The Best Savings Account Rates: What Savers Should Know
by Richard Barrington | MoneyRates.com Senior Financial Analyst, CFA
Choosing a savings account can seem like a pretty mundane task, but often it is one of the first and longest-lasting financial decisions a person makes. Before you simply walk into the nearest bank branch and settle for the latest offer, know more about your options.
After all, you would probably do a little research before shopping for a car, and over time you are likely to put more money into your savings account than into your car. So choosing a new savings account is not a decision you should make randomly.
Type: Savings Minimum to earn APY $0
Rates as of 4/30/2016 Rates / APY terms above are current as of the date indicated. These quotes are from banks, credit unions and thrifts, some of which have paid for a link to their website. Bank, thrift and credit union deposits are insured by the FDIC or NCUA. Contact the bank for the terms and conditions that may apply to you. Rates are subject to change without notice and may not be the same at all branches.
Minimum to earn APY $0
Rates as of 4/30/2016
Rates / APY terms above are current as of the date indicated. These quotes are from banks, credit unions and thrifts, some of which have paid for a link to their website. Bank, thrift and credit union deposits are insured by the FDIC or NCUA. Contact the bank for the terms and conditions that may apply to you. Rates are subject to change without notice and may not be the same at all branches.
As you can see in the table above, MoneyRates.com regularly monitors rates from more than 200 banks to highlight the best savings account rates. But as important as rates are – they are likely to be one of the central factors in your choice of bank – they are still only one component of a savings account.
To understand what else you might need from your savings account, it’s important to understand what part savings accounts should play in your finances.
Where savings accounts fit your life
A savings account should play an intermediate role between a checking account that you might access on a daily basis, and a long-term retirement account, which you shouldn't touch for many years. The following are some examples of how this intermediate role can come into play:
- Getting started with savings
- Saving for emergencies
- Building funds for large purchases
What makes a savings account suited to these uses is that it can pay higher interest than a checking account because you won't be drawing from it as regularly, but at the same time, it will allow you ready access to the money when it’s needed. Remembering the role of a savings account is important when evaluating the facets of a prospective savings account.
Types of savings accounts
Compared to a regular savings account, there are many different types of savings accounts you can open to prepare for future expenses or help grow your wealth.
- College savings (529 plans)
- Individual retirement accounts
- Rewards savings
- Jumbo savings
- Joint savings accounts
- Health savings
- High-yield savings accounts, also known as high interest savings accounts
Plans like 529 plans or IRAs are meant for particular purposes, such as saving for college or retirement.
Many accounts may qualify for tax-free savings, including health savings accounts. The IRS defines a health savings account as an account that is designed to pay or reimburse you for medical expenses. Having a health savings account has several tax benefits, including tax-free interest or other earnings in the account.
High interest savings account questions to ask
You might find accounts with attractive yields through either online savings accounts or your local bank branch. Naturally, the idea of a high interest savings account sounds good, but here are three things you should check on before you open one:
- The legitimacy of the institution. Is your bank or credit union well-established or have a great reputation for customer service?
- The extent of FDIC coverage. Make sure the institution is covered, and if you qualify for a high-yield savings account because you are making a very large deposit, ensure it does not put you over the limit for FDIC coverage, which is currently $250,000 per depositor, per institution.
- Any restrictions on your access to the money. A high interest savings account may limit how often you can access your money. If you can live with those limitations, take advantage of that strong yield. But if not, look for a savings account that offers looser restrictions.
Should you get an ATM card?
Some accounts also offer the option for an ATM card, including online savings accounts. This may sound like a nice perk, but before you opt for one, ask a couple of questions:
- Will easier access result in more spending? If this account is for savings, is having easier access to your money going to hurt your savings habits?
- Are you sacrificing a higher interest rate for the ATM card? If so, you might be better off with a conventional checking account for your short-term funds, while finding a high interest savings account or money market account for your longer-term savings.
Evaluating your savings account options should start with understanding how you intend to use the account, and based on that, what features are most important.
Look at the table above and select the best savings account for you to get your finances on track.
Best money market and savings account rates found by users like you
Have you been able to find even better money market and savings rates than the ones displayed above? If yes, please share them with us and other MoneyRates users! Please include the details: the name of the bank, term of the account, when you opened the account, and whether the account can be opened online or only in the branch (if the latter, please include the location of the branch). Thank you!