A recent Money and Synchrony Bank study revealed just 41% of women and 30% of men are actively contributing to an emergency fund should something go wrong — and if 2020 is any indication, the unexpected certainly is now on everyone’s radar. A high-yield savings account is a smart way to jumpstart an emergency fund, with rates that can increase your savings amount much quicker than a traditional savings account.
About High-Yield Savings Accounts
High-yield savings accounts have much higher interest rates than standard savings accounts, with some offering up to 25 times the national average. Although it is possible to find this type of account at traditional brick-and-mortar institutions, most high-yield savings accounts are offered by online banks. The lower overhead costs allow them to offer competitive rates with few, if any, drawbacks such as account maintenance fees.
Many banks offering high-yield savings accounts focus on that product, or limit themselves to a handful of other products such as certificates of deposit or money market accounts. If you have a checking account at a separate institution, you are allowed to link it to the savings account so you can make transfers as seamlessly as possible. If you don’t have internet access, or any way of initiating an electronic transfer, most institutions will offer the option of mailing a check. ATM cards are rarely issued for these accounts.
Though the rates offered by high-yield savings accounts aren’t necessarily the best way to quickly build capital, they can certainly help you achieve certain savings goals. H. Adam Holt, CFP, CEO and founder of Asset-Map, a software that helps financial advisors visually map a client’s assets, believes that most households should aim to invest at least 10% of their income. Additionally, he says, “households should seek to achieve 3-6 months of their living expenses in accessible savings depending on the variability of one’s income sources. High-yield savings accounts are commonly used to build this ’emergency reserve.’” Though your funds grow at a slower pace when compared to investing, these accounts are still useful for mid-term goals or situations, such as the aforementioned emergency fund or saving up for a down payment on a car or house.
What should you look for in a high-yield savings account?
- No minimum balance requirements
- Relatively stable rates
- Few to no administrative fees
- FDIC/NCUA Insurance
The Best High-Yield Savings Accounts of 2020
Our main factors when determining our top picks were high rates and no maintenance fees. However, given that there are several dozen banks with highly competitive rates, we also made sure to only pick ones with unique features that made them really stand out from the rest. For example, many online banks have their own dedicated mobile app, but only a handful offer online or mobile check deposits.
Our high-yield savings accounts top picks:
- Varo – Competitive APY and Great Tools
- Ally – Best Online Tools
- Nationwide by Axos – Highest APY
- Marcus by Goldman Sachs – Safest Bet
The Best High-Yield Savings Accounts of 2020: Company Reviews
Varo (1.21% – 2.80% APY)
For a Great Blend of High APY and Useful Tools
Varo’s high-yield savings account combines a competitive APY with useful online saving tools. Granted, in order to take advantage of some of these tools you need to also have a Varo checking account. This is understandable, considering said tools allow you to either transfer a percentage of your direct deposits to savings or round up the change from every purchase you make and deposit it in savings, like a digital piggy bank.
The most notable feature of this account, however, is the option to make its APY higher. In order to qualify for this higher rate, you must have a Varo checking account that receives at least $1000 in direct deposits per month and you must make five purchases with their debit card in the same span of time. If you satisfy both conditions, any amount up to $10,000 receives the 2.80% APY rate, making it a great tool for growing your savings quicker. All dollar amounts over $10,000 continue to receive the standard 1.21% rate.
My Savings from Nationwide by Axos (1.05% APY)
For the Highest APY, period.
Nationwide by Axos offers the “My Savings” account. Despite a drop in rates across the board due to the recent Fed cuts, it boasts one of the highest APYs in the market among accounts with no maintenance fees, and you do not need to hold a specific balance to qualify for said rate. The catch is, you need to open a checking account and set up a $1,000 direct deposit.
If you don’t want to do that, the standard APY right now is 1.0%.
Ally Online Savings (.80% APY)
For the Best Tools
Ally’s Online Savings account sports a robust APY which, while not the highest, certainly remains competitive. Their strongest point, however, is the amount of resources their online banking tools offer.
Aside from features such as mobile banking—including mobile deposits—and transfers between accounts, their online banking tools also include customizable savings goals, called “buckets,” which help you better visualize both your savings goals and your progress. Ally also offers different ways to boost your savings, whether through automatic transfers from checking accounts or personalized savings recommendations based on your deposit history.
Marcus by Goldman Sachs (.80% APY)
Founded in 1869, Goldman Sachs is one of the oldest and most authoritative financial institutions in the United States. Their history and track record in the industry translates to solid financial stability, which reflects in their savings account APY. Although Marcus has experienced rate drops due to the recent Fed cuts, it has maintained the steadiest interest rate since the cuts were announced. Marcus also has all the convenient features you can expect from a good savings account such as mobile banking, online and mobile check deposits, and more.
While their interest rates are not as high as some of their competitors’, Marcus by Goldman Sachs is a great choice if you prefer predictable interest rates that reduce your need to shop around.
How We Found the Best High-Yield Savings Accounts of 2020
To find the best high-yield savings accounts of 2020, we evaluated 20 banks and compared them on three main factors: interest rates, account fees, and customer experience.
While these factors helped us choose the most outstanding accounts, it is important that any bank or credit union that you work with be insured by the FDIC or NCUA, respectively. This will guarantee that your money (up to $250,000) is fully insured in the event of the bank’s failing.
You also want your financial institution of choice to have a strong financial rating, as this is an indicator of how likely they are to uphold their financial obligations to you.
When looking for the best high-yield savings account, focus on:
Although interest rates on high-yield savings accounts are highly volatile, many financial institutions show trends of higher interest rates across the years. A historically high interest rate will mean less shopping around when they do change.
If you’re looking to save money, it makes little sense to pay for the privilege of doing so. While you will rarely find a bank account without some sort of fee, you will want to choose accounts with no maintenance or minimum balance fees, to keep your interest rate as advertised.
Because most banks offering high-yield savings accounts are online only, it’s important that the process you go through to access your funds be as seamless and intuitive as possible. Aside from being able to access your account online, additional tools such as mobile apps, goal trackers, and financial literacy resources can help you build your savings more efficiently.
What to do if you don’t qualify for a high-yield savings account
Unfortunately, not everyone gets approved for a savings account. Many banks use ChexSystems as their account verification service of choice. If you’ve had instances of bounced checks or unpaid fees within the last 5 years, it could still be logged in your record, which would inform the bank’s decision to allow or deny your application.
If this is your case, although you may not have access to the high-yield savings account, you could still ask about opening a second-chance checking account to help rehabilitate your banking record.
Another possible reason for getting denied is having a credit freeze on your account. Given that a freeze restricts access to your credit history, the bank would be unable to perform the required background checks to approve your new account. Before opening any new bank account, make sure you do not currently have a freeze on your credit.
Watch out for the the fees
While most of these accounts advertise no minimum balance requirements, either for opening or maintaining the account, they do have provisions stating that, if your account maintains a null or negative balance for more than 30 consecutive days, they have a right to close it.
It is also important to point out that while many accounts don’t charge account maintenance fees, they may charge fees for other account activity such as outgoing wire transfers, account overdrafts, or paper check requests.
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