I remember opening my first savings account when I was a kid. I felt so grown-up, and for the rest of the day, I flashed my blue bank book at everyone like a medal.
But now you can find high-yield savings accounts that offer much better interest rates than their traditional counterparts.
Why you should consider a high-yield savings account
Because of the aforementioned abysmal interest, you shouldn’t use savings accounts for long-term investments like retirement or your kid’s college fund. Instead, you should invest in mutual funds, which offer a much higher return.
A savings account, on the other hand, might be where you keep your emergency fund or where you sock away money for a down payment. In those cases, you need the stability a savings account offers. And the type of savings account you should use is a high-yield one.
As the name suggests, high-yield savings accounts offer a higher interest rate than traditional savings accounts. Many offer 1.00% to 1.50% APY instead of the 0.01% offered by banks like Chase and Bank of America.
It’s worth noting that some small banks offer an APY of 3.00% or 4.00%, but they have account maximums in the range of $10,000 to $15,000 and require you to jump through hoops. For a full list, including regional banks with high interest rates, visit Doctor of Credit.
For those of you who want a straightforward national bank, here’s how a high-yield savings account would play out over time.
Let’s say you have $10,000 saved for your emergency fund. If you put it into a traditional savings account at an APY of 0.01%, you’d have a measly $10,030 after 30 years. But with a high-yield savings account at an APY of 1.50%, you’d have $15,679.
Although I wouldn’t advocate leaving money in a savings account for 30 years — unless it’s an emergency fund you’re lucky enough not to touch — it’s worth illustrating the difference just one percentage point can make.
5 high-yield savings accounts to try
If you’re intrigued, the banks below are proven players in the game, which means they’re unlikely to pull a bait-and-switch on you by offering a high interest rate to start and then significantly lowering it later. Because banks can lower their interest rates at any time, some disreputable institutions have done so to entice new customers.
They also are free of monthly fees and minimum balance requirements and are FDIC insured.
Synchrony Bank: 1.30% APY
Synchrony Bank has been in business since 1988. Its savings accounts come with a free ATM card, and although the bank doesn’t have its own machines, it refunds up to $5 in foreign ATM fees per statement cycle.
It offers complimentary identity theft resolution services as well as some travel and leisure discounts for customers who have more than $10,000 with the bank for a year.
“My interest rates are high … and that makes me incredibly happy because my local bank was not even near that,” said one reviewer. “Overall I would recommend this bank to anyone looking for an online savings account. It’s been great so far!”
However, some reviewers did note that wait times for phone and email support can be long.Visit Synchrony
Barclays: 1.30% APY
You’ve probably heard of British bank Barclays, which also comes in at a healthy 1.30% APY.
Its Dream Account offers a 1.20% APY — and extra bonuses for sticking to your savings goals. When you make deposits for six consecutive months, you’ll receive a 2.50% bonus on the prior six months of interest, and when you don’t make any withdrawals for that same period, you’ll get another 2.50% bonus.
“The interface and ease of use is what makes this bank great to use,” said one reviewer. “This is one of the better banks out there compared to others, as they offer better savings opportunities.”
A few reviewers noted that customer service hasn’t been as responsive as they’d like, which makes sense because the bank is open only from 8 a.m. to 8 p.m. EST daily.Visit Barclays
Ally: 1.20% APY
Ally, one of the stalwarts of the online banking game, has an easy-to-use interface and modern features like chat support and remote check deposit. Its agents are available 24/7, and it offers an ATM card and up to $10 per month in reimbursements for ATM fees.
Another bonus is the fact that the interest is compounded daily (at many other banks, it’s compounded monthly, which means fewer earnings for you).
“I like to call my Ally savings account my ‘rainy day fund’ because it is easy to maintain and it seems secure and safe,” said one reviewer. “Overall I am impressed with Ally.”
Complaints included the fact that you can’t use cash deposits, which might be a roadblock for people who don’t have a checking account.Visit Ally
GS Bank: 1.30% APY
If you wanna get fancy, try GS Bank, a subsidiary of massive investment company Goldman Sachs. Like Ally, GS offers daily compounded interest.
It doesn’t offer ATM cards or a mobile app, but that fact doesn’t seem to bother users much.
“Crucially for an online-only bank, their website is excellent,” said one reviewer. “It works as well on mobile as it does on my desktop, and I’ve never had an error, problem, 404, outage, anything. If they keep operating this way, I’ll be a loyal customer for a long, long time!”
Most complaints center around customer service: that it’s open only during the week and available only over the phone.Visit GS Bank
Live Oak Bank: 1.40% APY
Live Oak Bank is based in North Carolina and has been around since 2008. Though it doesn’t offer an ATM network or mobile app, its APY is one of the highest around.
So if you’re simply chasing returns — and don’t care about frills — it might be a good fit for you.
“I will continue to do business (and recommend them to everyone) due to their amazing website, ease of use, helpfulness, and delivery,” said one reviewer. “I can’t say enough good about them!”
Some users complained about the length of time it took to process electronic deposits, but one recent reviewer said that process has improved.Visit Live Oak Bank
Traditional banks are where your savings go to die. Instead, try one of these high-yield savings accounts to keep your emergency fund safe — and keep it growing.
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