Tips for choosing from the top 10 savings accounts
A savings account allows individuals to earn interest on their securely stored cash. When you deposit money into a savings account, you are essentially lending money to the bank. The bank then uses that money to provide loans to other customers and charges them interest. In return, the bank offers interest on the funds held in the savings account. Some savings accounts offer particularly favorable interest rates. Before discussing the top 10 savings accounts to consider, it is important to understand the basics.
How to choose from the top 10 savings accounts?
The choice of savings account depends on your financial goals. There are three main types of savings accounts:
- A Money Market Account typically requires a minimum balance and offers slightly higher returns. This account usually comes with limited monthly transactions, as well as a debit card and the ability to write checks.
- A basic savings account offers a lower interest rate. However, it provides quick access to funds during emergencies, ensuring the safety of your money.
- A Certificate of Deposit (CD) account is a fixed deposit that can be held for a few months up to a couple of years. This savings account offers the highest annual percentage yield, with longer-term deposits attracting higher interest rates.
What should you consider before opening a savings account?
Before choosing one of the top 10 savings accounts, consider the following five factors:
- Some savings accounts require an initial deposit to open the account. However, this does not necessarily mean you have to maintain a minimum balance each month. Read the terms and conditions of the specific bank you are considering.
- Banks that do not require a minimum balance typically offer lower interest rates compared to those that do. Keep in mind that fees may be levied if your savings account balance dips below the allowed minimum.
- Ensure that your chosen bank provides technological features to help you track your money, such as a mobile app and remote check deposit functionality.
- If your transactions are primarily digital, consider an online or mobile-only bank.
- When selecting a bank for your savings account, look for those backed by the Federal Deposit Insurance Corporation (FDIC) and offering a 5 to 6% interest rate.
What is an APY and how does it relate to a savings account?
Annual Percentage Yield (APY) is the percentage rate that reflects the estimated amount of interest to be paid on an account. It is based on the interest rate and the compounding frequency over a 365-day period.
Which are the top 10 savings accounts to consider?
Based on reviews and the services provided, here are the top 10 savings accounts with competitive interest rates:
- Aspiration Summit offers a 1% APY on balances over $2500. It also provides unlimited ATM reimbursements without any monthly maintenance fee or minimum balance requirement.
- Ally Bank offers a competitive interest rate and has over 43000 free ATM services. They operate as an online-only bank with 24×7 call-center support.
- Bank5's online banking service charges a $15 overdraft penalty, which is lower than the national median of $34.
- Alliant Credit Union offers direct, ATM, and mobile deposits, as well as transfers from other financial institutions. By using these services, you can qualify for a 0.65% APY return on your account.
- Other banks with similar features include Capital One, Discover Bank, Simple Bank, Chime's, CitiBank, and Synchrony Bank.