Looking for a place to stash your cash savings?
I spend a lot of time talking about the need to have your money in a high-interest or high yield online savings account.
I thought it was time I put together a list of the top high yield online savings accounts. (Don’t forget to check out our auto-savings apps too.) Okay, here are the best savings accounts:
This is by no means a complete list of the accounts out there. It’s just the one’s I’ve had some experience with.
I will link to this post from the home page and periodically update this listing with new accounts that I find and all the rate changes that take place.
The rates are constantly changing, so don’t focus on that too much.
One thing to note though is that any of these accounts would be great compared to the savings accounts held at traditional brick and mortar type institutions. Don’t forget that all of these high-yield online savings accounts are FDIC insured, unlike peer lending or the stock market.
There are many of these accounts now available across the web. All contain different features, both positive and negative. But most, if not all, are FDIC insured, contain no fees, and pay an interest rate significantly better than traditional savings accounts.
You should definitely find one that’s right for you and get started saving. And don’t just consider this list. These are just some of my favorites.
Ally Bank – Ally Bank is one of the newest faces in the online banking world. Although, they are really just a re-brand. They used to be GMAC bank. Either way, they offer some pretty nice services aimed at treating their customers responsibly (you’ve seen the commercials). They have both a savings and an interest checking account. They also offer some of the best CDs available today. Not just because of rates, but because of their flexibility. They have a no penalty CD and a one-time rate adjustment CD. They are FDIC insured and charge no ridiculous fees.
Learn more or get started with Ally by visiting www.ally.com.
360 Savings® by Capital One®– 360 Savings by Capital One is, in my opinion, the reigning leader in online savings because of their great website, excellent customer service, and multitude of other financial products. They offer a great savings account, a bonus to get started, 360 checking account, as well as debit cards to access your money. Like others, there is no minimum to open an account and they extend their services into CDs. They also have mortgages, life insurance, and low-cost investing through their ShareBuilder product. They are also FDIC insured and have no crazy fees.
I’ve been banking with 360 Savings by Capital One for several years now and I’ve been completely happy with the savings account. So much so that I made them my primary bank, opening up a checking account there and also doing some investing using ShareBuilder. See my review.
Learn more or get started with Capital One 360 by visiting www.capitalone360.com.
FNBO Direct – FNBO Direct is a product of the very old and stable First National Bank of Omaha. That’s where Warren Buffet lives. That’s got to be a good sign right? Anyway, they offer a nice, FDIC-insured savings account with a leading interest rate. There is no minimum to open a savings account. They also have a bill pay (checking) account, certificates of deposit (CDs), ATM card, credit card, and now a debit card. Their website is very user-friendly, but maybe not as easy to maneuver as others. They are FDIC Insured and void of any bad fees.
Learn more or get started with FNBO Direct by visiting www.fnbodirect.com.
Discover Bank – Most people don’t realize that Discover also has an online bank. They started offering the online Savings account in the Summer of 2009, and they have a really good offering. The offer one of the better rates. They have an initial deposit requirement of $500. They have no excessive fees of any kind and they are FDIC Insured. In addition to the savings account, they have a really attractive set of CDs, and their one-of-a-kind IRA CDs.
Learn more or get started with Discover Bank by visiting www.discoverbank.com.
EverBank – EverBank has a great interest rate. They have an initial deposit requirement of $5,000, but their account, both online and mobile have no surprise fees. This account is FDIC insured and gives you the ability to make six withdrawals each month. One of the best features of this account is the check deposit by scanner feature. No other online bank offers this service.
Learn more or get started with EverBank by visiting www.everbank.com.
Lending Club – As an alternative to savings accounts, Lending Club offers an investing / savings option. If you’re not familiar, Lending Club is a peer-to-peer lending program.
As we stated in our Lending Club review, the peer-to-peer model allows borrowers to access loans at better rates than they could get through traditional banks because they are borrowing from individual investors. And that’s where you come in.
You can be an individual investor with Lending Club and earn by investing in small fractions of hundreds to thousands of loans and thereby diversifying your money. You have a portfolio of loans and earn interest on the payments borrowers make to you. Lending Club handles the application process and screening borrowers.
Visit LendingClub.com to learn more and if this alternative savings option is right for you.
Why We Need High-Yield Online Savings Accounts
I love the online savings account. It has so many uses. Mainly it will simply help you start saving more of your money. When I first started getting passionate about my finances and making changes with managing my money, one of the first things I did was open up an online savings account. Here’s why I did and some of the benefits of having one. Hopefully, this list will convince you to open one.
Put Your Savings Behind a Wall – Since these high-yield online savings accounts are usually online-only, getting to your funds isn’t as easy as say a regular savings account. With regular savings accounts, you can walk into the bank, or move the money in a second to a checking account using an online feature.
Online banks typically don’t have physical locations. To get your savings in and out of these accounts, you’ll typically need to transfer your money to another bank and then make a withdrawal and or use the ATM.
I know this sounds like a negative. But it isn’t. Your savings is money you should only need for emergencies or for a short-term savings goal. It wouldn’t kill you to have a 2-3 day barrier to getting your money (learn why this takes so long).
I’ve found that this barrier often dissuades me from spending money that I shouldn’t, or keeps me from raiding the emergency fund for something frivolous. So you see, this faux-wall to your savings actually helps you to save more in the long run.
No Fees or Minimums to Worry About – Let’s face it. The big guys on the banking block have run the show for far too long. A big bank checking and savings account can cost you hundreds in fees every year.
There’s no reason you should put up with ridiculous fees and minimums from banks, just so you can lend them your money. They should be paying you. But they can’t because they are fat and bloated and need your money and fees to cover their fat cat expenses.
Don’t play that game any longer. Move to an online bank where you can enjoy a fee-free environment.
High Interest / High Yield – If you do like I did for so long and keep your savings in a regular savings account, you will earn a very small amount of interest on your savings. Typically this is something like 0.10%. That stinks.
That won’t even allow you to keep up with inflation. Boo.
With a high-interest online savings account, you can earn much more. Look at the rate chart above to see the current annual percentage yield on these accounts.
These rates also fluctuate with the LIBOR rate. So when interest rates start to rise again, you’ll see these rates shoot back up. I remember when the rates were something like 5.00%. Wow!
Can You Still Call Them High-Yield Savings Accounts?
I had a reader leave a comment over the weekend asking whether or not these savings accounts could still be classified as “high-yield” since the rates were so low. It’s a fair question and one that I thought I would tackle here on the blog.
Interest rates are currently ranging from 0.75% to 1.15% on these accounts. Historically speaking, that is a low interest rate. I remember when these high-yield savings accounts were at their highest (2007-2008). They were touting rates in the 4% to 5% range. It certainly appears that rates are no longer high.
But you can’t stop your comparison there. What makes these accounts so special is that they don’t have the internal expenses that most brick and mortar banks have. As a result, they are consistently able to offer a better rate on savings accounts than banks like Chase and Bank of America.
And they do. Right now most are offering at least 3 times what Chase and Bank of America offer. So if you compare the savings rates at the online banks against the brick and mortar banks, the term “high-yield” still holds up.
The only reason they are as low as they are is because the Federal Funds Rate and the LIBOR Rate (two factors that drive bank interest rates) are at historical lows. They were forced lower to supposedly keep inflation rates at normal levels.
All that to say, across the industry, banking rates are low. So the question then becomes, where do you turn to get a better rate without sacrificing the security of FDIC insured banking product? You can’t turn to the stock market or peer lending. Both are too risky. Some have turned to reward checking (some offering around 4%), which is probably a good move for those who can work within the requirements of such an account.
My money is staying put in my high-yield savings account. I’m there first and foremost for the FDIC insurance I get. I also like that these accounts provide clear separation from my checking account, and they provide the liquidity to actually use the money if it’s needed. If my account gets too full, then I’ll take the overage and put it in more risky investments.
Rates will return. These banks didn’t put out teaser rates, just to collectively drop them to the floor. They are low for a reason. Once the major banking rates mentioned above return to normal levels, the high-yield rates will be back. I’m fine sticking around till they do.
Learn more and get started with our featured partner, Ally, by visiting www.ally.com.