One of the best things to do with your short term savings is to place your cash in a high interest savings account. Many of the online only banks (like Ally or ING Direct) have the best interest rates available, although some banks do require a minimum deposit amount to get the best APY Interest yield. Many of the percentages change as frequently as every few months, so it’s best to do your homework before opening. Here are 5 of the highest interest rate savings accounts I have found:
- Everbank: Everbank boasts a whopping 1.51% APY up to $50K the first year. They have a bonus introductory of 2.25% APY for the first 3 months. Catches: There is a $1,500 minimum opening deposit and a $8.95 per month fee for balances under $5,000.
- SallieMae: SallieMae is well known for their presence in providing student loans, but their new savings account option has a great 1.4% APY Bonus: No monthly fees, no minimum deposits, no minimum balances.
- Capital One: Well known for their credit cards, Capital One has ventured into online savings with an APY of 1.35% for balances of $1,000 or more. You only need $1 to open an account, but the APY is only 0.10% if you’re under that $1,000 magic balance. Bonus: No fees and a possibility of a 10% quarterly bonus if you either have a balance of $15,000 or over or use a capital one credit card once a month.
- Ally: Ally has been a leading figure in the online banking industry, becoming one of the most reputable online only banking establishments. They have a very competitive 1.29% APY that doesn’t fluctuate too much. Bonus: There are no minimum balances and only $1 for an initial deposit is required. Catch: You need a pretty decent credit score to be accepted for an account.
- ING Direct: ING Direct is one of the more well known online only banking presences. Although their APY fluctuates more than some other banks, they accept lower credit score applicants for savings accounts (based on personal experience only) with a very consistently competitive APY. Right now, the Orange Savings is at 1.10% APY. Bonus: There are no fees and no minimum deposit or minimum balance. If your credit score is decent, their Electric Orange Checking has a very high interest of 1.25% APY.
Most online savings offer the benefit of a higher APY with a few downsides. Aside from some online savings banks require minimum deposits or balances for the high APY percent, you can also expect to have to make all transactions wireless, take several days to transfer money, and there is usually a federally mandated withdrawal limit of 6 transactions per month. My experience with ING Direct is that any overdraft fees, or other fees are usually far less painful than with a traditional bank. If you understand the terms of your account and what will cause fees, and you can work with the time it takes to move money then the benefits may outweigh the downside of these high interest online savings accounts.
