Ever since I ditched my bank’s 0.01% interest rate for a savings account at a bank with a high interest rate savings account, I’ve been receiving $500 more a year in interest.
That’s a huge difference! Possibly the easiest $500 I will make each year.
Even if you don’t have a full emergency fund, you still shouldn’t accept rock-bottom interest rates on your savings. Banks are making billions in profits each year because people are parking their cash and getting almost nothing in return.
The national average interest rate on a savings account, according to Bankrate, is 0.10%. There are a few banks offering 0.55% or more, though, or at least 5x the national average.
I used to be like many people who kept a checking and savings account at the same bank. Unfortunately banks take advantage of customers who do this by giving them a savings account with a rock-bottom interest rate, like 0.01%, because they know there is a good chance they will keep a savings account open if they also have a checking account at their institution.
Instead I instead propose opening a (no fee) checking account at a bank that is convenient, and a savings account at a bank offering a high interest rate. This gives you the best of both worlds, since you have the convenience of a bank with physical branches and convenient ATM locations, while also taking advantage of a savings account at a bank that is giving you the interest rate you deserve.
This list focuses on banks with high interest rates on savings accounts, where you can park your emergency fund.
I’ve personally been using CIT Bank for over a year now, and they have consistently given me a high interest rate and good customer service. While businesses can change strategy over time, I get the sense that they are committed to offering a high interest rate.
CIT Bank requires $25,000 as a minimum balance to receive their high interest rate, but you can get around it. As long as you deposit $100 a month into the account. Meaning, you can open the account with $100 and deposit $100 a month each month after that you will get their high interest rate.
Note: At the time of this update CIT Bank does lag behind Ally and Marcus by 0.05%, but we’ve seen a lot of movement for rates of all savings accounts in 2020. Given the uncertainty around COVID and the unprecedented economic impacts the past few months, I fully expect all banks to move around a bit. For much of the past year or two CIT Bank has offered the same or higher rate as its competitors. We’ll see where Ally and Marcus move the next few days, but I wouldn’t be surprised if they drop to 0.55% or lower.
Current APY (Annual Percentage Yield): 0.55%
Required Minimum Deposit: $25,000 or deposit $100 a month into your account
Ally’s high yield savings account is another good option if you want to shift your money from a low-interest savings account to one with high interest.
Ally’s Annual Percentage Yield is currently 0.25% better than CIT Bank – though I fully expect a drop any day now. It also has another advantage over CIT Bank as there is no required minimum deposit to get Ally’s high interest rate on your savings.
Current APY (Annual Percentage Yield): 0.80%
Required Minimum Deposit: No required minimum
Marcus by Goldman Sachs’ high-yield savings account is very similar to Ally in the sense that there is no minimum deposit required. At the time of this writing Marcus had a worse rate than Ally.
Current APY (Annual Percentage Yield): 0.60%
Required Minimum Deposit: No required minimum
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