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Generally speaking, savings accounts offer poor interest rates. As of January 2016, the average savings account interest rate offered by brick-and-mortar banks was just 0.11%. 

Knowing where to put your savings can help you do better than that – although you shouldn’t break out the champagne just yet. “Better” likely means around 1% or slightly more, depending on the type of institution and your balance. 

Terms, Conditions and the FDIC

Terms and conditions – such as whether a minimum deposit is required or whether you need a minimum balance to get the best interest rate – vary by financial institution. Most banks allow you to link to a checking account – including one from another institution – but most do not provide check writing within the savings account itself. Your deposits, including savings, in any Federal Deposit Insurance Corporation (FDIC)–insured bank are covered up to $250,000 per account holder. 

Savings accounts mentioned here are known as high-yield savings accounts. FDIC regulations limit the number of electronic and telephone withdrawals and transfers you can make from a high-yield savings account to six per month. 

Online Banks Are Best

With few exceptions, the highest interest rates on savings can generally be found at online banks. The reason is simple. Since online banks do not have physical branches, costs are lower, and they can afford to offer higher interest rates. Available rates at online banks generally range from 0.75% to 0.95% with a few offering interest rates slightly above 1%. It’s worth noting that rates change frequently and you should always check current rates before opening an account at any online bank. 

Top Online Banks

Although interest rates can change on a daily basis, several online banks consistently make various top lists.

Synchrony Bank

Currently, Synchrony offers a high-yield savings interest rate of 1.05% APY. It only takes $30 to open an account, and Synchrony charges no fee if you keep $30 or more in your account. Features include easy online withdrawals, phone withdrawals and the use of an included ATM card. There is no ATM fee at Plus, NYCE or Star ATMs. Synchrony will rebate $5 per month if you use an out-of-network ATM. Synchrony does not offer check-writing through its savings account. 

Goldman Sachs Bank 

Goldman Sachs pays the same interest rate as Synchrony, 1.05%. No minimum amount is required to open an account, and there is no minimum balance to avoid fees. The bank does not offer check writing from the account. Deposits may be made from a GS or other bank account electronically. Direct deposits are permitted, as are wire transfers and a mailed paper check. Your only options for withdrawing money are electronic or wire transfer. GS does not charge a fee for either method – but receiving or sending banks may – especially for a wire transfer. 

Ally Bank

Interest-rate wise, Ally comes in a close second at 1%. Ally’s remote Ally eCheck Deposit feature makes adding money to your account a simple smartphone click away. Ally is also noteworthy for its 24-hour call center, Twitter, and online chat features. Ally has no minimum balance requirement and no monthly fees. You can even connect your Ally Bank savings account to a checking account to serve as overdraft protection. However, Ally does not offer check-writing as part of the savings account.

Capital One 360

Capital One 360 Savings doesn’t pay the highest interest – just 0.75% compared to the ones above at 1% or more. It is, however, unique in the way it is structured. With Capital One 360 Savings you can divide your money into several accounts – up to 25. Then you can name each account based on the savings goal for that account. You are allowed six transfers between accounts each month. There is no monthly fee, and no minimum balance is required either to open an account or maintain one. Capital One touts the fact that you can speak to a live human being by calling a toll-free number. You also have the option of mobile and online banking and both include a check deposit function. Capital One does not offer check writing as part of the savings account. 

(For more, see: The 5 Best Alternatives to Bank Saving Accounts.)

The Bottom Line

If you are looking for a top interest rate and not much hassle, an online bank is your best option. You may want to check local banks and credit unions to be sure, but for all the reasons listed, online bank saving is generally best. To find the best current rate, use an online search tool such as this one provided by Bankrate.com. The tool lets you specify national or local banks and financial institutions and provides sliders to help you fine-tune your search.

 

 

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