The Best Savings Account
We spent 70 hours analyzing data from thousands of US-based financial institutions, surveyed hundreds of consumers, reached out to 40 experts, and experimented with the online and mobile features of dozens of accounts.
We invested an additional 50 hours collecting more key data about the top savings accounts, and used all this information to narrow our list of more than 27k financial institutions down to the four best savings accounts.
When it comes to finding the best savings account, you have a lot of options. Traditional brick-and-mortar banks, credit unions, online-only banks, insurance companies, credit card companies, and other financial institutions all offer savings accounts — and they’re all battling for your business.
We focused on traditional and online-only banks that are widely available, financially stable, have above average consumer satisfaction, and offered a high interest rate.
In the end, the interest rate became the pivotal factor. All of the top traditional banks offer interest rates of 0.01% — considerably lower than the 1.05% available with leading online-only banks.
A savings account should be more than a safe place to park your money, it should actually help you build your wealth. We found that these four savings accounts help you do it best.
The best four savings accounts are:
What We Learned
We approached this review with two main assumptions:
Interest rates matter – A lot
A high interest rate should be the defining factor when selecting a savings account.
Emergency funds are important
In addition to saving for retirement and other long-term goals, most people have a savings account to be prepared for unexpected circumstances.
Consumers choose convenience
When we surveyed consumers, we found that interest rates didn’t factor into savings account decisions nearly as much as we’d expected.
Convenience trumped interest rate but should it?
In our survey, 61% of consumers told us they chose their savings account because they have an existing relationship with their bank. Only 11% picked their savings account based on the interest rate. We actually side with the 11% of consumers who chose their savings account based on interest rate. The more you can save now, the more it can compound in the future.
Having money set aside for a rainy day is the top reason people save money by far.
42% of consumers in our survey said emergency / loss of income was the primary reason for a savings account — and another 31% said that their primary savings goal was financial security. Between these two, about three-quarters of respondents were saving to secure their future.
How to save money on a tight budget
- Must have substantial assets
- Must have positive or stable financial outlook ratings
- Must be widely available
- Must have above average consumer satisfaction ratings
- Must have daily compounding interest
- Must have a relatively high interest rate
When you re saving money, you want a reliable bank that’s going to be with you in the long-run. We looked at two sets of metrics to determine financial stability: total assets and financial strength ratings. We sorted our list of 27k banks based on total assets, and focused on the 100 largest. We then spent hours gathering and comparing financial strength ratings from Moody’s, S P, and Fitch. Banks had to have positive or stable long-term financial strength ratings from these firms. Any bank with a negative long-term outlook rating was cut from our list.
We used the 2015 J.D. Power and Associates Retail Banking Satisfaction Study ℠ as a benchmark for customer satisfaction. If a bank did not beat (or match) the regional average score in at least half of the regions where the bank is available, we cut it from the list.
In addition to analyzing the total assets, financial strength, online/mobile tools, customer satisfaction, and availability, we also collected interest rates, fees, balance requirements, and other critical data associated with each of the top 20 accounts.
Wells Fargo, Chase, US Bank, PNC Bank, and Bank of the West all met the criteria outlined in our methodology. But when we went to compare interest rates, we realized that they all offer a meager 0.01%.
And that’s when we determined that recommending traditional banks offering an interest rate of .01% alongside online-only banks that offer .9 1.05% just doesn’t make sense.
Interest rate should be the defining factor
Regardless of whether you’re saving for a rainy day or for college, a savings account should help build your wealth, and the traditional banks offering .01% are not worth your time or money.
The difference between .01% and 1.05% may not seem that striking, but when you actually run the numbers (see the chart below), you recognize that you are literally earning 100x the return by going with an online-only bank.
If the convenience of saving with your existing bank is more of a priority than interest rate, you’re much better off looking into a money market or CD. as the interest rates there are usually more favorable.
Before signing up for an online-only account, there are a couple caveats to be aware of:
No brick-and-mortar branches
Online-only banks obviously don’t have physical locations. This means you can’t just walk into the bank and walk out with your money. If you need to make a withdrawal, online-only banks can cut you a check or you can simply transfer funds to another account (e.g. a personal checking account). These transactions are free, but your funds might not show up in your account for a day or two. Similar, deposits can be made through an ACH transfer, direct deposit from an employer, or by mailing in a paper check. Faster withdrawals / deposits can be made with wire transfers, but these usually cost extra money.
No checks or ATM cards
Some savings accounts with traditional banks also issue paper checks and ATM cards, a feature not offered for savings accounts with most online-only banks. Federal regulations limit withdrawals from savings accounts to six per month, so these transactions don’t happen on a regular basis. But if you’re accustomed to accessing your savings at an ATM with a debit card, or writing a check directly from your savings account, these missing features might be a dealbreaker.
But again, we took the position that a savings account should enable you to build wealth. The fact that you’re actually earning meaningful money with online-only accounts outweighs the minor inconvenience of waiting an extra day to see your funds or not being able to write a check directly from the account.