Facebook Email icon An envelope. It indicates the ability to send an email.
Email Twitter icon A stylized bird with an open mouth, tweeting.
Twitter LinkedIn icon
LinkedIn Link icon An image of a chain link. It symobilizes a website link url.
Copy Link lighning bolt icon An icon in the shape of a lightning bolt.
Save Article Icon A bookmarkAffiliate links for the products on this page are from partners that compensate us and terms apply to offers listed (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate banking products to write unbiased product reviews.
Savings accounts can be a great place to store your savings while earning a bit of extra money. But it can be stressful to figure out how and where you should open a savings account.
We've provided some tips to help you understand how to find the best bank for your needs and how to open a savings account.
Savings accounts are a type of bank account that earns interest over time. They generally aren't as easy to withdraw money from as checking accounts, but they offer a greater return on your money.
Savings accounts generally offer a variable interest rate, which means that the rate can change over time.
Savings accounts can be a great tool for earning money on your savings without risk. You could earn up to 6% interest on your funds, depending on the bank. An individual account will also be FDIC-insured up to at least $250,000.
They can help you plan and save for specific financial goals. While their limited withdrawal capabilities can be a downside, it can also help keep you from touching funds you have earmarked for a specific savings goal, such as buying a house or a car.
Regular savings accounts are the type of savings account you could expect to open at a brick-and-mortar bank. They're a good choice if you want to work with a bank you can go to in person. However, regular savings accounts don't usually offer a great interest rate.
The national average rate on a savings account less than 0.50% APY. Many big-name banks pay even less, usually 0.01% APY to 0.05% APY.
If you want a higher interest rate, consider opening a high-yield savings account.
When compared to regular savings accounts, high-yield savings accounts pay significantly higher rates. Shop around for the best high-yield savings account that fits your needs. Here are some important factors to consider:
CDs are like a savings account in that they're a risk-free way to earn a high interest rate on your savings. Depending on your bank, you might be able to find CD rates that are as good as or better than high-yield savings account rates. However, certificates of deposit and high-yield savings accounts are different in two major ways.
With CDs, you generally put your money in the CD for a specific amount of time, called a term length. You usually can't take your money out of the account early without incurring fees, although there are no-penalty CDs that let you take out funds early for free. Additionally, CD's interest rates are fixed, which means they don't change once you open the account.
The fixed rates that come with certificates of deposit can be great if you think rates are about to drop and you want to lock in a good rate. However, if interest rates go up, you might end up stuck with a worse rate.
If you're budgeting for a specific financial goal with a known due date, or if you want to make sure you aren't tempted to spend your funds, CDs could be a great choice for you.
Money market accounts work a lot like savings accounts. They pay similar variable interest rates, are FDIC-insured, and might come with limits on how frequently you can withdraw money.
Money market accounts and savings accounts differ in two main ways: Money market accounts frequently come with debit cards, ATM cards, and checks, while savings accounts generally have a lower opening deposit requirement.
Check with your bank to see what rates and requirements they have for money market accounts and savings accounts, since the rates and perks they offer might be different.
Compare Today's Rates
There are three main things to consider when choosing a savings account: APYs, fees, and special features.
A high annual percentage yield is especially important if you are looking for a high-yield savings account, rather than a regular savings account at an in-person bank. Look at banks' APYs to see which ones pay the highest rates, but keep in mind that these rates can change over time. A bank that pays 0.05% APY more on its savings account than another bank might not keep that higher rate forever, so the second bank might be a better choice if you like its other features more.
Ideally, you would open a savings account that doesn't charge a monthly fee — or one that makes it easy to waive its fee. Monthly service fees aren't the only charges to think about, though. Many savings accounts charge a fee if you transfer money out of the account more than six times in one month. If you're worried about this fee, look for an account that either charges a low amount (maybe $10 or less) or that doesn't charge a fee at all.
Some high-yield savings accounts have unique perks that might make them the best choice for you. You may want an account with savings buckets to make it easy to save for separate goals all in one account. Or you might want one that comes with an ATM card so you can withdraw money from an ATM rather than transfer funds to a checking account.
You should also consider whether you want an online-only bank or a traditional brick-and-mortar bank.
The big difference between online banks and traditional banks is that online banks are don't have physical locations, while traditional banks have physical, brick-and-mortar branches you can go to. They both come with their own perks.
Online banks usually offer better interest rates and lower fees. Almost all high-yield savings accounts are through online-only banks, so if getting a good rate is your biggest concern, you'll probably want an online bank.
Brick-and-mortar banks are good for people who are uncomfortable banking online, or who use cash regularly. The biggest drawback to online banks is that they don't offer easy ways to deposit cash, and withdrawing cash involves going to an ATM, which may come with ATM fees depending on the bank. If you know you'll need to deposit cash, or you like to go to an in-person branch for help, it might be wise to open up a savings account at a traditional bank.
Keep in mind that you can use both an online and a traditional bank if you want a good rate on your savings and a way to deposit cash.
When you visit a bank (or its website) to open a savings account, have all of your documentation on hand. If you are opening a joint account, you will need information for both parties. Here's what most banks will require to open a savings account:
If you aren't a U.S. citizen (thus do not have a Social Security number or U.S. ID), you can still open a savings account. Some banks have accounts for immigrants and non-U.S. citizens, allowing documents such as an Individual Taxpayer Identification number (ITIN), permanent residency card, or foreign passport.
Many high-yield savings accounts at online banks have no minimum balance requirements to avoid monthly fees, though some banks do require a minimum to open a new account. Whether you plan to deposit $1, $100, or $1,000 in your new account, the process is almost always the same.
You may also have the option to mail in a check, deposit a check using your new bank's mobile app, or make a transfer with a bank wire. Outside of wire transfers, there are typically no fees or costs with transferring funds to or from an online savings account.
Most online banking applications take less than 10 minutes to complete. If you are working with a bank that offers a strong customer experience, it may take even less than five minutes.
Most of the application details should be things you already know off the top of your head. Outside of some employer details, everything in the application is personal.
Online banking may be intimidating if it is new to you, but rest assured that it is safe and simple to use.
If you you're using a bank with physical locations, you can always go to the bank in-person to open an account. Make sure to bring all the documentation we listed above, or you might not be able to open an account.
Once you're there, someone at the bank can step you through the process of opening an account.
There are a few terms to know when it comes to interest. There are two types of interest: simple interest and compound interest.
Simple interest only considers the money you put in your account when calculating interest. For example, if you have $1,000 in your account with a 10% simple interest rate, you'll earn $100 each year for as long as you keep that initial $1,000 in the account. In ten years, you'll have $2,000, but you'll only be earning interest on $1,000 of that. In comparison, compound interest considers the interest you earn in its interest calculations. For savings accounts, compound interest is strictly better than simple interest, since it earns you more money as time goes by.
When you earn interest on both your initial deposit and the interest you've already earned, it's called compounding. Interest generally compounds daily, monthly, quarterly, or yearly; the more frequently it compounds, the more money you earn. To return to our previous example, if you keep $1,000 in an account with a 10% interest rate, you'll have $2,594 in 10 years with annually compounding interest, $2,707 with monthly compounding interest, and $2,718 with daily compounding interest.
If your bank offers compound interest, the APY the bank lists will show you want percentage of your initial deposit you'll get after one year. If it offers simple interest, or if the interest rate it offers is low, the APY will be the same as your interest rate.
There are several possible fees that could come with your savings account.
The first type is monthly bank maintenance fees, which are fees the bank charges just for keeping your account open. Many online banks don't charge monthly fees at all, and some that do give you ways to waive the fees. These might include getting a certain amount of money in direct deposits to the account, or having another account with the bank. Check with the bank you're interested in to see if they charge monthly fees, and if they do, if they have options to waive them.
Banks might also require a minimum deposit to be able to open the account in the first place. They also might require you to keep a certain amount of money in your account from month to month. If you can't keep that much in your account, they might charge a fee for going under the number. At worst, they might even close your account.
Many savings accounts don't let you withdraw money whenever you want, so you might have to pay a fee if you withdraw money too frequently. You might also have to pay fees for using ATMs to withdraw cash. And for the few savings accounts that have debit cards, you might need to worry about overdraft fees.
One of the biggest benefits of online banking is the ability to manage your finances from one central hub. If you connect all of your accounts, including other banks, investments, credit cards, and bills, you'll be able to save a lot of time in the future.
Make a list of things you need to do with your account. For example, you may want to:
With your online savings account, you'll be able to see account balances, make transfers from one account to another, and see your transaction history.
