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Updated March 05, 2020

The Beginner’s Guide to Finding a High Yielding Savings Account

Savings Accounts

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When looking for the easiest way to deposit and withdraw money all while making interest, the search for a high yielding savings account is more important than ever.

While interest rates on almost all savings accounts are quite low, some banks and financial institutions have better ones than others.

A few of these institutions might also have certain features that make them a favorable choice. If you are looking for the best way to handle money with some decent interest rates should read our guide on how to do just that.

First though, let’s take an overview on what savings accounts actually are as well as their benefits and disadvantages.

What Are the Advantages and Disadvantages of Savings Accounts?

They’re Mostly Free
Savings accounts cost next to nothing to start. If you decide to have one at an online/community bank then it’s most probably going to be completely free.  So there’s really no financial risk to opening one. It’s not as if you’ll be risking a hundred dollars or so to set one up.

Safer than the Alternative

There aren’t many options to store money. You can keep money in a hidden location at home, buy a safe, or put it in a bank.

  • While hiding money at home or putting them in a safe might be feasible with small amounts, as you make more money it’s going to be more difficult.
  • Additionally, it’s hard to feel safe at home with all that money around. The fear of theft or burglary will always be there.
  • Natural disasters can pose as another threat to your cash, particularly fires.

Good to Know: By keeping your money safe in a savings account at the bank or institute of your choice, all of these worries will be laid to rest. Banks and credit unions are covered by insurance too, so even if something happens to them, your money will be unaffected.

No Restrictions

You could be thinking “what if I urgently need cash and it’s all at the bank?” You’re free to do with your money as you please once it’s in a savings accounts.

Several methods of payment such as using a checkbook, debit card, or online banking can be used freely. Of course you can always withdraw money from an ATM using your debit card or go straight to the bank to withdraw money from tellers.

Good to Know: It’s worth noting though, that savings accounts aren’t completely unregulated.

  • They often have a limit regarding the number of times you can withdraw money but that limit is usually quite high and most people don’t reach it.
  • Don’t forget to ask your bank about any limits or regulations they might have.

The penalty for these limits is often financial or they might lead to closure of the account.

Interest Rates

We mentioned at the start that interest rates aren’t as high as we would all like them to be. Nonetheless we’re going to get into banks and financial institutions that offer the highest interest rates later in our guide.

  • While the majority of interest rates being offered right now can leave you disappointed, they’re still better than nothing.
  • If someone told you that you could deposit your money in a bank and receive absolutely nothing or receive 1% in interest each month, what would you choose?
  • Rates vary not just from one bank to the other, but also from time to time as they’re influenced by the country’s economy.

Minimum Balance

Unfortunately, savings accounts aren’t flawless and there are limitations that might bug you. The first is the need to deposit a minimum balance.

For example having a minimum balance of $4000 at bank X means you can’t start a savings account at that bank unless you have that amount of money. Not to worry though because minimum balance varies between different banks and credit unions so you’ll find something that works for you.

Monthly Fees

While you probably won’t have to pay anything to create a savings account, there will be monthly fees. These fees are often negligible but if you’ve withdrawn too much money from your account then they can become significant.

  • Your balance will become in the negative if it’s zero then the bank extracts its monthly fee.
  • Credit Unions, on the other hand, don’t withdraw fees from your balance like banks. They’ll instead have you deposit a certain amount of money, $20 or so when you first start your account.
  • They’ll use that money and you won’t be able to withdraw it under any circumstances.
  • The only way to get it bank will be to close the account. It’s much more convenient though when you think about it. You won’t have to worry about the bank extracting the monthly fee from the bulk of your balance.

Good to Know: Some institutions will waive the monthly fee for your savings account if you already have another account open with that institution like a checking account for example.

This will change though if you close your other account and keep your savings one.

Opening an Account

Opening a savings account is something that should take you minutes to complete. There’s really not much for you to do and the process isn’t complicated at all. You can even do it online or using a mobile app now.

It’s also possible to open the account at a bank in person if you’re not really comfortable using technology for money. The first step and the one that’ll take you the longest is deciding on which bank you want to use first.

There are lots of factors to consider like interest rates, monthly fees, additional services they might offer, and the proximity of a branch to where you live.

  • While most actions can be completed online or through a mobile app, you still want a branch to be near you in case you have to go in for any reason.
  • Some institutes have a minimum amount of money that you need to deposit in order to have an account.
  • Don’t forget to ask about online banking, mobile apps, and any additional services they might be able to offer you.
  • If you have your mind set on joining a credit union then you’ll need to call them to verify whether or not you can join.

Credit unions are a lot like small banks but are more community oriented. They usually have lower fees and somewhat higher interest rates.

Important Fact: Regardless of whether you’re looking to join a bank or a credit union, ask them about the required documents. Most will need your ID and Social Security number as well as a mailing address.

Those who are under 18 years old will mostly be unable to open a savings account independently.

Pro Tip: Call the bank or credit union in order to find out what the process is for minors. They’ll still have saving options but it’s not as straightforward as it is with those over 18.

Popular Uses for Savings Accounts

You probably already know this, but a savings account is a great place to keep your money stored safely while earning some interest along the way. The main use however is for savings, as the name implies.

  • Keeping a large sum of money at home in a safe might tempt you to use some of it whenever you want to buy something.
  • Depositing that money in a savings account, however, will make you think twice before withdrawing any of it.

That’s why a savings account is quite beneficial if you’re trying to save a large sum of money on the long term.

An Example to Look At

Let’s say you’re looking to buy a house within a couple of years from now, knowing you have the house’s deposit money safely in an account and adding to it as the months go buy will eventually lead you to achieving your goal and lots of satisfaction. The same premise applies if you’re trying to save for a vacation. It doesn’t have to be all fun and games though. Your savings account could have money saved for emergencies.

Unfortunately, most Americans aren’t prepared for a financial emergency or crisis.

Needing healthcare without insurance or the car breaking down will result in most people seeking a loan or ending up in debt. If you have a savings account, however, and you’re one step ahead then you’ll be prepared for whatever life throws your way.

Creating a savings account is one of our top 109 easy ways to make money fast.

  • Hopefully you don’t end up needing that money but it doesn’t hurt to be prepared.
  • Those who want to save for different things at the same time can open multiple savings accounts.
  • You could open a savings account for a big family vacation next year, another so that you can buy a new car in 2 years, and maintain a third one for emergencies.
  • As you receive each paycheck you can deposit some money into each account.
  • You could also deposit money in one account each month.

An Example

For instance, deposit money in the emergency account in January, in the vacation account in February, and in the car account in March. As time passes by you can keep an eye on each account on whether you’re seeing the progress you like towards achieving your goal.

The problem with multiple accounts is that each account will incur its own fees from the bank or credit union.

Pro Tip: Take care to not have too many fees that you’re getting almost no interest whatsoever.

Another Possible Issue

Another issue you might face is that it can be cumbersome to monitor and take care of multiple accounts.

Pro Tip: In order to avoid these problems, check the bank’s maintenance fees for each account first.

Also ask about online banking and mobile apps which can make tracking your money a lot easier.

Adding and Withdrawing Money from Your Savings Account

Handling money with a savings account is far from complicated. Whether you’re looking to add money to your account or withdraw funds, both processes are easy and convenient. Money you add to a savings account is in no way locked up or inaccessible.

Depositing Money

Obviously the easiest and best known method of depositing money is directly through bank tellers or even ATMs.

  • You can take your cash and deposit it to your savings account through an ATM or have a bank teller do it for you at no expense.
  • Checks can also be deposited into a savings account. Just write the savings account number on the deposit slip.
  • Checks can be deposited into your account through mobile apps as well. Another reason to ask a bank about the services they can provide via their mobile app.
  • Of course transferring money between accounts or from a different bank are also options.
  • If you have another type of account in the same bank, you can easily transfer money between them either through an app, online banking, or customer service on the phone.
  • The same applies to transferring money from a different bank.
  • Instead of moving money around yourself, you could have your employer directly deposit your paycheck or part of it into your savings account. A great option if you don’t have the time or energy to keep making the transfers yourself.

So whether it’s in person, over the phone, via ATM, or by having your employer do it for you, you’ll surely find a way to deposit money that suits your needs.

Withdrawing Money

We mentioned plenty of ways you can deposit money and in the same manner, there are plenty of ways that you can rely on to withdraw or use money in your savings account.

  • You can straight up withdraw cash using your debit or credit card for that account at an ATM or in person at the bank.
  • The debit or credit card can also be used to make purchases whether online or in a store.
  • It’s also possible to transfer money from one account to the other or from one bank to another. This operates both ways, into and out of your savings account.

What Makes a High Yielding Savings Account?

When we talk about yield, what we mean is the annual percentage yield (also known as APY).

  • Regular and most accounts offer APYs that are about 0.02%. You’re already thinking this, but this is a seriously small percentage.
  • There are, however, high yielding savings accounts that have APYs of up to 2.15%.
  • This is over 2 extra percent compared to the most common and regular accounts.
  • While 2% don’t seem much, but as you deposit more money and over a longer period of time, they will make a difference in your finances.

So it’s important to never underestimate small percentages when it comes to money.

A Few Examples

If you’re still not convinced, let’s give you a few examples comparing what kind of profit you would get with a basic savings account versus a high yield savings account. Seeing the number play out in front of you is particularly useful when managing your finances.

  • Let’s say you deposit $5,000. A basic savings account would give you 0.01% interest which amounts to just $5,005 after 10 years. In comparison, depositing the same $5,000 in an account with 1.9% interest will amount to approximately $6,046.
  • Receiving 1.89% extra in interest earned you over 1,000 extra dollars. This is money you’re not actively working with and is just deposited in a bank account. For our second and final example, we’ll pretend deposit $15,000.
  • After 10 years of the traditional 0.01% interest, they’ll amount to $15,015. On the other hand, after 10 years of the high yielding 1.9% interest, they’ll amount to approximately $18.138. The 3,000 dollar difference is certainly worth spending some extra time looking for high yielding savings accounts.

Considering the large difference found in rewards between traditional and high-yield savings accounts, why would you opt for the former? There is practically no benefit to starting a low yield savings account unless you find banks offering high APYs to also require high monthly fees, but that’s rarely the case.

Good to Know: We mentioned that often the goal of opening a savings account is to eventually be able to purchase or put down a deposit for an expensive item or product.  For sure getting an extra 1-3,000 dollars will be useful when buying a car or putting down a deposit for a new house. Even if you’re setting up a savings account to eventually go on a big vacation or for emergencies, having extra money won’t hurt. It’ll actually give you more options.

What to Look for in a High Yielding Savings Account

Money is complicated and a topic that we all worry about. If you start getting really into the tiniest of details you might never end up making a decision.

That’s why we’ve established a few items to help you find a savings account to suit as many of your needs as possible. These few simple items are designed to ensure that your money is absolutely safe and that you’re starting a high yielding account.

FDIC Insurance

First things first, we need to make sure we don’t lose our money. FDIC insured banks or entities are safer because if that bank gets robbed or anything happens to the money, your finances won’t be affected as they’ll be insured.

High Interest Rates

This is pretty self explanatory, but you want a high yielding account to make the most profit. We’ll discuss some of the banks that offer the highest interest rates later on.

Monthly or Yearly Fees and Minimum Deposit

While you may want to make as much money as possible through interest rates, you don’t want to lose a significant portion of it in monthly or yearly fees. Look for banks that charge no or minimal fees in order to preserve your earnings. Go for banks that don’t have a high minimum deposit if you don’t have much money to deposit right now.

Bank Reviews

What other customers have to say about a bank is very important even if everything looks good on paper. Make sure to look up online customer reviews before depositing money in a bank.

Try to Start an Account with a Local Bank or Credit Union

While credit unions are smaller entities than global banks, they have a few advantages in the sense that they have decent interest rates and charge fewer monthly and yearly fees. The same applies to online banks since they have fewer expenses on account of not having actual branches.

Check for Offers

In order to collect more customers, banks sometimes promote offers for a limited period of time. These offers may include higher APY for a short period of time, a couple of months for example.

  • After these few months are over, the interest rate will go back to regular.
  • If the bank’s regular interest rate is originally low you can forget about it.
  • There’s no point in getting 1.5% in interest for 3 months then 0.01% for as long as the account is open when you can just sign up with a bank that has a steady and constant interest rate of 1.5%.

Connect Your Savings and Checking Accounts

This isn’t really something to look for, but rather something to do. By connecting both accounts it’ll be much easier to transfer money between them. The more money you transfer to your savings account, the more profit you make.

Top High Yielding Savings Account Options

savings accounts tipsMost of the highest yield savings accounts right now are online forms. This is good news for those who prefer dealing with their finances online with the click of a button and bad news for people who are less comfortable with technology.

Luckily, however, most of these banks can provide you with an ATM card so you can withdraw cash at an ATM and make purchases. Let’s take a look at some of the best savings accounts online.

CIBC Bank USA

This is the US division of a bank originally based in Canada. When downloading the mobile app take care to download the US version rather than the Canadian one.

  • We’re mentioning it first because it offers an APY of 2.39%. Higher than almost everyone else out there.
  • The drawback is that you need a minimum of $1,000 to open an account unlike other banks that don’t need a minimum deposit.
  • CIBC Bank USA won’t charge you a monthly fee, but note that if you make more than six transactions per statement cycle you’ll be charged $10.

Vio Bank

Vio Bank is basically the online division of MidFirst Bank.

  • It offers an APY of 2.41% which is the highest on our list, but it’s not as established as some of the other popular and well known banks out there.
  • You only need $100 to open an account and there are not monthly fees.
  • So far they haven’t released a mobile app although their website says that it’s in the works.
  • If you choose to go with Vio Bank you can still use their services through your phone since the website is mobile friendly. You shouldn’t have any problems until they launch the app.

Marcus by Goldman Sachs

Ever heard of Goldman Sachs? This is a bank associated with them offering 2.25% APY. There is no minimum amount of money required to open an account and there are no transaction fees.

  • You’ll be getting an amazing interest rate without losing any of your money to monthly fees.
  • Depositing funds into your account is quite easy since you can do it through wire transfers, electronic transfers, and checks.
  • If you would like to use your funds in any way then you only have two options: electronic and wire transfers.
  • The maximum amount of money you can deposit in your account is one million dollars but that shouldn’t be too much of a problem.
  • Your money will be insured by the FDIC up to $250,000 which is pretty neat too.

Ally

While the options mentioned above are online divisions of different banks, Ally is solely an online bank that has no actual branches.

  • Ally offers 2.20% APY.
  • What makes Ally so special is that you can open a free checking account along with a savings account.
  • This is great because as we mentioned earlier, it’ll make transferring money between both accounts fluid.
  • You’ll be able to deposit and withdraw money from your savings account with greater ease.
  • A mobile app is available so you can manage your finances on the go without having to use a computer or laptop.

Barclays

Barclays is probably the most well-known bank on our list. The famous British bank has been around for over 300 years and is present all over the world including the United States.

  • There are no monthly fees and no minimum required amount to open the account.
  • There’s an added sense of security to depositing your money at one of the largest banks across the globe which is perhaps the bank’s greatest advantage over most of its competitors.

American Express National Bank

You can get an interest rate of 2.10% with American Express Bank.

  • There are no monthly maintenance fees and no minimum deposit although you need to start depositing money into your account within 2 months from the day you open it.
  • There’s really not much special about opening an account with American Express National Bank, but it’s still a great option with one of the highest APYs available at the moment.

Synchrony Bank

Formerly a part of General Electric, Synchrony Bank is now its own entity. There are a couple of pros but there are definitely some flaws here too.

  • What we like the most are the APY of 2.25%, the absence of monthly fees, and that there’s no minimum balance required to open an account.
  • We also appreciate that they send you an ATM card giving you more options to access your money.
  • What we really don’t like is that their website isn’t as smooth as it should be and there’s no mobile app.
  • The poor online experience really takes away from Synchrony Bank’s online savings account.

HSBC’s SBC Direct

HSBC is the 14th largest bank in America so it’s no surprise that they created an online division in the form of SBC Direct.

  • SBC Direct has been around for over 10 years actually and has been offering incredible rates ever since.
  • The bank used to offer an interest rate of 1.70% APY but has no increased that to 2.25% making it one of the highest yield savings accounts available.
  • The minimum balance requirement of $1 is almost negligible and the limit to how much you can deposit is 2 million dollars.
  • There are no monthly maintenance fees and all of your funds will be FDIC insured.
  • Just like with Barclays, you get the added benefit of dealing with one of the largest banks available.

Citizens Access by Citizens Bank

Citizens Access is a newly created online division of Citizens Bank. There are no monthly fees to maintain your account, but you will need at least $5,000 to create one.

  • As long as your account balance has at least $5,000 then you’ll be getting 2.35% APY.
  • Once your balance drops below $5,000 the APY will drop to 0.25% which will be a major problem for some people who can’t guarantee that their account will always have the minimum 5,000 dollars.
  • Another problem with Citizens Access is that they haven’t launched a mobile app, at least not yet.

PurePoint Financial

PurePoint Financial is a division of Union Bank that offers 2.35% APY. Sadly, you need a minimum of $10,000 to open an account and if the account balance drops below that then you’ll stop receiving an interest rate (it’ll drop to 0.25% like with Citizens Access).

Regularly you won’t need to pay any monthly fees unless you make over 6 transactions per month, in which case the bank will charge you 10 dollars. They have a website that’s mobile friendly but no app is available so far.

Alternatives to a Savings Account

While we have presented you with all you need to know about savings accounts and choosing the best one for you, it might be possible that you’re still not convinced. So in case you want to try something other than a savings account, we’ve made a list of some other similar options you might like.

Certificates of Deposit

Certificates of deposit are another popular way of saving money while making even more interest, but they’re not as flexible as savings accounts.

  • By buying a certificate of deposit, you’ll deposit your money but won’t be able to withdraw any of it for a certain period of time (at least 6 months).
  • If you absolutely must withdraw money for any reason then you’ll have to pay a penalty.
  • What’s great is that by waiting the full amount of time agreed upon, you’ll receive much greater interest compared to a savings account.

Money Market Accounts

Money market accounts are somewhere in between savings accounts and certificates of deposits.

  • They’re similar in that money market accounts will pay interest on your deposited money, but different in that they’re a little more strict.
  • You can only withdraw money a certain number of times per month. So you can’t freely spend it.
  • So money market accounts are pretty much more flexible than certificates of deposits, but not as flexible as savings accounts.

Finding a high yielding savings account isn’t as hard as some make it out to be. The key is to know what matters to you most. Is it having an ATM card? Does a minimum balance requirement bother you?

There are lots of options available and you’ll certainly find a high yielding savings account that has everything you need. Managing finances shouldn’t be a chore and most of the options we listed make sure that it isn’t.

 

Logan Allec, CPA

Logan is a practicing CPA, Certified Student Loan Professional, and founder of Money Done Right, which he launched in July 2017. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.

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