are you will earn more than $10 in interest and as a result, owe taxes on the income. As of this writing, the interest you earn from your savings account is considered ordinary income and is taxed at your normal tax rate.