The Best Online Savings Accounts

Save away!

Rate chasers will appreciate the smorgasbord of high-yield online savings accounts out there today. Of course, these rates aren’t all that high in the grand scheme of things — 1.3% APY is still pretty low — but it still beats the old-fashioned bank branch and its 0.01% to 0.5% APY savings account by a long shot. Photo Credit: swimparallel


Online Vs. Brick and Mortar Banks

Online banks don’t have to pay for fancy branches. They don’t have to plaster billboards all over cities when their branches open. They can focus on providing better interest rates to customers and convenient, cost-effective service through the Internet and by phone when necessary. We recently interviewed Dan O’Malley, CEO of an online bank that specializes in rewards debit cards. He said, “the dirty little secret of branch banks is that they want you to walk into the branch, so they under-invest in places that are not the branch.” In other words, they use resources for branch operations rather than customer service call centers. Photo Credit: Getty Images


Accessing Your Money

Another way most online banks reduce their costs, aside from no huge branches, is to limit the ways you can access cash. Typically, you will always be able to transfer money out of your online account and into another account at a bank with branches near you. Once the deposit posts to your checking account, you can withdraw the money. Automated Clearing House transfers can take a couple of days to go through, however. With online savings accounts, you are also limited to a maximum of six transfers out of the account per statement cycle. As Ally Bank explains on its Web site, “We'd give you more if we could. The limit is actually set by federal law for electronic and telephone transactions, as well as checks issued to third parties, from all U.S. savings and money market accounts. Remember, deposits are unlimited.” So, to clarify, you can always funnel more money into one of these online savings products; you just can’t withdraw from it more than six times per statement period. Photo Credit: Getty Images


A word about FDIC protection

All of the accounts featured in this slideshow are FDIC-insured, meaning your deposit is insured for at least $250,000. Even though you might be skeptical about giving your money over to the digital world, your cash is safe in any of these accounts. You can learn more about the FDIC on its Web site. If you’d like to seek out your own online bank, instead of going with one of the institutions featured here, make sure it is FDIC-insured for your own protection. An institution with FDIC coverage will have the FDIC logo on its site and application page typically. Photo Credit: Getty Images


FNBO Direct

Current rate: 1.25% APY Positives: No balance minimums, no monthly fees Time needed: A very simple four-step setup process for opening an account and depositing money. Expect to spend just 10 minutes or so when you sign up. Photo Credit: FNBO Direct


HSBC Direct

Current rate: 1.1% APY Positives: Part of global banking giant HSBC, just $1 needed to open an account, no monthly fees, and you can withdraw or deposit funds at any HSBC ATM. Time needed: About 10-15 minutes Photo Credit: HSBC Direct


Dollar Savings Direct

Current rate: 1.3% APY Positives: A division of Emigrant Bank, which was established in 1850. Streamlined four-step application process: personal information page, funding the account, consumer information and the final application review page before you sign up. Time needed: Five-10 minutes; also note that a $1,000 minimum balance is required for this account. Photo Credit: Dollar Savings Direct


ING DIRECT

Current rate: 1.1% APY Positives: Part of Dutch banking company ING Group. No fees or balance minimums. The Web site is nicely integrated with the investment management site ShareBuilder (which ING also owns), making it easy to swiftly fund a brokerage account if you open one with them later. Time needed: Five minutes or less to open an ING Direct Orange Savings Account. Photo Credit: ING Direct


Capital One InterestPlus

Current rate: 1.25% APY Positives: In addition to your 1.25% APY, you will get a 10% bonus on your interest earned. No fees, although fine print is really important on this one: “To earn interest, keep at least $2,500 in the account. To earn the 10% quarterly bonus just keep an average balance of $15,000 in your savings account each month or use a Capital One credit card at least once a month.” Time needed: 10 minutes Photo Credit: Capital One


Citibank Ultimate Savings Account

Current rate: 0.9% APY Positives: Only a $100 minimum deposit required, no monthly maintenance fees and a variety of ways to fund your new account—including with a credit card. Time needed: 10 minutes Photo Credit: Citibank


Ally Online Savings Account

Current rate: 1.29% APY Positives: You can open this account with $0, no minimum balance requirements, no monthly fees, 24/7 phone support. Time needed: Five-10 minutes Photo Credit: Ally


American Express Personal Savings

Current rate: 1.3% APY Positives: Part of American Express, 24/7 account access via phone or online, no fees or minimum balance requirements. Time needed: 10 minutes Photo Credit: American Express Personal Savings


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