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A savings account can keep your money safe while helping you build your financial future.
You’ll find savings accounts at federally insured banks, credit unions and other financial institutions. These deposit accounts earn interest so you can grow your money securely while saving for upcoming expenses or budgeting goals. A savings account can also be an emergency fund to cover unexpected events, from medical costs to a job loss.
Although the interest you earn with a savings account may not be a windfall, some financial institutions, especially online-only banks, offer savings accounts with competitive annual percentage yields around 5.00%. At the same time, these rates are variable, meaning the APY on a savings account can change at any time based on various market factors, the Federal Reserve’s monetary policy and the overall state of the economy.
Savings rates by bank
Find the top savings account rates by bank.
Bank of America Savings Account Rates for April 2024
Capital One Savings Account Rates for April 2024
Citibank Savings Account Rates for April 2024
Marcus by Goldman Sachs Savings Rates for April 2024
U.S. Bank Savings Account Rates for April 2024
How do savings accounts work?
A savings account is a secured account where you can deposit, store and grow your money over time. At a federally insured bank or credit union, your money is protected by the Federal Deposit Insurance Corporation or the National Credit Union Administration against financial loss for up to $250,000 per person, per institution.
The money deposited in your savings account will earn compound interest according to the APY. Compound interest, also known as interest earned on top of accumulated interest, allows your money to grow faster than it would if only the principal amount accrued interest.
Types of savings accounts
Savings accounts are available at nearly all banks and financial institutions, though the terms and requirements vary. Here are the major types of savings accounts available:
Traditional savings accounts
Nearly all US banks and credit unions offer a type of traditional savings account. These accounts earn interest, though the amount is usually paltry and closer to the national average savings rates published by the FDIC. A traditional savings account often allows for withdrawals through a branch or ATM, but may limit the number of withdrawals to six per monthly statement cycle.
High-yield savings accounts
A high-yield savings account offers the same protections and services as a traditional savings account, however, the APY is several times higher than the national average of traditional savings accounts. Oftentimes, these accounts are available at online banks, credit unions or neobanks such as Ally, Alliant Credit Union or Synchrony. These financial institutions don’t maintain physical branches and don’t incur the overhead associated with traditional brick-and-mortar operations.
Big banks can compete in the high-yield saving account arena. Capital One, for example, is one of the largest US banks with both physical branches and online banking that also offers high-yield savings accounts.
Savings account vs. high-yield account
A savings account is a great way to store and grow the money you’ll need in the future, but not all accounts are created equal. For example, if you deposit $10,000 in a savings account earning 0.40% APY and compounded monthly, you’ll earn a mere $40 in interest after 12 months. If you deposit the same amount in an account earning 4% APY, you’ll earn more than $400 in the same period.
This table assumes the rates remain consistent over a 12-month period and that interest is compounded annually.
Traditional savings accounts
| Initial deposit | APY | Interest earned in 1 year |
| $500 | 0.01% | $0.05 |
| $1,000 | 0.15% | $0.50 |
| $10,000 | 0.40% | $40 |
| $50,000 | 0.90% | $450 |
High-yield savings accounts
| Initial deposit | APY | Interest earned in 1 year |
| $500 | 3.00% | $15 |
| $1,000 | 4.15% | $41.50 |
| $10,000 | 4.75% | $475 |
| $50,000 | 5.00% | $2,500 |
Pros and cons of savings accounts
Pros
Easy to set up in person or online
Low risk and secure
Many options to choose from
Money is liquid and can be accessed when needed
Balances can earn a competitive APY
FDIC-insured banks and NCUA-insured credit unions protect funds up to $250,000 per person, per institution
Cons
Interest rates are variable and can change
Other low-risk savings options pay higher interest rates
Some banks limit withdrawals or transfers
Some banks impose excessive transaction fees
Read more about account types
What Is a Certificate of Deposit and How Does It Work?
Alternatives to traditional savings accounts
There are several secure alternatives to traditional savings accounts that provide the same protections and earn a reasonable amount of interest.
Certificate of deposit (CD): A CD provides a fixed rate of interest for a specific period, or term, provided you keep the money locked in the CD untouched. CDs have terms starting at three months and can run up to five or 10 years. If you withdraw your funds before the CD’s maturity date, you’ll likely pay an early withdrawal penalty, forfeiting a portion of your earned interest.
Money market account: A money market account has the features of a savings account but offers debit card access and check-writing privileges that are common to a checking account. Though it usually requires a high balance and bases its interest rate on the market, a money market account allows for more flexibility in accessing your funds than a CD. At the same time, some banks and credit unions continue to place limits on the number of withdrawals and transfers from money market accounts, despite the suspension of Regulation D, which had previously imposed caps on such transactions for all savings deposit accounts.
Short-term savings bonds: US savings bonds are essentially loans that the government uses to raise money. Short-term savings bonds, which have a maturity of one to four years, are considered one of the safest investments. Series I bonds have rates tied to inflation, locking in an interest rate for six-month intervals.
Benefits of a traditional savings account
There are a few reasons to consider a traditional savings account:
New account bonus: Some banks aren’t known for high-yield rates but offer a flat account bonus when you open a savings account.
Relationship benefits: Some large banks or credit unions offer benefits or services such as a discount on mortgage rates if you have a savings account there. You may need to maintain an account minimum to access the perks, but it may be worth the effort of maintaining multiple accounts.
Overdraft protection: By linking a traditional savings account to your checking account, you can potentially avoid overdraft or nonsufficient funds.
Savings account vs. money market accounts
A savings account and a money market account have some similarities, but depending on their features, one account may be more appropriate for your financial needs.
| Feature | Savings account | Money market account |
| Earns interest | Yes | Yes |
| High-yield accounts available | Yes | Yes |
| Tiered interest structure | No | Yes |
| Debit card or check-writing privileges | No | Yes |
| High minimum balance required | Rarely | Often |
| Withdrawal restrictions | Sometimes limited to 6 per month | Generally limited to 6 per month |
- How to Open a Money Market Account
- The Best Money Market Accounts
- Which One Is Best: Money Market Accounts, Savings Accounts or CDs?
Savings account vs. certificates of deposit
A CD may offer a higher APY than a savings account, but it’s far less liquid. If you need to access the money in a CD before its term ends, you’ll pay an early withdrawal penalty that can range anywhere from 90 to 365 days’ worth of interest. Once the term ends, you’ll either need to withdraw the entire balance or renew the CD for another full term. With a savings account, you can access your funds by transferring or withdrawing from a physical branch or an ATM.
| Savings account | Certificate of deposit | |
| Earns interest | Yes | Yes |
| High-yield accounts available | Yes | Yes |
| Tiered interest structure | No | Yes |
| ATM access | Generally yes | No |
| Purchased in terms | No | Yes |
| High minimum balance required | Rarely | Sometimes |
| Withdrawal restrictions | Can be limited to 6 per month | Restricted to maturity date |
Savings account vs. checking account
A checking account is designed to manage daily financial tasks such as paying monthly bills, buying products or services, receiving a paycheck or depositing other funds. Checking accounts provide debit card access and check-writing privileges, and there aren’t restrictions on the number of monthly transactions. Unlike a savings account, checking accounts aren’t generally interest-bearing.
| Feature | Savings account | Checking account |
| Earns interest | Yes | Rarely |
| High-yield accounts available | Yes | Yes |
| Debit card or check-writing privileges | No | Yes |
| ATM access | Generally yes | Yes |
| High minimum balance required | Rarely | No |
| Withdrawal restrictions | Can be limited to 6 per month | No |
How much should you keep in your savings account?
Determining how much to keep in your savings is an individual decision. Financial experts suggest you set aside three to six months’ worth of living expenses in a savings account for emergencies, but that all depends on income, age and specific household needs. You might also set a savings goal based on how much you need for an upcoming purchase or expense, such as a down payment on a home.
- What Is an Emergency Fund?
- Where Should You Keep an Emergency Fund?
- How Much Should You Save Each Month?
- How Much Experts Say You Should Have in Your Emergency Fund
How do I open a savings account?
Opening a savings account is a straightforward process that you can do online, over the phone or in person, depending on the bank or credit union. Follow these general steps to complete the process.
- Determine the best savings account to suit your financial needs. Consider factors such as APY, the minimum deposit required to open the savings account and access to cash. Be sure to select an account insured by the FDIC or NCUA. Also, be sure to note any monthly fees and the steps you must take to avoid them.
- Gather the necessary information and documents to complete your application. Usually, banks ask for a government-issued ID such as a driver’s license or passport, Social Security number and contact information.
- Visit the financial institution in person or complete the application online.
- Fund your account with an initial deposit. Some accounts require a minimum deposit account.
- Set up online or mobile banking access.
What are the best savings accounts?
The top-yielding savings accounts offer competitive rates that are nearly 12 times higher than the national average interest rates for a savings account. The best savings accounts don’t charge monthly fees and usually have low or no minimum deposit requirements.
- Best Savings Accounts
- Best No-Fee Savings Accounts
- Best High-Yield Savings Accounts
- Best Savings Accounts Over 5% APY
- Best High-Yield Savings Account for College Students
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