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Best online savings accounts

Open a savings account to prepare for the future

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by Tom Rains ConsumerAffairs Research Team
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Online savings accounts are a secure and simple way to track savings and potentially earn a sizeable amount of interest. Traditional savings accounts often offer just 0.01 percent interest. Online savings accounts, on the other hand, can easily exceed 2 percent interest. Our top pick for a high yield savings account nets 2.25 percent interest.

Online savings accounts are also notable for their near lack of fees. Minimum balance requirements or monthly maintenance fees are exceedingly rare. Additional features like budgeting tools, mobile access and the ability to link to checking accounts also make online savings accounts popular.

Top 3 best savings accounts

When narrowing down our top picks for best online savings accounts, we considered important factors like high annual percentage yield (APY), lack of fees, fee forgiveness policies, accounts with no required minimum balance, apps that help with ease of access, sign-up bonuses, backing by the FDIC and excellent customer service. All of our chosen companies have highly favorable interest rates when compared to savings accounts offered by traditional banks. When choosing an online savings account, make sure that it is backed by the FDIC, has virtually no fees and has a high APY. That way you can start the road to saving without being bogged down by unexpected fees or a low interest return.

Best online savings account overall
Discover

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Discover
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  • No minimum balance
  • 2.10% APY
  • $1 to open
  • $15 fee for seventh withdrawal and beyond each month

What we like: Consumers praise Discover’s easy-to-use iOS and Android apps, generous sign-up bonuses and companion checking account. This helps make it our top pick for best online savings account overall.

Discover has no monthly balance requirements or monthly maintenance fees. If you do receive an unexpected fee, it might be waived. That’s because your first fee each year (if you have any) will be forgiven. That’s great for when you’re still getting used to your account or if you lose track of how many times you’ve withdrawn from your account.

It’s easy to build up savings with a Discover account. Interest on the account is compounded daily and paid monthly. There is also a nice signup bonus, though it requires a large initial deposit. If you deposit $15,000 or $25,000, you will receive $150 or $250, respectively.

If you also want a checking account linked to your savings account, keep in mind that you can earn 1 percent cash back on up to $3,000 with Discover debit card purchases.

What to consider: Discover will charge you if you go beyond six withdrawals in a month on your account. The $15 fee is not desirable, but it’s difficult to find any savings account that doesn’t charge a fee for exceeding withdrawal limits. Synchrony is one of them.

Who it’s best for: Discover is best for those looking for a solid APY and a great signup bonus. Those looking for a checking account will also like the 1 percent cash back for debit card purchases.

Best high yield savings account
Synchrony

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Synchrony
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  • No minimum balance
  • 2.25% APY
  • $1 to open
  • $25 fee for outgoing wire transfer

What we like: Synchrony’s biggest claim to fame is the excellent 2.25 percent APY on its high yield savings account. Another interesting feature is that Synchrony does not charge users for going over the federally instated six withdrawal limit each month. However, their site notes that if an account exceeds withdrawal limits on a regular basis, the account might be shut down.

Like many other online bank accounts, Synchrony has neither a minimum balance requirement nor a monthly fee. The debit card that comes with a Synchrony savings account can be used at ATMs for quick access to funds. This is a rarity for savings accounts. Users are also reimbursed up to $5 per month for fees accrued at out-of-network ATMs.

What to consider: Synchrony still does not have a mobile app specifically for its high-yield savings account. If this is a dealbreaker for you, there are other options out there, like Discover and Ally. The outgoing wire transfer fee of $25 is also high.

Who it’s best for: The Synchrony high yield savings account is best for people looking to take advantage of big interest rates. It’s also helpful for those who want to occasionally withdraw money from their account through an ATM.

Best savings account interest rates
Ally Bank

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Ally
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  • No minimum balance
  • 2.20% APY
  • $1 to open
  • $10 fee for seventh withdrawal and beyond in the first month

What we like: There are few regular online savings accounts with rates as good as Ally’s 2.20 percent APY. Interest on this account is compounded daily. Ally also has very few fees. The savings account has no monthly maintenance fees and no required minimum balance.

Great technology features make Ally stand out. You can use Alexa to transfer money to your savings account. You can also use Ally’s eCheck Deposit to deposit checks or Ally’s mobile app to pay bills.

Ally is backed by the FDIC, just like traditional banks. Unlike most traditional banks, customer service is available 24/7 via phone, online chat or email.

What to consider: Users are limited to six transactions a month. The seventh transaction and all transactions after (within the same monthly period) are subjected to a $10 fee.

Who it’s best for: Ally is best for consumers looking for a regular online savings account (not a high yield account) with a great interest rate. Ally’s lack of hefty fees also helps consumers save money.

What is a savings account?

A savings account is a bank account where you can deposit and withdraw money anytime while earning interest and keeping your money safe. It is offered by banks and credit unions, along with other financial institutions. There are no fees to open a savings account, but banks require a minimum opening deposit and maintaining balance each month. Most savings accounts are insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration to protect account holders from bank failures.

How does a savings account work?

After opening your savings account, you can deposit money in cash, checks, transfers from other accounts within the bank or electronic transfers from other banks. You can withdraw in-person at the bank’s counter (if available), via ATM or through transfers to other accounts within the bank or electronic transfers to other banks. The average savings account interest rate at traditional banks is a modest .01 percent. At online banks, this percentage can be over one or two percent.

Interest rates can be over
1–2% at online banks

While there are no fees to open a savings account, the account may be charged a fee for falling below the maintaining balance each month. You can withdraw money anytime, but most banks require a limited number of withdrawals during a one-month period. The Federal Reserve limits the frequency of withdrawals to six times a month to encourage savings. Any withdrawal beyond the set limit is charged a certain fee.

What is a high yield savings account?

A high yield savings account is an FDIC-insured deposit account that earns a higher interest rate than regular savings accounts. Most banks require a $100 opening deposit for these accounts with no monthly fees. Other banks don’t require a minimum deposit but the account must be funded within a prescribed period after account application. A high yield savings account works just like a regular savings account where deposits and withdrawals can be made anytime.

Big banks with large loan portfolios offer high yield savings accounts because they need funds to bankroll their loans. Smaller online banks can afford to offer high interest rates because they have lesser overhead expenses. On average, interest rates range from 1 to 2.25 percent, though they can be higher.

Are online savings accounts safe?

Online savings accounts are safe provided they are insured by the FDIC. To determine if your bank has FDIC insurance, look for the “Member FDIC” banner in their logo or official documents, or go to the FDIC website for the list of FDIC-insured institutions.

Can I make payments from my savings account?

Technically, you can make payments from your savings account, but you are probably better off refraining from doing so. Savings accounts are intended for long-term savings, not spending. Moreover, you may get in trouble with the transaction limit and run into unwanted fees. If you’re compelled to make payments, you’ll need to watch closely so you don’t go beyond the six transaction rule. If you make more than six transactions in a month, you’ll have to pay a fine.

It’s much better to open a checking account, link it to your savings account and make payments from there. Many online banks even do this automatically. You can then make a one-time transfer that covers bills and purchases you want to pay during the month and use your checking account to make the payments.

How much money should I have in savings?

How much money you need to have in savings depends on your economic situation. If you’re an average earner with little savings, some financial experts recommend a cash reserve to cover 6–8 months of living expenses because that’s about the average time it takes to find a job. If you have minimal or no debt, have built enough cash buffer and maintain other liquid assets, three months savings may be acceptable. You may also want to consider the 50/30/20 savings rule in which 50 percent goes to needs, 30 percent goes to wants and 20 percent is allotted for emergencies and your future, such as a retirement fund or life insurance.

Checking vs. savings account

A checking account is a bank account against which checks can be drawn by the account owner. It is ideal for everyday use without any limit in the number of withdrawals. Special features include debit cards, direct deposit, ATM access and online and mobile banking services. A savings account is a bank account that can be accessed anytime but with limited withdrawals of an average of six per month to encourage savings. Special features are similar to those of a checking account and include direct deposit, ATM access and online and mobile banking services.

A checking account works well for common transactions like ATM withdrawals or bill pay. You can also link a debit card to a checking account for everyday spending. Savings accounts typically feature a very small amount of interest and have rules to encourage saving rather than withdrawals. With online banks, interest is usually higher. Here’s a comparison between checking accounts and savings accounts:

FeatureChecking AccountSavings Account
PurposeSpendingSaving
AccessibilityIssue checks anytimeLimited monthly withdrawals
InterestNone/minimal0–2.5 percent
Minimum balance requiredVariesVaries
FeesSome have overdraft, bouncing check and maintenance feesSome have maintenance fee

Savings account pros and cons  

A savings account is an essential financial tool to save and manage your finances. Knowing the pros and cons of online savings accounts can help you decide if it is right for you.

Benefits of savings accounts

Starting with a minimal initial deposit, a savings account earns interest to help you save and grow your savings over time. It is a convenient way to manage your recurring bills, especially when it is linked to a checking account for payments for monthly utilities, rent or mortgage. A debit card is also a special feature that facilitates the payment of goods and services. You can make inquiries on your account via mobile apps and online platforms. More importantly, a savings account keeps your money safe.

Disadvantages of savings accounts

While already low, interest rates on savings accounts tend to fluctuate depending on the performance of the bank and the economy. If the rates drop, the interest rates may become negligible. Because you’re free to access your account anytime, you may also be tempted to spend your hard-earned savings and possibly breach the withdrawal limit. You also have to maintain a minimum balance to avoid incurring a fee.

Bottom line: Are savings accounts worth it?

Security, convenience and the opportunity to save are three great reasons why savings accounts are worth it. Low interest rates may be disappointing, although some online banks have fairly good interest rates, but a savings account is primarily a vehicle for saving your way to financial stability. It’s also great to have in the unfortunate event that you lose your job or have to make a large and unexpected payment.

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Profile picture of Tom Rains
by Tom Rains ConsumerAffairs Research Team

Tom Rains graduated from the University of Oklahoma in 2014 with a master’s degree in Professional Writing. Tom’s passion for delivering quality content fuels him to provide consumers with accurate, well-researched information on major life purchases.