The Best Savings Account
- March 23, 2018 - To keep our review current, we've updated our top picks to take into account the customer service, fees, and APY offered by online banks as of March 2018. Our new top pick, Ally Bank, came out on top in all of these areas.
The Best Savings Account
To find the best savings account, we focused on online banks. Our top picks all feature high interest rates, are convenient — you don’t have to live in a particular part of the country to have access to them — and have great customer support features for when you have a question about your account or want to learn more about banking. Whether you’re looking for an introductory savings account, or are trying to maximize your interest rates, online banks offer great savings accounts that outcompete their brick-and-mortar competitors.
Our overall favorite is Ally Bank. With a 1.45% APR — twenty-four times the national average 0.06% APR — it has one of the highest interest rates on the market. In this case, high interest rate doesn’t mean sacrificing on customer features, a trade-off that some online banks make in the race to save money. But Ally impressed us with its fast and friendly customer service, and the ability to contact them however we chose — by phone, email, live chat, even Facebook — at any hour of the day.
Discover Bank is another strong contender for the best savings account. Its interest rate is currently 1.50% APY — just edging out Ally Bank. That said, Discover Bank’s fees for things like overdrafts and domestic wire transfers were a little steeper than Ally's. These costs have the potential to cancel out any additional savings you might see from the slightly higher APY. Additionally, you’ll be sacrificing a couple of customer service options by going with Discover, since they only offer phone support (albeit 24/7), and they don’t have a live chat or email option.
How We Found the Best Savings Account
To find the best savings account, we started with a list of all the online banks we could find that offered savings accounts and FDIC backing (which guarantees that if your bank fails, the government will reimburse you, usually up to $250,000). Our list included larger companies you might be familiar with — like Ally Bank — as well as lesser known options like Live Oak Bank and DollarSavingsDirect. We didn’t include USAA because membership is restricted those who serve in the military and their families, but if you’re eligible, it’s another option worth checking out. We ended up with a list of twenty-four online banks, all federally insured through the FDIC.
We only considered online banks because they offer better APY.
APY vs APRAnnual Percentage Yield (APY) and Annual Percentage Rate (APR) are two ways to calculate interest. APY is more helpful because it includes compound interest (essentially, the interest that your interest earns), thereby giving you a more realistic expectation of how much money you’ll make.
Online banking means giving up some of the conveniences of a brick-and-mortar buildings where you can walk in and ask for help or make a physical deposit. The tradeoff is that you don’t have to worry about whether there’s a branch nearby: Online banks are open for business to customers across the nation. The best online banks also translate some of the overhead normally spent on rent and electricity into increased benefits for you.
In particular, online banks tend to offer much higher interest rates for their savings accounts. Most of the banks on our list offer annual percentage yields (APY) of 1.2% or higher (frequently climbing up to 1.60%) — a stark contrast to most brick-and-mortar banks, which have an average APY of 0.06%. If you made a single $1000 deposit with a 0.06% APY, at the end of the year, you’d have $1000.60. The same deposit in an account with 1.45% APY would give you $1014.61 — twenty times more income than the lower APY account.
As with brick-and-mortar banks, most online savings accounts don’t come with ATM cards or checks. But since you can’t make an in-person withdrawal from an online bank, you’ll have to transfer your money to move it out of your account. Transfers typically process in the banking world’s standard two to three business days. If speedy access to funds is a priority, we’d suggest opening a savings account through the same lender: Internal transfers are typically processed much faster. Ally and Discover both offer checking accounts in additions to savings — you can read more in our Best Bank review.
Then we narrowed in on savings accounts with an APY of at least 1.24%.
To find the savings accounts with the best interest rates, our next step was to directly compare APYs. Our 24 contenders offered APY anywhere from 0.01% (Chime) to 1.80% (DollarSavingsDirect), with an average (mean) APY of 1.24%. To ensure competitive rates, we cut any banks that fell below this 1.24% average.
APY will change, sometimes multiple times per year — based both on the Federal interest rate and the decisions of each individual bank. While all of our finalists currently offer extremely competitive APYs, it’s always a good idea to double-check rates before choosing a savings account based solely on annual percentage yield.
Bank5 Connect, BankMobile, Chime, First Internet Bank, iGO Banking, State Farm Bank
We evaluated each savings account for their customer service.
Next, we evaluated the customer service of our 18 finalists, following methodology similar to the one we used when we reviewed the best banks. We wanted to find which banks would be there to support us in our hour of need — whether arranging a deposit or answering questions — plus which banks made it easy to find information about their rates and fees. We looked for:
- Customer Support: We gave points to banks which offered 24/7 live customer support. No one wants to wait for “business hours” when they need answers to time-sensitive questions.
- Modes of Communication: Every bank gave us a phone number to call, but we gave extra points to banks that went above and beyond by offering live chat, email support, or customer service through a social media platform — like answering questions and complaints on Twitter or Facebook. As far as we’re concerned, the easier it is to get ahold of a representative, the better.
- Easy-to-locate Fee Schedules: We were impressed with Ally Bank for transparently displaying their fee schedule front and center on their savings account main page. On the other hand, UFB Direct buried its account details in a 30+ page PDF document that made us hunt through the fine print to learn whether we could be charged an overdraft fee. We wanted banks that made it easy for us to compare our options and make informed decisions.
Two banks with APY rates higher than our top picks were cut in this round — Live Oak Bank (1.60%) and DollarSavingsDirect Bank (1.80%). If you value APY above all else, you can look into these options, but we’d suggest being cautious: These banks essentially cut costs by limiting their customer support. If you have questions or need to close your account, it may be a lot harder to get in touch with a service rep.
Barclays, CIT Bank, DollarSavingsDirect, FNBO Direct, IncredibleBank, Live Oak Bank, Marcus by Goldman Sachs, MutualOne Bank, Nationwide, Radius, Synchrony Bank, PurePoint Financial, UFB Direct
We evaluated each savings account for fees.
This left us with five savings accounts available nationally, with competitive APY and excellent customer support services. To find our top picks, we took a closer look at each bank’s fee schedules and disclosures to make sure that we wouldn’t need to pay excessive charges just to have an account. Some of the most common fees include:
- Minimum Balance Fees: a charge for not maintaining a certain level of money in your savings account.
- Monthly Maintenance Fees: a charge to offset costs of maintaining your account with this bank.
- Dormancy or Inactivity Fees: charges usually levied if there has been no account activity (transfers, withdrawals, or deposits) for a prolonged period of time.
- Excessive Withdrawal Fees: the FDIC only permits six withdrawals per month (not including ATM withdrawals). Most banks will charge a fee if you exceed that limit.
None of our top five banks have a minimum balance fee. Alliant Credit Union specifies that to earn interest, you must maintain an average balance of at least $100, and your balance must remain above $5 for your account to stay open. Our other top savings accounts don’t specify their minimum balance requirements but note that if your account doesn’t have any money in it, they may close the account.
Alliant Credit Union also stands out for a more stringent inactivity policy than our other finalist: If your account has seen one year go by without any transfers, withdrawals, or deposits, they will charge you $10 for a dormant or inactive account. If you’re carrying a low balance on a forgotten account, this policy allows them to slowly whittle it down until it reaches $5, at which point they will close the account. By contrast, American Express FSB, Discover Bank, Bank of Internet, and Ally Bank don’t charge your account for inactivity or dormancy.
We still wouldn’t recommend opening up an account and never touching it again: At some point, your account may be considered abandoned — the definition of which varies by state — and your bank may have to hand over any money it contains to the state.
There is one fee that none of our finalists could avoid: A charge for excessive withdrawals. This isn’t surprising, as the FDIC requires that banks limit the number of transactions per savings account to six per month. There are some exceptions: transactions made in person and withdrawals from an ATM don’t count. But preauthorized transactions, automatic transfers, and telephone, fax, or online banking transfers are all on the FDIC's list of limited transactions.
As long as you won’t need to make account transfers more than, say, once a week, you’re unlikely to fall afoul of this rule. But it’s an important one to be aware of. While excessive transaction policies vary, most banks charge a fine (around $10 to $20 per transaction). And some banks will refuse the transaction, convert your account into a non-interest earning account, or close it entirely.
Our Favorite Savings Accounts at a Glance
*Alliant Credit Union spots you the $5.00 when you open your account, which you’ll pay back before you close your account — so your account balance can’t dip below $5.00.
Our Picks for the Best Savings Account
Ally Bank won first place in our customer service test, offering the most resources and most friendly representatives. If you need to get in touch, their lines are open (with a live representative) 24/7, and they have a phone line option to select if you have impaired hearing. If you’d like to skip the phone, you can also contact Ally Bank through its live chat, email support, or through one of its social media pages (like Facebook and Twitter).
If you do a lot of on-the-go banking, Ally Bank also offers a mobile app. Through it, you can manage fund transfers — whether they’re one-time or recurring — and deposit checks. If you have a checking account through Ally Bank, you can also pay bills through the app. Unfortunately, you’ll still need to use Ally’s website to locate ATMs (another consideration only if you hold a checking account; you won’t be able to have a debit card directly attached to your savings account).
Currently, Ally Bank’s high-yield online savings account has a 1.45% APY rate — more than 24 times as much interest as the national average. Even though this currently isn’t the highest APY rate on the market (remember, APY can fluctuate frequently), Ally Bank has a strong track record of staying competitive. It has consistently outperformed our other top picks over the past three years. This was especially true in 2015, when Ally Bank’s APY rate was 1.00%, compared to Discover Bank (0.95%), American Express (0.85%), or Bank of Internet USA (0.61%).
Like all of our top picks, Ally Bank doesn’t charge a maintenance fee or require a minimum balance, and it doesn’t charge an inactivity or dormant account fee. That said, you will need to put some funds into your savings account within 30 days of opening it, or they will close the account. Ally Bank also charges a $10 fee for excessive transactions, and warns that if you’re consistently treating your savings account more like a checking account, they will close your savings account or convert it into a checking account.
One final caveat: You won’t be able to make international wire transfers with Ally Bank. Ally charges $20 for each domestic outgoing wire transfer, and official / cashier checks are free, but for international transfers, you’ll want to check out our other top pick, Discover Bank.
Discover Bank stands out for having the highest interest rate of our top picks — 1.50% APY, versus Ally’s 1.45%. If you opened two accounts — one with Discover and one with Ally — and made a single $20,000 deposit into each, Discover’s rate would net you an extra $10.14. It’s not a lot. But it’s still $10 you wouldn’t get through Ally.
Discover’s other leg-up on Ally Bank is that Discover lets you make international wire transfers from your savings account, while Ally only lets you make domestic wire transfers. If you work with international banks frequently, Discover Bank will let you directly transfer money to those banks.
Discover Bank did well in our customer support evaluation, although they didn’t impress us quite as much as Ally. Like Ally Bank, Discover Bank has 24/7 customer support, and you can contact them via phone or their social media platforms. However, Discover doesn’t offer a live chat or an email option – for an immediate response you’ll need to hop on the phone.
Aside from having fewer contact options than Ally Bank, our primary complaint with Discover Bank is that its fees are steeper than Ally’s. Neither bank charges monthly maintenance, minimum balance fees, or inactivity / dormancy fees, but Discover Bank’s other fees typically run $5 to $10 more expensive than Ally Bank’s (which means you could easily lose that extra $10 in interest from our example above). In particular, Discover Bank’s higher outgoing wire transfer and excessive transaction fees mean that some customers are likely to save money by choosing Ally.
We liked Discover Bank’s mobile app, which lets you check your account balances or submit a deposit on-the-go. You’ll also be able to locate the nearest ATM (and the app will let you know ahead of time if it’s in-network and fee-free, or not) through the app. Like Ally Bank, you won’t be issued an ATM card if you only sign up for Discover Bank’s savings account, so this last feature is only a consideration if you also hold a checking account through Discover.
Our Top Picks’ Secondary Fees
*Ally Bank only allows domestic wire transfers. Discover Bank charges a flat rate of $30 whether it is an international or a domestic wire transfer.
**Ally Bank and Discover Bank only apply an overdraft fee a maximum of once per day.
Other Savings Accounts to Consider
Finding the best interest rate may seem like the first priority when finding the best savings account, but since APYs change, sometimes on a daily basis, it can be tricky to find the savings account with the absolute highest interest rate. If you’d like to shop around, below are three good options that impressed us with their customer service and high rates, but didn’t stand out quite enough to be top picks.
American Express First Savings Bank currently offers the same interest rate as Ally Bank for its high yield savings account: 1.45% APY. It also scored highly in our customer service evaluation. You can contact them 24/7 by phone, and via their social media profiles. Unfortunately, its live chat feature is only to support current customers (you won’t be able to ask questions as a prospective customer), and like Discover, it doesn’t have a support email address. Additionally, while we like that American Express offers an app, it’s only useful for its credit card customers to make payments; you won’t be able to make transfers or check savings balances on it.
Alliant Credit Union also stands out for offering a 1.45% APY rate for its online savings account. That said, we weren’t impressed with the number of fees it levies on its accounts. In addition to $10 inactivity and dormancy fees, you’ll be charged a $10 closing fee if you close your account within 90 days of opening, and $5 for each manually paid check and ACH item. Customer service-wise, Alliant does fairly well. They don’t have a live chat option, but they do have 24/7 phone service, an app, as well as email and social media support options.
Bank of Internet USA currently has the lowest interest rate of our top picks: 1.30% APY. This still is a vast improvement over the nationwide average of 0.06%, but historically, Bank of Internet USA has had lower interest rates than our other top picks. That said, Bank of Internet USA also scored well on our customer service test, with live chat, email and social media support, as well as 24/7 live phone support.
Money Market Accounts, CDs, and IRAs are also great ways to save.
Standard savings accounts are the most common way to save money and grow your wealth, but they aren’t the only option. Depending on your goals and circumstances, it might also make sense to look into money markets, certificates of deposits (CDs), and IRAs. You can check out our review of the best IRA account, or read our review of the best banks, which includes discussion of CD rates. To learn more about money markets, we’d suggest reading up on the US Securities and Exchange Commission’s overview of the topic.