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Updated: June 4, 2020 10:49 AM ET | Originally published: March 23, 2020
Money; Getty Images

Interest rates quoted are valid as of June 4, 2020, and are subject to change. Check with each financial institution for current rates before making any investment decision.

Opening a savings account is one of the first financial decisions you make, sometimes made as early as childhood when you take that first trip to the bank with your parents and your piggy bank. While the main reason for having a savings account hasn’t changed – having a safe place to keep money in reserve in case of an emergency – many of today’s accounts offer a lot more benefits than those of days past.

With so many savings accounts on the market, it can be hard to discern which one is best suited to your personal and financial situation. There are plenty of factors to consider before choosing a bank account, including your budget and likely balance, flexibility of deposits and withdrawals, and interest rates — so that you can get some return on your money.

A good savings account will provide features that help you strategize contributions and reach your savings goals. It will also be easy to manage and keep track of your finances.

Some features to look for when considering a savings account include online banking, mobile apps, few (or no) fees, and the availability of quick, seamless transfers between accounts. These things can lead to a happier, more stress-free financial life. After all, if setting money aside isn’t easy, you’re not as likely to follow through with it.

What really separates the best savings accounts from the rest of the pack, however, is a high interest rate. The average savings account interest rate, as of June 4, is a pathetic 0.06% annual percentage yield (APY), according to the most recent estimate from the Federal Deposit Insurance Corporation (FDIC), with some accounts offering rates as low as 0.01%. That’s more like a puff of smoke than a turbo charge for your savings.

With the Federal Reserve cutting interest rates to near zero in response to the economic stress caused by the COVID-19 virus, it’s become more difficult to get a decent return on money stashed in a savings account. Luckily, some online banks today are still offering rates that are much higher than the average, in some cases as high as 1.5%, and it only takes a few minutes to set up your account.

Important Things To Know About the Best Savings Accounts

  • Both “APY” and “interest rate” refer to how much you earn on your savings account.
  • Even with a high yield savings account, if your goal is to significantly grow your money, you’re better off looking into a different type of investment account.
  • Look for accounts that compound interest daily rather than monthly. You will earn interest on the interest earned the previous day, increasing your yield.
  • Some savings accounts advertise high APYs that only apply to a given amount of money, such as the first $500, or on balances over $10,000, while others will offer the same APY regardless of the balance.
  • Many banks and credit unions allow you to open multiple savings accounts to help you save for different goals.
  • Federal law limits the maximum number of withdrawals you can make from a savings account to six per month. Exceeding this limit can result in the bank or credit union imposing fees on each withdrawal over the limit. A repeated pattern of exceeding this limit can result in the bank or credit union automatically converting your savings account into a checking account or closing the account altogether.
  • Banks and credit unions are both governed by different agencies, but the rules are essentially the same for both.
  • Credit unions may have membership requirements to join, while banks generally don’t.
  • Most banks and credit unions insure deposits of up to $250,000 per account.

5 of the Best Savings Accounts

Reviewing the Best Savings Accounts

It’s important to consider what you want in a savings account before signing up. For example, if you want to be able to withdraw cash from an ATM, you should obviously avoid opening a savings account with no ATM access. If you want to earn a high interest rate on your entire balance, you should stay away from savings accounts that pay different interest rates at different balance levels. Before opening an account, set your goals, check for minimum opening balances, interest rates, any fees the bank or credit union may charge, and how accessible your money is. A little comparison shopping can help you find the right account for you.

PenFed Credit Union

Working with a credit union has several advantages because of its non-profit structure, which allows it to provide complete banking services with few to no fees. However, most credit unions lag behind their traditional bank brethren as far as their online offerings are concerned. Not so with PenFed Credit Union: this financial institution boasts all of the handy online and mobile features you’d expect from a big-name national bank.

That’s especially true of its Premium Online Savings account. It offers a high interest rate of 1.15% APY as of June 4, 2020, and this interest rate will be paid on your entire balance (up to $250,000). Furthermore, there are no monthly maintenance fees, you can set up recurring transfers between your PenFed accounts without paying transfer fees, and it only takes $5 to open your account.

PenFed’s Premium Online Savings is an entirely online-only account, so you won’t be able to go into a PenFed Credit Union branch or to an ATM to withdraw your money in cash; you’ll have to do it entirely with online transfers to and from a regular saving or checking account.

Most credit unions restrict membership to certain groups of people, such as those that live in a certain area or are employed by certain companies. While PenFed Credit Union was originally founded to help military members and features special assistance just for them, today anyone is free to join.

Capital One 360

The Capital One 360 Performance Savings account advertises that its rates are 5X higher than average, but the truth is that they’re more like 16 times higher than normal, at least according to the FDIC. That’s because as of June 4, 2020, Capital One offers 1.15% APY on all balance levels in this account—far higher than the 0.06% APY offered on average by most banks.

There are no minimums to open this online savings account, so you can get started today with whatever amount you choose. There are no monthly fees, either. If you need to withdraw money you can do so with an online transfer, by phone, or by visiting a Capital One banking location, but you can’t use an ATM with this account.

Capital One has over 500 branch locations and is the eighth largest bank in the United States according to the Federal Reserve. With big-name banks like this you often sacrifice high interest rates and customer service, although Capital One bucks the trend here too. J.D. Power named Capital One as the second-highest rated mobile app in a 2019 study, which will especially help with managing this online savings account.


Barclays is one of the oldest banks in the world, having gotten its start in London well before the United States was even a nation (the bank started in 1690, to be precise). Much like the British Empire, it’s grown in size to feature several country-specific divisions, including the U.S. online banking division based in Wilmington, Delaware. Given that this division focuses entirely on online banking, you can be confident that you’ll have a good experience with this account.

Barclays offers an online savings account with a high interest rate of 1.15% APY (as of May June 4, 2020), no transfer fees, no monthly maintenance fees, and no minimum balance requirements. Barclays has no U.S. branch locations, and you won’t be able to get access to your money through an ATM with this account. Withdrawals are made by either an electronic transfer to a linked account with access to checks or an ATM, or by requesting that a check be sent to you. If you aren’t in a hurry to receive the funds, this shouldn’t be an issue. However, if you need quick access to your money, Barclays may not be the best option.


NBKC Bank’s savings account works a little differently, because it’s not actually a true savings account at all. It’s a Personal Money Market Savings account which means it works a little differently on the bank’s end, but for you it’s essentially the same thing, with the added benefit of being able to double as a checking account if needed It still comes with the same amount of FDIC insurance and the same rules as a regular savings account.

Although NBKC does require an opening balance of $5.00, there is no minimum balance required after that, and no fees charged for things like automatic bill pay, e-statements, overdrafts, stop payments, and more. Even the first box of 120 checks is free. The only fees you’ll pay are a $5.00 charge to send a domestic wire anywhere in the U.S., and a $45.00 fee for sending or receiving international wires.

The real beauty of NBKC Bank’s Personal Money Market Savings account is that it not only offers a relatively high interest rate (1.01% APY as of June 4, 2020), but it also provides free access to any one of 32,000+ Moneypass ATMs located across the U. S. and Puerto Rico. There are no NBKC fees if you use an out-of-network ATM, but if the ATM’s owner charges a fee, the bank will refund you up to $12 per month. This means that as long as you don’t use ATMs excessively throughout the month, you can pretty much use whichever ATM you want and not have to worry about annoying fees anymore.

Discover Bank

You may know Discover from its credit card commercials, but it also has a robust online banking division too. Discover’s Online Savings Account is one of the best out there, offering 1.15% APY as of June 4, 2020. Even better is that Discover Bank doesn’t charge any of the fees you might see at other banks. In fact, the only fee it does charge is a $30 wire transfer fee if you need to get money into someone else’s account fast. Otherwise, you can simply do a regular automated clearing house (ACH) transfer to move money to a different account within a couple of business days, so the wire transfer fee is easily avoided.

Discover Bank also gets one of the best ratings in the online banking world for customer satisfaction, according to a 2019 J.D. Power study. According to these rankings, Discover Bank scored highly for its stellar online support and easy account-opening process. It also has a handy mobile app you can use, which even offers facial or touch recognition logins to make for a secure and smooth experience.

The only downside with Discover Bank is that like many online savings accounts, you won’t be able to use an ATM to get access to your cash. You’ll have to make do with online transfers, and Discover Bank also offers the option of free cashier’s checks.

How Are Online Savings Accounts Different?

It used to be that the best way to get a savings account was to visit whichever bank branch was most conveniently located to you. That meant that most banks invested heavily in opening as many branches as possible, but this was a costly approach as banks had a high overhead that needed to be covered, usually by charging fees for certain account services. Furthermore, since most people were more interested in convenience than earning a good rate, physical banks simply didn’t offer savings accounts with high APYs.

If you flash-forward to today, the internet has opened up a world of possibilities — literally. Banks that are operated entirely online, with no branches at all, are becoming more and more common. Even many traditional banks now offer high-yield online only savings accounts, and some still offer you the option of visiting local branches in-person.

Since most online banks don’t offer branches, they’ve focused more on developing a positive online and mobile experience that’s equally matched with high interest rates. According to the 2019 J.D. Power study mentioned above, online banks score 53 points higher than traditional banks on a 1,000-point scale for overall satisfaction. At least before the Federal Reserve began cutting interest rates in 2019, online banks had engaged in a sort of reverse bidding war, increasing interest rates constantly in order to compete with each another. In 2018, some high yield savings accounts were offering interest rates as high as 3.00%. While online savings account interest rates have fallen hand in hand with cuts by the Fed, but these accounts still offer a far better return than standard accounts.

Aside from not being able to have a weekly chat with a bank teller, people with online bank accounts often have to worry about what to do with cash. With most online banks there’s no easy way to deposit cash, so an online bank may not work for you if you handle cash frequently. Many online banks don’t offer ATM use either with savings accounts, while others, like NBKC Bank, have more consumer-friendly ATM policies than traditional banks. The solution for many people is to maintain multiple accounts — at least one with local branches and easy ATM access (even if it has minimal or no interest) in addition to a high-yield online savings account.

Online Savings Accounts Can Help Your Savings Strategy

Online savings accounts are insured up to $250,000 per account through either the Federal Deposit Insurance Company (FDIC) or the National Credit Union Administration (NCUA), making deposits in online accounts as safe as those in a traditional bank. However, there are other reasons why choosing an online savings account can make more sense in many cases.

Protect Your Savings Account From Yourself

Online banks are especially well-suited for savings accounts because getting access to your money can be slightly more difficult than with a regular bank. At first this sounds like a downside (and it can be in some cases), but remember: the purpose of a savings account is to serve as a spot to park your money for a specific use at a later date. If it’s too easy to get ahold of, you might be tempted to withdraw the money to pay for an ultra-sweet (but ultra-unnecessary) sale on something you really want.

If your main checking account is at another bank, it can take a few days to transfer the money over from your savings account. This buffer can help lessen the temptation of using the money too soon.

If you’re someone who’s not easily tempted and prefers to have quick access to your savings account funds, you still have options. You can always open a savings account with ATM access or open a checking account at the same online bank so you can take advantage of instant transfers between these two accounts. You can also link accounts at other banking institutions that allow easier access to cash, although transfers between different banks can take a few days. However, if you need to access cash from your account often, a different type of account, such as a money market or checking account, might be a better option.

Savings Accounts for Different Goals

Many online banks allow you to open multiple savings accounts. For example, you may choose to open separate savings accounts for:

  • House down payment
  • Emergency fund
  • Vacation
  • New car
  • Children’s college fund

You can essentially do the same thing on paper with a budgeting program and a single savings account. However, many people find that it’s easier to stay on track with their savings goals by separating their savings like this.

Whichever reason you have for opening a savings account, always shop around before settling on a bank. Remember, you’re saving money for a long term objective, so why not earn as much interest as you can while you’re at it.

Protect Your Savings Against Inflation

The rate of inflation in the U.S. is currently around 0.33%. That means if you’re not earning at least 0.33% per year on your savings account balance, your money is losing value as the years go by. And since savings accounts are designed to be held for the long haul, this is especially important to consider. You can at least minimize the damage by choosing a savings account with the highest interest rate possible. Your money will still slowly lose value over time, but at least it won’t be as bad as if you choose a savings account offering the national average of 0.09% APY.

Should you choose a savings account at a bank or credit union?

Banks and credit unions both offer very similar products, but there are some slight differences that might push you one way or another.

Banks are for-profit businesses that offer FDIC insurance. Anyone can join a bank as long as you meet the minimum account opening requirements. While many banks offer a full suite of financial products, you can also find online banks that specialize in offering just one or two types of high-quality savings accounts.

Credit unions, on the other hand, are non-profit organizations that offer NCUA insurance. At a credit union, you’re considered a member rather than a customer, and members can even be involved in governing the credit union if they choose. Most credit unions have restrictions on membership, so you may not qualify to join all credit unions. In addition, most credit unions focus more on in-person, brick-and-mortar development than online offerings, although many forward-thinking credit unions like PenFed Credit Union are becoming more open to a digital existence.

Summary: Best Savings Accounts


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