Are you building your emergency fund for a rainy day, saving for a new car, or setting aside money to take that family vacation you’ve long dreamed about? When you’re looking for the best place to put your short-term savings, the interest rate you earn should be a top consideration. High-yield savings accounts, often offered by online banks, pay significantly higher rates than traditional savings accounts offered at large banks.
Although savings account interest rates, expressed as APY (annual percentage yield), have dropped across the board over the past year, the average APY for high-yield savings accounts currently ranges from about .50% to .70%—which is much better than the national average of .05% for traditional accounts.
High-yield savings accounts follow federal rules regarding withdrawals, allowing up to six per month. If you make more than the allowed number of withdrawals, the bank could convert the account to a checking account. High-yield savings accounts may also require a minimum deposit and charge various fees.
All the banks listed below are online-only (lower overhead typically allows online banks to offer higher interest rates). In addition, every bank listed offers a mobile app, so you can easily access your savings balance and other information from your mobile device.
Are you worried about the safety of putting your savings in an online bank? Savings accounts with online banks are insured by the FDIC up to $250,000 per account owner on the account, just like traditional bank savings accounts are.
Bankrate’s best high-yield savings accounts are chosen based on APY, minimum balance requirements, and availability to consumers. Its top choices as of January 23, 2021, are:
Quontic Bank: 0.65% APY, $100 minimum opening deposit, no monthly maintenance fee.
Live Oak Bank: 0.60% APY, $0 minimum opening deposit, no monthly service fee, no minimum balance.
Synchrony Bank: 0.60% APY, $0 minimum opening deposit, no minimum balance.
Comenity Direct: 0.60% APY, $100 minimum opening deposit, no monthly service fee.
Popular Direct: 0.60% APY, $5,000 minimum opening deposit.
Better interest rates are enticing to be sure, but they are only one factor in helping you decide which bank is best for you. If you prefer walking into your neighborhood bank to conduct your transactions or have a face-to-face with a banker, then an online-only savings account may not be the right choice for you. But if you’re fine making transactions online in return for a higher rate of return, these are worth checking out.
Subscribe to the Digital Orange Juice for juicy ideas and the people who fund them. You can find out about our next pitch competitions here. Also, be sure to join our new community BGV Connect!
Maria Valdez Haubrich is the Executive Editor of SmallBizDaily.com where she is responsible for all web content. Previously she was the Executive Editor at Entrepreneur Magazine, where she worked for more than 20 years.