How We Rate the Best Savings Accounts of 2021
Our researchers have sifted through the market to identify which online savings accounts deserve your attention. Before we present our findings, let’s go through the fundamentals of our ranking system. Here are the criteria you should evaluate when choosing an online savings account.
Annual Percentage Yield
The annual percentage yield is the amount of money you earn through interest over the course of one year. APY is based on the interest rate and how often the interest compounds. This makes it a crucial factor in determining how beneficial a savings account will be for your funds.
While America’s current average APY is about 0.1%, some of the best online savings accounts pay 2% or more, enabling your money to grow faster.
The rates of high-interest saving accounts are typically not fixed, but variable. That may not make much difference if your balance is low. If you plan to deposit a larger amount and see it grow, then this becomes a key factor.
Believed to have originated in Mesopotamia in the earliest days of human civilization, compound interest is best explained as “interest on interest.” It allows your balance to grow faster, as interest payments are made based on the cumulative sum over time, instead of on the principal amount.
Depending on the bank, the type of account, and the amount you deposit, your interest can be compounded monthly, quarterly, yearly or daily.
Our motto: The best online high interest savings account options are the ones that compound interest as often as possible.
Your minimum balance is the smallest amount you need to deposit in order to open and maintain your high-interest savings account. It can also refer to the minimum amount that needs to be in the account at all times in order to earn interest. In some cases, going below the minimum balance can lead to unpleasant service fees.
To receive any sort of real benefits from high-yield savings accounts, you need to deposit a certain minimum amount. Some banks allow you to open an account with a $0 balance. Others insist you deposit as much as $10,000 on the day you open the account.
While it's clear that the more you deposit, the higher your earnings will be, our criteria for finding the top online choices for savings is based on a balance between a reasonable minimum balance and attractive benefits.
It’s time to discuss fees imposed by online savings account options. Traditional brick-and-mortar banks have high maintenance expenses, many of which they cover through a complex system of fees. Online-only banks generally pay fewer employees and certainly spend less on rent. This gives them the freedom to charge lower fees and offer better interest rates.
Therefore, online banks can afford to spare you the service fees for monthly maintenance and similar expenses that come with a traditional savings account. We’re not saying that online banks are without service fees, but they often exclude monthly maintenance from their basic plans and generally charge less than their brick-and-mortar counterparts.
User Experience & Support
Before you decide which is the best high-interest online savings account for you, we advise you to get familiar with what online savings accounts have in common.
For example, most accounts don’t include an ATM card, as the unwritten rule among online banks is to keep you away from your savings as much as legally possible. While this might be annoying, in most cases you’ll be glad you kept your savings safe from impulsive spending sprees.
This applies to checks as well. If you wish to have more access to your savings account, you might want to consider a money market account, which allows you to write checks from your account.
The best online high-yield savings accounts usually rely on the automated clearing house method of transferring funds. ACH is a highly trusted electronic payment system commonly used to transfer funds from one bank account to another. However, since online savings accounts are considered deposit accounts by the Federal Reserve, they are subjected to Regulation D, which limits the number of transactions of all types to six per month.
After this limit has been met, the bank decides whether to charge you a fee for every additional transaction or to simply prohibit you from making more transactions on your online savings accounts until the next cycle.
Transferring your money to a checking account is the simplest and the most common method of withdrawing funds from a savings account. Be advised, this transaction can in some cases take up to five business days.
Online-only banks provide online-only customer service, so be prepared to chat your way out of an issue instead of resolving problems face-to-face. That is why the quality of the website or mobile app is a significant factor in rating the best savings accounts online. If a website is intuitive and easy to navigate, it will certainly influence the way you manage your funds. So be sure to check the virtual experience a bank has to offer before you deposit your money.
Check for bonuses too. Sometimes an online bank can provide you with a new account bonus or a premium-tier interest rate. These benefits are usually earned by making regular deposits, opening other types of accounts at the same bank, or keeping your funds above a defined threshold.