A great online savings account provides a key cog in your overall financial plan; a place to park your emergency fund, or build up cash towards a big purchase. To that end, you’re looking for a high interest rate, to be sure, but should also privilege accounts with low fees, good customer service and a seamless digital experience. We surveyed more than 250 options from roughly 135 financial institutions to find the best options for you.
Annual percentage yields (APYs) and account details are accurate as of Feb. 15, 2023.
Best online savings accounts
Best online savings accounts
Compare the best savings accounts
National average for savings accounts
The national average savings account rate is 0.33% according to the Federal Deposit Insurance Corporation (FDIC). This includes all traditional and high-yield savings accounts. Here’s how some national averages on savings products compare.
What is a savings account and how does it work?
A savings account is a safe place for you to keep money that you don’t need every day. Holding savings in a separate account from your day-to-day cash, can make it less tempting to spend.
“It’s simply a safe place to put money,” said Nicholas Bunio, CFP in Berwyn, Pa.
By law, it used to be that you could only make up to six withdrawals each month, and even though the Federal Reserve relaxed Regulation D in 2020, many banks still keep this rule on their own books.
This limit on the number of withdrawals though doesn’t prevent you from liquidating the entire account in one withdrawal if you need to. A savings account can serve as a fund for a rainy day—a great way to collect some interest while preserving liquidity. For anyone starting out, here’s a guide to building an emergency fund from the Consumer Financial Protection Bureau.
How to choose the right savings account for you
The right savings account for you depends on your priorities.
“[T]he primary factor would [typically] be the interest rate, but some depositors may choose a lower rate for convenience,” said Seth Mullikin, CFP at Lattice Financial in Charlotte.
If you already have a relationship with a bank or credit union, such as a checking account or a loan, opening a savings account should be quick and easy. If you prefer in-person banking, you may prefer one that has physical branches near your home.
Who should have a savings account?
Keeping some funds on reserve, but easily accessible, is a smart thing to do for most Americans.
“I think everyone should have one,” Brunio said. “Everyone should have at least three-to-six months’ worth of expenses in savings.”
That chunk of changes sitting on the sidelines serves many purposes.
“Goals might include an emergency fund, travel expenses, et cetera,” said Lisa Kirchenbauer, CFP, founder and president of Omega Wealth Management in Arlington, Va. Most banks let you easily create more than one savings account if you want to keep your goals independent, i.e. a Christmas savings account in addition to a vacation fund.
Fees and balance requirements
Each financial institution has its own fee schedule and balance requirements. The best savings accounts don’t charge any type of maintenance fee that’ll dwindle your savings. They also don’t require a minimum balance, either.
In some situations, you may decide however that paying fees and meeting balance requirements aren’t a huge deal to you in exchange for what the bank offers.
Is a savings account safe?
“Savings accounts are considered one of the safest investments,” said Mullikin.
Your money is insured up to $250,000 for each type of savings account you have, in each institution you use.
For example, if you have $250,000 in a joint account and $250,000 in an individual account in the same bank, then that same amount in an individual account at another bank, all of your funds would be insured.
The Federal Deposit Insurance Corporation (FDIC) guarantees funds at banks and the National Credit Union Association (NCUA) does the same for credit unions. You can check whether your institution is officially covered at this FDIC site and this NCUA site.
Keep in mind that, in the very rare case a financial institution fails, it’ll take some time to recoup your funds.
“FDIC insurance doesn’t always mean you can access your money right away,” said Kirchenbauer. “As we learned in prior bank crises, you will get your money back at some point, but it may not be right away.”
You’re also protected in the unfortunate instance of someone withdrawing funds from your account without your permission, such as an act of identity theft or robbery.
Under the Electronic Fund Transfer Act (EFTA), you’re not liable for funds lost when you report the loss in a timely manner.
Requirements to open a savings account
To open most savings accounts you’ll need to share these things for each person on the account.
- Identity information. Your legal name, date of birth and Social Security number (SSN) or individual taxpayer identification number (ITIN).
- Contact details. Your phone number, email and residential address.
Depending on the account, you may also need:
- Proof of identity. A valid form of government-issued identification can be a driver’s license, passport or birth certificate.
- Proof of residence. This can be a lease or mortgage statement, utility bill, bank statement or credit card statement.
- A minimum balance. If the account requires you to make a minimum initial deposit, you’ll need to be able to transfer the required amount.
- Proof of school enrollment. If you’re signing up for a student account, you’ll likely need to show your student ID, acceptance letter or transcript.
Pros and cons of having a savings account
The positives provided by a savings account include the fact that they’re easy to open, easy to maintain, easy to access, well-protected and interest-earning.
“It’s a nice way to keep monies earmarked for non-day-to-day expenses segregated,” said Kirchenbauer.
However, it’s not the most liquid account, traditionally. If you’ll need to make withdrawals more than six times a month from your savings account, you’ll likely need to search around for a financial institution that allows it.
It’s also not an investment. If you want to earn passive income or even keep up with inflation, other deposit and investment vehicles can put your money to work, offering much better returns and even tax advantages. Certificates of deposit (CDs), which have a guaranteed APY, are one example of an alternative.
Alternatives to a savings account
There are many alternatives to savings accounts, but, as you look at other options, remember that you’re not limited to a set number of accounts. You can have a savings account, or two, in addition to these other types of accounts. And you can always close them if they’re no longer meet your needs, as long as you’ve met any term requirements.
Checking accounts. While a checking account can be an alternative to a savings account, it’s actually more complimentary—most experts recommend that you have both. Your checking account can function as your home base from which you pay bills and to which you deposit income. Your savings account can function as your backup store of cash, which earns interest until you need it.
Money market accounts (MMAs). Money market accounts are a type of hybrid.
“This combines the check writing ability of a checking account with potentially higher interest like a savings account,” said Bunio. “But I recommend getting this via a bank that is FDIC insured. Some investment companies also offer money market accounts, but these have no legal principal protection.”
Certificates of deposit (CDs) and share certificates. If you’re OK with locking your money away for a period of time, CDs and credit union share certificates can be a great option. Terms range from a few months to a few years.
“[They] could pay even higher interest than a savings or money market account, but there really isn’t any liquidity,” said Bunio.
If you have a three-year certificate, you typically can’t touch it for three years unless you pay a significant penalty, but it earns a guaranteed interest rate for that time and your principal investment is protected and insured. Consider our ranking of the best CDs.
Bonds. Similar to CDs, bonds allow you to put your money in a vault and earn higher interest than most deposit accounts. As a bonus, you generally don’t pay state income taxes on any interest you earn from federal bonds, like I Bonds. However, bonds are more strict than CDs. In some cases, if you have a sudden need to withdraw cash, you simply can’t.
“I Bonds have a lot of restrictions in the first few years, with zero liquidity in the first year,” said Bunio. “Also, short-term bonds, if needed sooner than maturity, could have principal loss.”
Methodology
We looked at over 250 high-yield savings accounts offered by 135 financial institutions. We evaluated them to create a star rating for each. An institution with a perfect score of 100 would get five stars. One with a score of 80 would get four stars and so on. Here are the categories we analyzed and how we weighted each.
- APY: 50%
- Customer experience: 20%
- Fees: 10%
- Digital experience: 10%
- Minimum deposit: 5%
- Minimum balance to avoid fees: 5%
We believe that potential earnings reign supreme, so APY was the most heavily-weighed factor, followed by fees. Non-APY factors still played a part, including customer experience and digital experience.
The financial institutions we monitor include American Express Bank, Capital One, Chase, Citi Bank, Discover, TD Bank, Marcus by Goldman Sachs, TIAA Bank and USAA.
Why some banks didn’t make the cut
Each online savings account offers different rates and resources. Only the best made our list. Most well-known banks aren’t included because their savings accounts actually have lower APYs and higher minimum deposit requirements. They typically don’t offer competitive rates and terms because they are already top-of-mind for consumers. Relatively new and smaller financial institutions do this to attract customers.
Frequently asked questions (FAQs)
Yes, there’s nothing to stop you from having multiple savings accounts. You can have as many as you can keep track of and fund.
Yes, you must report all the interest your deposits earn on your federal income tax return. If you earn over $10, you should receive a Form 1099-INT or Form 1099-OID from the financial institution that holds your deposit.
Typically, yes. Without the overhead cost of physical branches—real estate, utilities, staff—online banks can generally afford to pay more interest to savers.
The average interest rate fluctuates with the ebb and flow of the economy. You can check here for the current national average deposit rates.
The minimum deposit requirement for an online savings account depends on the bank you choose. Many offer $0 minimums but some require up to $1,000 or more.
