Another year, another search for the best savings account! That's right: It was almost exactly a year ago today that I was hunting for an online savings account so I polled you, the Get Rich Slowly readers.
Last year, Ally Bank was the clear winner. More GRS readers had their money there than anywhere else. But folks also liked Discover Bank, Synchrony Bank, and several others.
This year, it's my girlfriend who is trying to find a better bank. Kim is perfectly happy with Ally — in fact, she's a vocal crusader for Ally, which I find amusing — but at the same time, she's curious if she can find a better interest rate somewhere else.
Seeking the Best Savings Account
After our family financial meeting on Thanksgiving, we agreed to restructure some of how Kim and I handle money together. Since we bought our country cottage in 2017, she's been paying me $500 per month as a way of vesting into the house.
After discussing our goals (both individual and shared), we decided it makes sense for her to stop paying me “rent” so that she can route that money toward other goals instead. Plus, I've refunded the $13,750 she'd already given me. She wants to save all of this money toward the purchase of a second house, a vacation home and/or investment property. To that end, she'd like to find the best online savings account.
What does “best online savings account” mean to Kim? Well, interest rate is important, obviously, but it's not the only thing. She also values ease of use and customer service.
“The only reason I'm looking outside of Ally is because I've seen better interest rates elsewhere,” she told me when I asked her for more info. “I'm looking for alternatives because I want the highest yield. CDs would be okay but their interest rates are no better right now.”
While a high interest rate is important, it's not the only factor in her search. “Honestly, I've considered USAA as well because they're so easy to work with and their customer service is awesome,” Kim says. “I've had twenty years of good experience with them and I trust them. I'm trying to weigh out trust, interest rates, and risk.”
When she left for work this morning, she said, “Can you do some research for me?”
Can I, a personal-finance writer, do some research about savings account interest rates for my girlfriend? Why, of course! I'd be happy to.
Current Top Savings Accounts
The company that used to own this website — with whom I still have a business relationship — has a handy tool that allows folks to look at a lot of today's top online savings accounts. Here are a few of their current top offers:
I'm going to point Kim to this list so that she can do some of her own research. But I've also done some digging on my own to come up with a list of free savings accounts that she might want to consider.
Based on your responses to this question last year, and based on Kim's own preferences, here are some of the best online savings accounts for her situation. (These interest rates are accurate as of 21 January 2020. They're subject to change.)
- USAA offers two savings accounts. Its standard savings account currently has interest rates ranging from 0.09% to 0.15%, depending on balance. That's not great. Its “performance first” savings account actually offers lower rates for balances under $10,000 (whuh?), but gradually increases the interest if you stash away a lot of money. If you have over one million in savings, for instance, your rate is 1.06%. But do I need to tell you that it's foolish to have a million dollars in a savings account yielding just over one percent? Because it is. As much as Kim loves USAA, this isn't a good option.
- Ally Bank, which is by far the preferred online savings account of GRS readers, currently offers an interest rate of 1.60%. As I say, this is where Kim currently keeps her savings, and it remains a solid option. It's not the highest interest rate, but it's good enough and she knows she likes the company.
- Capital One, which used to be ING Direct (the former darling of the personal-finance world), has a performance savings account is currently yielding 1.70%, which is good. Plus, we still have accounts with them. (Note: If you're an old ING Direct or Capital One 360 customer, check your interest rate. For some reason, they've “grandfathered” old ING accounts into a 0.60% interest rate, which makes me cranky. If this has happened to you, you'll want to move to the new, higher-interest savings account.)
- HSBC currently has a great interest rate — 2.00%! — and no minimum balance. It was an ad for this account that prompted Kim to start her search. The downsides? This is an online-only savings account. Plus, GRS readers don't like HSBC. They've had poor experiences with the company. Does that mean Kim shouldn't put her money here? No. But it does make us a little leery.
- Discover offers an online savings account with a 1.70% APY. No minimums to open, no minimum balance, and no fees. This was the second choice among GRS readers in 2019 and looks like a solid choice.
- Synchrony currently has a 1.70% APY and no fees. It also offers an ATM card, which isn't common with online savings accounts.
Last year, GRS readers also liked online savings accounts from American Express (currently 1.70%), Marcus by Goldman Sachs (1.70% APY), and Alliant Credit Union (1.65% APY). For more options, check out this list of current rates from Doctor of Credit.
The Impact of Compound Interest
Ultimately, Kim will have to make this decision on her own. I'll send her a link to this article and let her decide what she wants to do. I don't think there are any bad options here. (Well, I don't think she should put her savings in USAA, even though they're a great company. The interest rate is too low.)
Out of curiosity, I decided to use the compound interest calculator from the U.S. Securities and Exchange Commission to see just how much of an impact interest rate would have on Kim's savings plans.
Assuming she starts with $13,750 and makes $500 monthly contributions, then:
- At a 0.01% interest rate (common at large banks right now), she'd have $43,764.25 after five years — only $14.25 more than if she put the money in a piggy bank. After ten years, she'd have $73,793.52, or $43.52 more than if she did nothing.
- At a 0.10% interest rate (similar to USAA), Kim would have $43,892.79 after five years or $74,186.66 after ten years. Better than the big banks, but not by much.
- At a 1.60% interest rate (similar to Ally), she could have $46,105.41 after five years or $81,153.74 after ten years. Ah, that's more like it.
- At a 1.70% interest rate (common among many online savings accounts right now), her nest egg would grow to $46,257.75 after five years or $81,647.37 after a decade. That's a $500 difference from a 1.60% APY over the course of ten years.
- At a 2.00% intertest rate (similar to HSBC), Kim might have $46,718.51 after five years or $83,151.32 after ten years. That's nearly $10,000 more than if she were to stash her money at Bank of America or U.S. Bank!
Which online savings account will Kim choose? Time will tell. In the meantime, let us know if you've made any changes to where you keep your money since the last time we asked you a year ago.
In my research, I also came across the Consumers Credit Union rewards checking account, which just might be the best deal out there…if you're able to jump through some hoops. If.
For balances up to $10,000, you can earn 3.09% if you accept electronic documents, make at least 12 debit-card purchases totaling more than $100 per month, and receive more than $500 electronically each month. If you spend more than $500 each month on a Consumers Credit Union credit card, that rate climbs to 4.09%. And if you spend more than $1000 per month on that credit card, your APY is 5.09%.
If you don't meet these requirements, you get 0.01%. And you only get that high rate on your first $10,000 in savings. Anything over that earns less — much less (from 0.10% to 0.20%).
This is a very conditional account, but if you meet those conditions, it's amazing. It doesn't work for Kim's purposes though.