With the best savings accounts yielding over 25 times the national average, taking the time to look for the best savings account is worth the effort. Of course, savings accounts are not judged solely based on APY yields. We have researched savings accounts and compared APY yields, monthly fees, customer service, and user-friendliness, and we bring you our list of 2018’s best savings accounts.
1. What Is a Savings Account?
Savings accounts are offered by banks and other financial institutions to help people to save. These accounts usually provide interest at modest rates, although the best savings accounts offer substantial APY rates. The financial institution may charge a fee if you don’t maintain a certain amount of money in the account and may limit the number of withdrawals you can make in a month. Banks normally don’t provide checks to owners of savings accounts.
2. What Is the Difference Between a Savings Account and an MMA?
Savings accounts are very similar to money market accounts (MMAs). The financial institution may require a lot more money in terms of deposits and minimum balances for an MMA compared to a savings account. MMAs usually have higher yields compared to savings accounts. In addition, money market account holders may be entitled to checks, unlike typical savings account holders.
3. What Should I Look Out for When Choosing the Best Savings Accounts?
The yield of the savings account is the single most important factor. The higher the yields, calculated in APY, the better. You can get yields as high as 2 percent APY. But it is also important to consider fees. Some banks charge fees when your account balance goes beyond a certain minimum. You also need to scrutinize the terms and conditions of the account. You may face limitations on the number of times you can withdraw in a month. Since the safety of your deposits is critical, you should generally only open accounts in FDIC-insured institutions.
4. Should I Open a Savings Account in an Online-Only Bank?
If you don’t mind the difficulty typically involved in moving your money to and from an online account, you probably should opt for one. Online-only banks usually offer higher APY yields than brick-and-mortar banks, but many people are concerned about the safety of their savings in online banks. However, many online banks are owned by giant financial institutions like Discover, Goldman Sachs, and American Express. Moreover, the deposits in many such banks are guaranteed by the Federal Deposit Insurance Corporation just like deposits in brick-and-mortar banks.
5. Will I Be Required to Pay Taxes on My Savings Account Yields?
Yes. The Internal Revenue Service (IRS) considers any interest you earn from a savings account as taxable income. You are required to file Form 1099-NT when you file returns to show any income you obtained as interest. The rate at which you will be taxed is based on the IRS marginal income rate structure and you can expect to pay taxes at rates anywhere from 10 to 39.6 percent. The IRS requires you to pay taxes on the interest whether you withdraw it or transfer it to another account.
How We Reviewed
To compile our list of the best savings accounts, we reviewed based on the following parameters: APY, customer service, minimum account requirements, withdrawal limitations, and monthly fees. We think that the safety of your deposits is important, so we limited our review to accounts that are insured by the Federal Deposit Insurance Corporation (FDIC).
Overall APY Range of This Product
Savings account yields can be as low as 0.13 APY. However, the best savings accounts in the country can yield as high as 2.5 percent APY. The savings accounts on our list yield in the 1.95% APY to 2.5% APY range.
What We Reviewed
EBSB Direct High Yield Statement Savings
EBSB Direct is the online branch of the East Boston Savings Bank. East Boston Savings Bank was founded in 1991 and has equity of over $532.6 million and assets of over $5.23 billion. EBSB has 32 full-service locations and one loan center. The bank offers accounts to people in Massachusetts, New Hampshire, Maine, Rhode Island, Connecticut, Vermont, and New York. This bank has solid financial health ratings. This bank pays 2.5 percent APY.
To open this bank account, you need a social security number, driver’s license or state ID number, address, and an account number you’ll be using to deposit or withdraw from the bank.
Although this account requires a minimum deposit of $50, be prepared to deposit at least $5,000 as smaller balances will not yield any interest. There is also a $1 Million cap on the amount of money you can keep in this account.
The bank charges a $3 monthly service fee if you don’t meet its $350 average daily minimum balance requirement. This fee is low compared to many brick-and-mortar banks, but it is a fee all the same. This bank also charges $15 per withdrawal if you go over the allowed six withdrawals in a month. This fee applies to withdrawals from an ATM, electronic bill payments, or ACH transfers. The bank reserves the right to close your account if you withdraw very often. Other fees you may pay at this bank include $15 for incoming domestic wire transfer, $40 for outgoing wire transfer, and $32 for a stop payment order.
This account pays 2.5 percent APY on deposits equal to or over $5,000.
Where to Buy
Marcus by Goldman Sachs
The Marcus by Goldman Sachs savings account is an offering from an online arm of the famous Goldman Sachs investment firm. Marcus by Goldman Sachs pays 2.05 percent APY on deposits and savings. Opening an account with this bank is easy and can be done either online, by mail, or over the phone. Details you will need to open this account include your address and social security number or Individual Taxpayer Identification Number.
Like EBSB Direct, this bank is an online-only account. This account does not charge fees. Unlike the EBSB direct account which requires you to deposit a colossal sum to earn interest, the minimum deposit amount you are required to have to earn interest with the Marcus account is $1.
Users interested in CD rates can also get generous offerings from this bank. The bank doesn’t have ATMs or a mobile app, and you need another bank account to move your money into or out of this account. Options for moving your money into or out of the account include check, direct deposit, and ACH or wire transfer. Customer support is either through the website or by phone on weekdays. Unlike the EBSB Direct account, this account has no monthly or overdraft fees.
Marcus by Goldman Sachs offers yields of 2.05 percent APY.
Where to Buy
Salem Five eOne Savings
The Salem Five eOne Savings account is one of the best savings accounts overall. Salem Five Direct is the online division of the Salem Five Cents Savings Bank. The bank is based is Salem, Massachusetts and has been in business for over 150 years. The online bank’s eOne Savings account is another high-yielding account.
To open this account, you need a name, address, phone number, email, social security number or Tax ID.
Although this bank has no minimum balance and no monthly fees, you’ll need $100 to open the account, and you need to maintain your balance at over $100 to qualify for the 2.05 percent APY. The bank has a $1 Million cap on deposits. Any balances over $1 Million may be transferred to the bank’s Statement Savings Account which earns just 0.05 percent. ACH transfers cost $3 with this bank. The account has no monthly or withdrawal fees. Unlike many online-only bank savings accounts, this account comes with a free ATM card and you also enjoy free transfers between this account and the bank’s eOne Checking account.
This account yields 2.05 percent APY.
Where to Buy
The MySavingsDirect savings account is offered by Emigrant Bank. The bank is FDIC-insured and has been in business since 1850, and it has very strong financial rating. This account has one of the best savings account yields in the U.S. The bank offers 2.25 percent APY with a minimum opening deposit of just $1. But don’t read too much into the high interest rates, as many customers have complained that they are sometimes used as bait and are lowered summarily after a few months. Unlike the eOne account in which deposits are capped at $1,000,000, this account has no deposit cap.
This account yields 2.25 percent APY.
Where to Buy
Alliant Credit Union High-Rate Savings
Alliant is an online credit union with over 385,000 members nationwide. You have to be a member of this credit union to open an account. Their savings account is one of the best savings accounts offered in 2018. Although the credit union has specific criteria you must meet to qualify to be a member, you can bypass these requirements by simply stating that you support one of the nonprofits affiliated with Alliant. The credit union will then make a donation of $5 to the nonprofit on your behalf. This credit union has over 80,000 surcharge-free ATMs nationwide.
In terms of yields, the savings accounts yields about 1.95 percent APY. If you choose to open a checking account with this institution, their account offers some of the best rates in the country (0.65 percent APY). There is a $1 monthly fee but it can be waived if you opt out of their paper statement service. This credit union is tech-savvy and offers a number of user-friendly electronic tools. Alliant has a number of savings account offerings for specific saving goals. This credit union has one brick-and-mortar branch in Chicago.
This bank yields 1.95 percent APY.
Where to Buy
We believe that the Salem Five eOne Savings Account is the best savings account overall. Like the Marcus account, this account yields 2.05 percent APY. Unlike most online-only bank accounts, you get a free ATM card with this account and you can transact through a mobile app. The only drawback with this account is that you will need to keep your balance above $100 to qualify for interest.
Marcus by Goldman Sachs is a good option for those who don’t want to commit to maintaining the balance at a certain minimum. Their account is an easy-come-easy-go type. You don’t need to deposit any funds to open the account and you can withdraw your money at will without any penalties. Bank customers qualify for high interest rates by depositing just $1. Its 2.05 percent APY yields are very generous plus the bank has no monthly fees. However, you can only transact online with this account you don’t get an ATM card. This means that you need another account to transfer money in and out of this account.
The EBSB Direct account is the best savings accounts for people who can afford to keep large amounts of money stashed away without withdrawing. Its 2.5 percent APY yields are only available to customers who maintain minimum deposits of $5,000 or more.