Looking for places to grow your money without much risk is difficult these days, but finding the best savings account might be a good place to start. Although your money will be safe there, the average American is hardly capitalizing getting rich on rates today.
A great place to start looking for better savings accounts is online. This year, I switched to Ally Bank for my main savings account. Why? At 1.00% interest I’m earning roughly 16 times the national average. I found Ally’s user interface to be super easy and it’s been considered one of the best online banks for years. This is a must because I tend to set up automatic transfers often and I need my bank accounts to talk to each other easily.
If you want to keep tabs on the lowest rate, check out this tool (below) that includes a list of banks and displays daily rate updates for all the best savings accounts.
The key to finding the best online savings account is to look for rates close to 1% APY - roughly 16 times the national average!
According to the FDIC, current average savings account rates are still a paltry 0.06%. Many of the nation's biggest banks have rates as low as 0.01%. That’s a hard pill to swallow for savers who expect a safe place to park their cash.
The Best Savings Accounts for 2016
I always like to start my searches with the online tool above to get the lay of the rate land at any given time. Rates change all the time, so interest rate is only one factor to consider, but it is a good starting point. From there, its much easier to compare account features to match preferences.
I took some of the best high yield savings accounts, and analyzed all of their other features to determine who each account is best for. With this guide, you should be able to find the right account for you.
All-Around Best Savings Account: Ally
Best Savings Account/Checking Account Combo: Capital One 360
Best Online Savings Account for High Balances: CIT Bank
The Best Savings Accounts for Check Writing: EverBank and Synchrony
Understanding Interest Rates
Due to the extremely low interest rate policy (which directly impacts your bank’s savings rates) from the Federal Reserve, low interest rates on savings accounts will be here for a while. Rates have even been dropped further going into this year.
The Fed Funds rate is the rate that banks lend money to each other overnight. This rate, which affects all other interest rates, has been held artificially low in my opinion, and is now effectively zero.
As I mentioned, there are some accounts that pay yields closer to 1% and others with short-term promotions that pay even greater than that. These accounts can provide some relief, especially to seniors who have retirement incomes that may have been decimated by low interest rates.
The best savings accounts are mostly found online where costs are much cheaper than traditional brick-and-mortar banks.
Where to Look for Savings Account Options
Deregulation has enabled many different types of finance companies to compete for savings deposits. In addition to your traditional local bank, you may be surprised to find that you can open a savings account with one of these types of companies:
- Auto finance companies (Ally - formerly GMAC)
- International banks (Barclays)
- Large commercial finance companies (CIT, GE Capital - now Synchrony)
- Credit card companies (American Express, Discover)
- Insurance companies (USAA, Farmers Insurance)
- Online brokerages (Charles Schwab, Fidelity)
- Smaller regional banks with internet banking arms (EverBank)
- Credit unions
Why choose an online savings account?
Today, almost every financial institution with personal banking products has an online presence. People simply want to bank when they want, where they want, and how they want with minimal interference. The best online savings accounts deliver this experience through several key advantages.
Advantages of Online Savings Accounts
Higher yields: Online banks boast less overhead because they don’t need to maintain physical branches. Online banks are able to pass on this savings to their savings account holders in the form of higher interest rates.
A word of caution: These rates can and do change. As with any savings account, banks often run promotions to get you hooked, then lower the rates later. However, the best online savings account will still handily beat out the yield of a traditional bank over the long term.
24/7 access: You can check your balance, update your contact info, make transfers, and order deposit slips at any time. Most online accounts will give you access to your account 24/7, 365 days a year. This enables you to access your information when you want. For more pressing issues, customer support is also usually accessible 24/7, so you can talk to an actual human instead of your computer screen.
Self-maintenance: Why drive to a branch and talk to a banker to transfer money, update personal information, make payments, or check your balance? You can perform all of these functions and more from your computer screen or mobile device without even getting dressed.
Superior online and mobile experience: Many traditional banks have been slow to adopt the best web and mobile features to improve the customer experience online. Because online banks’ users are exclusively on the Internet, greater attention is paid to the usability of the website and mobile tools.
More Banking Guides
If you're still looking for banking options, here are some other useful guides on other important banking accounts:
- Best High Interest Savings Accounts
- Best Checking Accounts
- Best Money Market Accounts
- How to Find the Best CD Rates
Personal Savings Calculator
To help you determine your savings needs, we've created this savings calculator that will help you determine you personal savings goals.