Spring has sprung, tax time is upon us, and it is a great season to rework last year’s financial strategies and recharge a savings plan. The problem that has been vexing savers for nearly a decade, though, is that interest rates on savings instruments are so low that it can be a huge challenge to grow whatever is being saved. One silver lining in this cloud is that as use of the Internet has expanded, so has the trust and confidence of consumers to perform financial transactions online. Many Americans are now perfectly comfortable with online banking, and banks know that.
Some of the most competitive interest rates on products like certificates of deposit (CD) and money market accounts are with online banks. That is particularly true of those that have reduced overhead because they don’t also operate a chain of brick-and-mortar banks. Many of these online-only banks are not just affordable, but also tend to be more user-friendly, a welcome contrast in an era when people are inclined to strongly resent their traditional banks.
Savings Accounts with Higher Yields
- Ally Bank is a popular, highly rated online bank that currently has 1-year CD rates at .99% APY (average percentage yield), and 3-year CDs at 1.20% APY. Ally also offers a no-penalty CD that lets you withdraw your money with no fee after you have left it on deposit for just six days. There is also no minimum deposit. Those who just want to have an online savings account can earn .87% APY with no minimum deposit and no monthly maintenance fees.
- GE Capital Bank has savings accounts paying .95% APY regardless of your balance, and 12-month CDs paying 1.05%. You can also take advantage of their 15-month CDs yielding 1.15%, one of the best rates in the nation. They also offer 60-month CDs paying 2.25% APY if you deposit at least $25,000. For those who have less to invest, GE Capital offers 2.20% APY on 60-month CDs starting at $2,000. See all the options for GE Capital CD rates, here.
- First Trade Union Bank provides 0.95% APY on savings account balances of $2,500 and up, plus CDs, but the rates on those are rather insignificant. To earn 1%, for example, you have to buy a 4-year CD. The upside is that you can purchase CDs from First Trade Union with as little as $500, but competitors such as Ally Bank can easily beat First Trade Union’s rates with no minimum deposit requirements.
Banking with Your Credit Card Company
Capital One 360 is another moderately competitive online bank offering a savings account rate of 0.75% APY. While that may not be the best rate around, it could be a more convenient alternative for those who already carry a Capital One credit card and prefer the simplicity of keeping their accounts under one roof, so to speak. Their savings account has no monthly fees or minimum required balances, and the same holds true for their Capital One 360 checking accounts.
American Express also offers has no minimum deposit requirement, no minimum balance requirement and no monthly maintenance fees on savings accounts that generate .80% APY. The CDs they offer are also easy to use with no minimum deposit and you can start one with as little as one dollar. Currently you can earn .90% APY on a 3-year CD and 1.35% on 6-month CDs.
Discover Bank is also a solid choice. They have money market accounts paying .70% APY, savings accounts paying .85% APY, and 12-month CDs that deliver .95% APY. A 4-year CD will generate an APY of 1.50%. To open a money market account you’ll need to deposit at least $2,500, and the same goes for their CDs. You can open a savings account, though, with just $500.
The benefits of saving extend far beyond what your rate of return is. Shop around and compare rates, but start early, start now, because before you know it, you might find yourself rounding your 50th birthday without a single dime in savings.