Do online savings accounts have higher interest rates?
High-yield savings accounts work by paying you interest on money you deposit into a savings account (usually with an online bank). These accounts typically offer higher interest rates than traditional savings accounts because online banks have lower overhead costs.
Perhaps an obvious reason online banks can offer higher interest rates is that they have lower overhead than brick-and-mortar banks. They don't have to pay for the costs of operating and staffing bank branches.
If they're FDIC-insured, online banks are as safe as traditional brick-and-mortar banks in many ways. You can also take steps as a consumer to ensure your account is as protected as possible when banking online, whether you bank with a brick-and-mortar or an online bank, also called a direct or digital bank.
Key Takeaways
Before choosing an online bank, it's important to decide what features are most important to you. The lack of overhead gives internet banks advantages over traditional banks, including fewer or lower fees and accounts with higher APYs.
Drawbacks of Online Savings Accounts
Online banks normally don't have their own ATMs, although they might provide access to an independent ATM network and reimburse any ATM fees. Online banks might not offer certain services, such as mortgage loans, that their traditional bank counterparts do.
That's because online banks don't have the overhead costs associated with maintaining physical branches, and they can pass on the savings to customers in the form of higher interest rates. Boost your savings with one of these savings accounts.
- My Banking Direct – 5.55% APY.
- Poppy Bank – 5.50% APY.
- BrioDirect – 5.35% APY.
- Vio Bank – 5.30% APY.
- Ivy Bank – 5.30% APY.
- TAB Bank – 5.27% APY.
- TotalDirectBank – 5.26% APY.
- Jenius Bank – 5.25% APY.
- Customer service lacks personal touch.
- Not an option for those lacking access to the internet.
- ATM options may be limited.
- Greater due diligence required to vet the bank.
| Provider | Account name | Interest rate (AER) |
|---|---|---|
| Post Office | Online Saver Issue 72 | 5.06% |
| Cynergy Bank | Online Easy Access Account (Issue 71) | 5.01% |
| Wealthify powered by ClearBank Sponsored | Instant Access Savings Account * | 4.91% |
| Bank Account | Minimum Balance for Rate | APY |
|---|---|---|
| Citizens Access Online Savings Account | $0.01 | 4.50% |
| Ally Bank Online Savings Account | $0 | 4.25% |
| Marcus by Goldman Sachs High-Yield Savings | $0 | 4.40% |
| Synchrony High-Yield Savings | $0 | 4.75% |
How many online savings accounts should I have?
There's no limit to how many savings accounts you can have. Having just one savings account can simplify money management. Having multiple savings accounts may let you easily stash cash for different goals.
What are the cons of a high-yield savings account? Variable rates. Interest rates on these accounts can and do fluctuate, which means the APY you started with could potentially drop. Keep your eye on such changes and remember that the money is yours; at any time, you can move it to a bank that offers a higher rate.
But the money in your savings account could be earning more interest if you shop around for an online alternative. Online-only banks may not have physical locations, but the resulting low overhead costs mean they often offer higher interest rates and lower fees.
Like traditional banks, online banks are usually chartered and insured by the FDIC to keep your deposits safe. With online banks, you can take care of all your banking needs electronically, including: Opening a new account. Depositing checks.
Yes, just about all online banks provide FDIC insurance of $250,000 per depositor, per FDIC-insured bank, per ownership category.
While you can grow your money daily and take on zero risk with high-yield savings, they are not the best way to grow your wealth long-term. The rate of inflation can be higher than the yield you earn over time, so it's better to not keep piling cash into your savings and instead invest your money.
Is your money stuck in an online savings account? No. Just like a traditional savings account, your money is accessible to you when you need it. With just a few clicks, you can move money in and out of your savings and into another account.
As of April 2024, no banks are offering 7% interest rates on savings accounts. Two credit unions have high-interest checking accounts: Landmark Credit Union Premium Checking with 7.50% APY and OnPath Credit Union High Yield Checking with 7.00% APY.
CDs are best for individuals looking for a guaranteed rate of return that's typically higher than a savings account. In exchange for a higher rate, funds are tied up for a set period of time and early withdrawal penalties may apply.
As of November 2023, the average saving rate published by the FDIC is 0.46%, so a good rate would be over 1.00% APY. It's also possible to find rates 10 times higher, as many of the best savings accounts pay 4.50% to 5.00% APY. By contrast, some of the largest national banks keep savings rates at 0.01% APY.
What is a good realistic interest rate on a savings account?
Some of the best rates can be found on high-yield savings accounts, which currently offer around 4.5%–5%. Saving money can be tough, but a high interest rate gives your savings a boost. Fortunately, plenty of banks and credit unions are offering just that.
The best savings account interest rates are around 5%. At a brick-and-mortar bank, you'll often find savings rates closer to the national average, which is currently 0.47%.
- BrioDirect High Yield Savings Account: 5.35% APY.
- Ivy Bank High-Yield Savings Account: 5.30% APY.
- TAB Bank High Yield Savings: 5.27% APY.
- UFB Secure Savings: Up to 5.25% APY.
- EverBank Performance℠ Savings: 5.15% APY.
- Bask Interest Savings Account: 5.10% APY.
- Apple Federal Credit Union – 5.40% APY.
- Expedition Credit Union – 5.40% APY.
- NexBank – 5.40% APY.
- CIBC Agility – 5.36% APY.
- TotalDirectBank – 5.35% APY.
- CFG Bank – 5.31% APY.
- First Internet Bank – 5.31% APY.
- Sun East Federal Credit Union – 5.30% APY.
- Easy-access savings account: 5.06%
- Notice savings account: 5.27%
- Best fixed-term bond: 5.18%
- Sharia savings account: 5.05%
- Regular savings account: 7%
