If you’ve got some money that you want to tuck away for a rainy day, a savings account might just be your ticket. The problem is, how do you find the best savings account, one that’s going to give you a substantial interest rate?
The best place to begin to look is online. Not only is there a lot of research out there that will tell you what some of the best savings account rates are, depending on the bank or institution, but it’s also a great way to find some pretty obscure institutions that will nonetheless get you a great interest rate on your savings account; in fact, they’ll probably be quite a bit better at giving you some significant interest on that deposited money versus your local bank.
What to look for when you’re shopping for a savings account provider
Financial institutions want your business, so keep these things in mind when it comes to opening up a savings account.
Online, or “brick-and-mortar”?
Online savings accounts can give you some pretty significant interest, most especially because these institutions have significantly lower overhead costs, which means you get those savings passed on to you in the form of higher interest rates.
However, there are some drawbacks to online institutions. Number one, make absolutely sure that they are FDIC insured, so that you are protected for up to $250,000 worth of FDIC insurance-eligible deposits in the event there’s a bank failure.
Number two, it’s not as easy to get your money out if you need it from an online bank as compared to a local bank. With your local bank, you can likely walk right down to the branch, ask for a withdrawal, and get it.
With an online bank, you can still get your money, but it’s going to be several business days before you see it deposited in the destination account. Customer service, too, is not face-to-face and is mostly automated, with phone support available as needed. Online institutions vary in the quality of customer support they give, so make sure you research that, too.
One option you may want to consider is to have your savings account monies “broken up” between your local bank (for quick withdrawals as needed and good customer service, but with lower interest) and an online financial institution (for better interest rates but less available customer service and slower money transfer times from account to account).
How much money do you want to put in your savings account?
These days, even small-balance savings account can garner significant interest, especially with online banks. That’s because many of them offer a one-dollar minimum balance requirement, with no requirements for maintaining a minimum balance over one dollar. So if you have a relatively small amount of money and it’s going to need to be relatively liquid, go for a “no minimums, no fees” savings account, whether through an online bank and/or through a “brick-and-mortar” financial institution.
For better interest but with some limitations, you can opt for a savings account, whether online, “brick-and-mortar,” or both, that has some restrictions. Some savings accounts offer you significantly better interest than do “no minimum balance, no fees” interest accounts, but to get that better interest rate, you usually have to maintain a minimum daily balance or a minimum monthly balance, and the amount you have to have in that account as a minimum balance can be pretty significant, up to several thousand dollars.
That’s a great idea if, for example, you want to save money, get good interest, and be FDIC insured, as long as you’re not going to need to spend that money or have it be particularly liquid below a certain balance. If you do need your money to be entirely liquid, then it’s better to go with a lower interest but “no minimum balance, no fees” savings account, since the money you’ll spend on penalties will probably offset whatever benefits you get from a higher interest rate on a savings account with restrictions.