What is a savings account?
A savings account is a bank or credit union account (that is insured upto $250,000) that is used to store money. They are designed for no or not many transactions (as opposed to a current account.) They have higher interest rates than a normal bank account. They aren’t a great investment but if you’re waiting to invest your money and need somewhere to put money in 6-12 months.
What is the difference between a savings account and a CD?
Simply a savings account lets you access your money at any time, you can withdraw the money and use it as you like. You may be subject to monthly fees to keep the account open but the money is liquid. A CD (certificate of deposit) requires you keep your money locked up for a term 6-12 months or longer. In order to access the money you’ll likely get no interest and have to pay a hefty fee.
What does it mean to be FDIC insured?
FDIC or Federal Deposit Insurance Corporation is a congress created institution designed to insure people’s invested money in banks. Basically any money you have invested in your bank up to $250,000 is federally insured. This means if your bank goes bankrupt or closes the US Government will reimburse you upto $250,000in your bank account.
What are the best savings accounts?
Save is a newly founded FinTech company (so isn’t a bank) offering much more competitive savings rates. The way they do this is, they invest your money broadly across a number of investments on the market. Unlike other investing accounts, this is FDIC insured and your initial investment isn’t at risk.
Member FDIC – Yes
Annual Savings (APY) – Average returns 1.03-146%.
Minimum balance requirement – $1000
Monthly fees – 0.59% on return amounts.
Credit or debit card connected – Yes
Check writing – No
OnJuno is a new FinTech company (not a bank) offering a checking account for crypto and cash. They do offer a $15 sign up bonus and it comes with a metal card. The best thing about Juno is it’s interest rate is 1.2%. What’s the catch, it’s only up to $5000 in savings. They are also FDIC insured. They offer a number of products including getting your paycheck in crypto, 5% cashback and cheap foreign exchange. Here’s their features pertaining to the savings account which lets you use it like a checking account:
Member FDIC – Yes
Annual Savings (APY) – 1.20%
Minimum balance requirement – No but you only get 1.2% on balances up to $5000. They also have a business account that has a $500 a month minimum for earning interest on up to $50,000.
Monthly fees – $0 for the free account, $9.95 for the business account.
Credit or debit card connected – Yes but you only get 1 cash withdrawal a month on the free account and 3 for the business account.
Check writing – No
LendingClub is another FinTech company that offers peer to peer investing. Which means you lend them money and they lend it out to credit worthy consumers. Your money is protected as LendingClub is FDIC insured. Here are the features of LendingClub’s account:
Member FDIC – Yes
Annual Savings (APY) – 0.60%
Minimum balance requirement – $2500
Monthly fees – $0
Credit or debit card connected – Yes
Check writing – No
Comenity Direct is a brand of Comenity Capital bank. They have a high yield savings account and CD’s for 1 or 2 years. They’re an FDIC member and have no monthly fees, they do charge a $25 outgoing wire fee. Here’s the features of their savings account:
Member FDIC – Yes
Annual Savings (APY) – 0.55%
Minimum balance requirement – $0 but they have a $100 minimum opening balance and a maximum of $1 million deposit.
Monthly fees – $0
Credit or debit card connected – Yes
Check writing – No
Marcus by Goldman Sachs has one of the most competitive offerings currently on the market. Marcus is a new app developed by Goldman and accessible via smartphone. Here are some of the features of a Marcus savings account:
Member FDIC – Yes
Annual Savings (APY) – 0.50%
Minimum balance requirement – None
Monthly fees – $0
Credit or debit card connected – No
Check writing – No
Citi bank’s offering is also fairly competitive with a similar APY to Marcus, however they do have a minimum balance requirement which Marcus does not. Here are the features of a Citi bank savings account:
Member FDIC – Yes
Annual Savings (APY) – 0.50%
Minimum balance requirement – $500
Monthly fees – $4.50
Credit or debit card connected
Check writing – No
Credit or debit card connected – Yes
Vio Bank offers an FDIC insured account and gives you 6 free ATM withdrawals a month. It also has no monthly fees. Vio’s high yield account has these features:
Member FDIC – Yes
Annual Savings (APY) – 0.51%
Minimum balance requirement – $0 but $100 minimum to open
Monthly fees – $0
Credit or debit card connected – Yes
Check writing – No
Quorum is a credit union with very competitive interest rates and low minimum balance requirements to earn interest. They’re also a FDIC member and have no monthly fees here’s the features of their savings account:
Member FDIC – Yes
Annual Savings (APY) – 0.35%
Minimum balance requirement – $1
Monthly fees – $0
Credit or debit card connected – Yes
Check writing – No
How should I choose the right savings account?
Choosing the best savings account really depends on how often you plan to access your capital and how much you plan to put into the account. If you don’t need to touch the money often (but want access for emergencies) then you should really focus on the APY as the major deciding factor as this dictates how much you’ll earn on your invested cash. If you do want to pull cash out and have more frequent access then you should look for a bank that has a lower minimum balance and lets you pull cash out with a card. It also pays to check out how many ATM withdrawals you get for free.
When you check out the APY make sure you check it based on the amount you plan to keep in the account. Many banks and credit unions offer better rates for higher balances. Whilst others limit how much you can have in the account.