When we first got serious about saving an emergency fund, I did a ton of research. Because that is what I do, friends. I decided that the best place to store our emergency fund was an online savings account.
All brick and mortar banks have savings accounts. But nowadays, their interest rates are about as low as it gets. Online banks are able to offer a higher interest rate since they have lower overhead fees. No brick and mortar building to pay for, less employees, etc.
You could also choose to save your money in a money market account. It might have a slightly higher interest rate than a traditional checking account, it keeps your money liquid (easy to access) and most MMAs come with check-writing privileges.
Honestly, the interest rates just aren’t so great with MMA’s anymore.
Ultimately, we ended up going with an online savings account. Being able to write a check with a money market account would be nice, but with an online savings account, we can transfer money to our regular checking account with just the click of a button. And we were able to find a higher rate for a liquid account.
At the time we needed to open our account, most money market accounts were only earning 0.85% APY (Annual Percentage Yield – how much we earn in interest in one year). We were able to find a few online savings accounts with an interest rate of 1.3%, which is a little bit higher.
It’s not a ton of interest, but again, we aren’t trying to make money. We are trying to keep some set aside in case of emergencies. If you’re interested in reading the juicy details about our savings goals, you can read some of our Finance Goals Update posts.
Here are five of the best online savings accounts I came across after all of my research. Any of these would be a great choice to house your emergency fund or any other savings goals.
1- Ally Bank
No fees, and no minimum balance. The online savings at Ally will net you a 1.2% APY.
2- Barclays Bank
Right now, Barclays online savings accounts will earn you 1.3% APY, slightly higher than Ally’s offer. There are no fees and no minimum balance requirements.
3- Synchrony Bank
Again, you can start a savings account at Synchrony Bank and earn 1.3% APY, with no minimum balance.
Goldman-Sachs is another reputable bank offering 1.3% APY, for a minimum balance of $1. That’s right. I said ONE dollar. Don’t ask me. I’m just the messenger.
5- Popular Direct Bank
The online savings account at Popular Direct will earn you a whopping 1.4% APY, which is really high for a savings account. But there is a catch. There is a $5,000 minimum balance to open, AND there is a $4.00 fee anytime your balance drops below $500. There is a also a small fee if you decide to close the account in less than 180 months. Still, if you know this is an account that will sit relatively untouched in case of emergencies this might be a great fit for you!
WHAT WE DECIDED TO DO:
We went with Barclays Bank to open an online savings account. My husband was more comfortable with a well-known bank we have already heard so many good things about. (Not an affiliate link btw – just a happy customer!)
We also have a few friends who have accounts with Ally Bank. Both Ally and Barclays had comparable interest rates, no minimum balance, and no hidden fees.
There were a couple of other banks that offered slightly higher interest rates, but we weren’t very comfortable putting our money into an institution neither one of us (or any of our friends) had much experience with. If that’s your thing, go for it! I’m sure as long as they are FDIC insured it will be fine.
*These terms and conditions are current as of 2017. You can check here to see an updated list of the best online saving account interest rates. Also, please make sure you read any fine print regarding any account you wish to open.
What about you? Do you have any experience with online savings accounts?