5 Best Online Savings Accounts

By Miranda Marquit on 11 January 2013 13 comments

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Having a savings account is pretty much taken as an article of faith among those in the personal finance world. You are supposed to have a savings account — and you are supposed to look for the highest yield or interest rate.

In many cases, the highest yield is likely to come from an online source because of their limited services and low overhead.

Pros and Cons of Online Savings Accounts

Before you decide to open an online savings account, it's important to research your options and understand the realities that come with online savings accounts.

Better Interest Rates

The main advantage to an online savings account is the higher yield. Traditional brick and mortar banks are paying yields of between 0.1% and 0.3% right now. But if you put your money in an online savings account, you could earn a yield of around 1%. While this is hardly "high yield" when compared with the 4% and 5% yields common prior to 2008, it is still better than what you will get at a brick and mortar bank.

Inconvenient Access to Funds

The biggest downside to an online savings account is your access to the funds.

While you can mail paper checks to some online banks for deposit, it's more common to transfer money from your checking account into your online savings account. And, if you want to withdraw your money, chances are that you need to transfer it from your online savings account to your primary checking account. This can take three to four business days — which can problematic if you need your money immediately.

Some online savings accounts have ways around this, though. You might be able to link your online savings account with an online checking account with the same bank. You can then instantly transfer the money to the linked checking account and use the debit card to withdraw the money from the online checking account.

Finally, there are some banks that will send you an ATM card for use in withdrawing money from your account. You need to be careful in these cases, since you might end up paying ATM fees. Your bank might not charge you, but the bank that owns the ATM may. Some online banks reimburse consumers for all fees, though. This can be a way to access your money quickly and conveniently without worrying about ATM fees.

Which Online Savings Accounts Are the Best?

When deciding which online savings account is likely to work best for you, start out by looking at interest yields. You need to look beyond the Annual Percentage Yield (APY), though. Some of the items to consider include:

  • Minimum balances
  • Fees
  • Introductory periods
  • Customer service
  • FDIC insurance

With an online savings account, it is also important to consider how you will manage your funds. An easy-to-navigate website is essential if you plan to do the bulk of your banking via the Internet. Many online banks provide live chat so that customers can contact support quickly and easily.

Here are the best online savings accounts, all of which are FDIC-insured.

Discover

You might know Discover for its credit card offerings, but Discover has a banking division, and you can open an online savings account with a yield of 0.95%. Discover also offers a money market account with a yield of 0.75%, and a five-year CD with competitive 2% APY.

In order to open an account, you do need $500. Other than that, there is no minimum balance to maintain, and no monthly maintenance fees. Finding the customer service information is a little more difficult on the Discover site, but you can call 24/7 or send an email.

Click here to open an account now!

Capital One 360

Click here to apply nowFormerly known as ING Direct, Capital One 360 (detailed review here) offers the same great rates and service. Just like before, there are no fees and no minimums to open an account. Plus, if you're already a Capital One checking customer, your accounts can be automatically linked. Transfers are free and easy. The current APY is % APY.

Click here to open an account today!

Chase Savings

While not quite in the same category as the online-only banks mentioned, Chase deserves a spot simply because of its presence. If you are wary of using an online only bank, consider Chase, with its 18,000 ATMs, online banking access, and many more features that only a large bank can offer.

When it comes to the Chase SavingsSM account, you'll find that saving money can be quite easy and rewarding. Currently, there's a special offer for new account holders in which a $100 bonus will be awarded to you after opening an account, depositing a total of $10,000 or more in new money within 10 business days, and maintaining a $10,000 balance for 90 days. The current APY is 0.01%. There is a $5 monthly fee that can be waived if you meet certain requirements.

Click here to learn more about Chase SavingsSM today!

GE Capital Bank

Click here to apply nowGE Capital Bank isn't as well-known as others but they are FDIC insured and offer many of the same products. They're known as an "industrial" bank, and is owned by the General Electric Capital Corporation.

Their rates beat the national savings average, there's no minimum deposit requirement, and they don't charge transaction fees. If you're looking for a new place to hold your savings, GE Capital Bank is one to consider.

Ally

Click here to apply nowAlly Bank offers a savings account with a yield of 0.99% annually. There is no minimum account balance required to receive that rate of interest, and you don't need to maintain a particular balance to avoid fees. Ally offers a number of savings products, including options for high-yield CDs and IRAs.

This bank generally receives high marks for customer service. The website is easy to navigate, and you can call customer service anytime of the day, as well as access live chat.

EverBank

One of the more interesting banks right now is EverBank. If you are a serious saver, this might be the right fit for you. The Yield Pledge Money Market account comes with a very attractive introductory rate: 1.40% for first-time account holders for the first six months on balances of $50,000 or less. That makes the first-year APY is as high as 1.01%. After that, EverBank promises that the yield will be in the top five nationally. The ongoing rate is 0.61%.

You need $1,500 to open this account. You can move money up to 6 times a month. There is no monthly fee.

In the end, you have to decide what you want from your online savings account. Consider your options and whether or not you will need immediate access to your money. Additionally, pay attention to minimums. It doesn't do you much good to open a high yield account if you don't have the balance to qualify you for the best rates.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any bank, card issuer, airline or hotel chain.

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Guest's picture
Guest

Ally doesn't coordinate well with Quicken -- you can't request transaction download through Quicken. You have to go to Ally site and push the download to Quicken. (Is this the Direct Connect? I forget what they call it.) Anyway, it's a pain, and it's the reason I closed my recently opened account with Ally.

Quicken has been around a long time, and works with many, many different banks and financial institutions, but Ally/GMAC hasn't invested a little time into making this work...? Ridiculous.

Guest's picture
Guest

I download my transactions from Quicken for my Ally accounts with no problem.

Guest's picture
Rajiv Agrawala

Everbank's website shows under "Rates & Fees" for this account an $8.95 "Monthly fee in any month when average daily balance is below $5,000". Which means one of two things:
1) The REAL minimum balance to open is $5000, not $1500.
2) Having a balance of $1500 with a 1.01% APY would earn only about $15/yr, but would cost you about $96/yr, meaning you're paying EverBank rougly $81/yr to hold your money.

Guest's picture
Miranda

You bring up a good point about the Yield Pledge account -- which is that even if a bank has a specific minimum to OPEN the account (in this case $1,500), you do need to read beyond the initial marketing materials to see what else is in store if you don't meet the other requirements. Thanks for bringing that up.

Ryan Guina's picture

EverBank announced this week they will be dropping their fees. There will no longer be a minimum balance requirement.

Guest's picture

Don't let a higher or the bank with the highest interest rate be your main decision maker. I remember back in the early 2000's when many online banks were competing for business they would out raise each other in terms of interest paid. But a lot of their other qualities (customer service, fees, etc.) were worse than a lower interest paying bank.

Also, many of those highest yielding banks then have horrible rates now. Find a bank with a decent interest rate that also excels in every other area. I would rather earn a few dollars less per year and not have to deal with any headaches than the other way around.

Guest's picture
Guest

You should look at Sallie Mae. They have a money market accout paying 1.5%

Guest's picture
dj

I created a spreadsheet that contains all the questions I need an answer to, to understand what a bank charges, min/max, other fees, rewards, and rates. I'm surprised these sites don't offer such a tool. I add to it as rules change, and have used it for years for comparison. Financial institutions have a lot of hoops to jump through, and EVERYONE should understand those rules. Personally, I abhor marketing gimmicks. To me, they are a red flag. A good sound financial institution doesn't need gimmicks. Treating customers professionally, easy to understand rules, nice assortment of products with good rates, sound management, and most important, security taken seriously, will go a long way than some 6 month gimmick. Who wants to spend all their free time institution hopping.

Guest's picture

I personally have a handful of different online savings accounts. Since their rates fluctuate all the time, I can move my money around and ensure it is always earning a great rate.

Guest's picture
Guest

And btw, Ally's rates are no longer quite as good as they were for a little while. I think their rate is down to .84%......

Guest's picture
Guest

I wonder what how the value of the dollar can be trusted when our dept is 20 trillion

Guest's picture
GuestPeter

When Ban Cards yield 19.2 % annually its time for Savings accounts to yield 7% annually. THis is the main use of your savings why not become the 50 50 partner we should be. even 5 is an insult people do not save because a $in hand is worth $1.19. on the market.

Guest's picture
Cinch

Great post, and you're definitely right--it's so important to research your options and understand what each bank offers. Different banks/ accounts are created for different people, so it's always good to know what's right for you. And Cinch offers a personalized recommendation tool to do just that!