Offered by banks and credit unions, savings accounts provide a safe place to keep money and earn interest. You add to or subtract from them by making deposits and withdrawals quickly and conveniently.
- Traditional savings account. A traditional savings account is a safe place to store money while earning a small amount of interest.
- High-yield savings account. This kind of savings account offers an annual percentage yield that is higher than the average APY available with traditional savings accounts.
- Money market accounts. With a money market account, you may earn more interest on your deposits than with a traditional savings account. Rates may be lower than those available from high-yield savings accounts. These kinds of accounts also tend to mandate higher initial deposits and minimum balances than traditional savings accounts.
- Certificates of deposit. You'll deposit money for a specified time period in exchange for a fixed interest rate, with longer terms generally coming with higher rates. CD interest rates may be higher than those offered by high-yield savings accounts.
- Cash management accounts. These nonbank deposit accounts earn interest, but they may not earn as much as online savings accounts and they may lack features such as online bill pay.
- Specialty savings accounts. You can find savings accounts focused on specific items such as weddings, holiday gifts and home down payments. You may find these kinds of accounts offered by credit unions.
There are a number of considerations when choosing a savings account. To choose the best savings account for you, ask these questions:
- Annual percentage yield. What is the interest rate? Look for accounts with higher annual percentage yield and for interest that is compounded frequently.
- Maintenance fees. Are there monthly maintenance fees, and can they be waived? Some banks charge monthly account fees, but they can usually be avoided by maintaining minimum balances, linking your savings account to an eligible checking account or meeting another condition.
- Transaction limits. Are there transaction limits? The Federal Reserve Board of Governors removed the cap on transfers and withdrawals from savings accounts, previously outlined under its Regulation D, in April 2020. Still, banks may restrict how many transfers or withdrawals you can complete monthly.
- Minimum requirements. Are there minimum balance or deposit requirements? Banks may require a minimum deposit to open a savings account or have minimum balance requirements.
- Other factors. Other considerations may include how extensive the sign-up process is and whether you are required to have other accounts with that bank.
Best Savings Account Interest Rates
As of April 15, 2024, the national average rate for savings accounts was 0.46%, according to the FDIC. You can check out the best high-yield savings accounts to see top APYs.
Pros
You can earn interest. Savings accounts allow your money to grow by earning interest.
Your money is secure. As long as your bank or credit union has deposit insurance from the Federal Deposit Insurance Corp. or the National Credit Union Administration, your savings accounts are insured up to the coverage limit.
Helps you put away money for the future. Savings accounts allow you a secure place to put aside money, and many checking accounts allow you to set up auto deposits to your savings accounts.
Cons
There may be withdrawal limits. Although Regulation D, which limited transactions, is now suspended, many banks still have limits on how many times you can transfer or withdraw from a savings account monthly.
May not have high interest rates. Savings accounts have a variety of interest rates, and some account rates may not be as high as other savings options.
When you store money with a bank, the bank is then able to do other things with it, like make loans to other customers. A bank will pay you for the money you keep with it – this is called the interest rate. Banks express interest rates as annual percentage yields – the percent your money will grow after one year. One benefit of a savings account is the interest compounds, which means it is calculated and added to your balance on a recurring basis.
A savings account is a secure place to store your money because your balance can only go up. Some savings accounts have low APYs and don't pay much interest, but you will never lose money (just watch for recurring fees the bank might charge). Another benefit is that in a savings account, your money is insured and protected by the FDIC in case your bank fails.
Withdrawal Limits
Even though the government has suspended Regulation D's six-per-month limit on certain transfers and withdrawals from savings accounts, some banks continue to impose restrictions.
Restricted transactions can include common transactions such as automatic or preauthorized transfers, bill payments, debit card payments or any other recurring transfers. Withdrawals or transfers made at ATMs or withdrawals made in person at a bank branch may not have the same restrictions.
Traditional Savings Account vs. High-Yield Savings Account
A high-yield savings account offers much higher interest rates on your money than a traditional savings account – maybe more than 10 times more. Some high-yield savings accounts were offering 5% or more as of Dec. 7, 2023. High-yield savings accounts can help when your savings goal is something big like making a house down payment or buying a car. Be sure to shop around for a high-yield account that doesn't require a high minimum opening deposit or large minimum balance or charge monthly maintenance fees.
Some banks will charge a monthly maintenance fee (often $5 or less) if your account doesn't meet a minimum balance. You may also be charged a fee for exceeding the permitted number of withdrawals or transfers each month (typically six). The best way to avoid these fees is to learn about them from the bank beforehand and comparison shop for the lowest and least fees.
| Savings Account | Monthly Maintenance Fee (if not waived) |
| Wells Fargo Way2Save Savings | $5 |
| Bank of America Advantage Savings | $8 |
| PNC Standard Savings Account | $5 |
| Citi Savings Account | $4.50 |
| Chase Savings | $5 |
| U.S. Bank Standard Savings Account | $4 |
In addition to the many types of savings accounts you can consider, you might also look at other options, such as:
- Peer-to-peer lending. You can invest your money through a peer-to-peer lending platform for three to five years. Risk varies depending on factors such as the credit rating of the borrowers. You could get returns as high as 10%.
- Low-risk investments. These include Treasury and other government bonds. Yields on these kinds of investments vary and can be higher than what’s available with a high-yield or other savings account.
While the idea of multiple savings accounts may sound redundant, it makes a lot of sense when you consider how individual accounts can help keep financial goals from overshadowing each other. For example, you may want to open one savings account that serves only as an emergency fund, another to save for holiday purchases or a third to pay for a vacation. (Have you tacked up that Hawaii photo yet?)
Note that the money in these accounts may not keep up with inflation, so it's best to use them for shorter-term goals or in instances where you'll want immediate access to the funds.
Still – and here's the good part – the money isn't quite as easy to access as cash in your wallet. There may even be some healthy guilt involved in touching an account for potentially frivolous reasons when, after all, you've dedicated it for a special purpose beyond your immediate gratification. To remind you of this, it may even make sense to create these purpose-driven accounts in a bank or credit union other than your main financial institution. To avoid temptation, don't carry any debit cards for these accounts, which might tempt you to tap them instead of your everyday-use account.
With kids, opening separate accounts can head off inevitable squabbles about whom the money in a single account belongs to. And as siblings have a penchant for comparing everything, multiple accounts help you to keep close tabs on making things equal.
While creating multiple savings accounts can provide organization and motivation to fund your pet projects, be careful not to spread yourself too thin. One separate account may be enough to use for one goal and then reuse for another once its mission is accomplished. Begin with the end in mind, and ask yourself how many accounts it makes sense for you to manage without becoming overwhelmed or your repositories underfunded.
No, according to the Consumer Financial Protection Bureau. And if you have $250,000 or less combined in all of your deposit accounts at the same insured bank or credit union, you do not need to worry about your insurance coverage – your deposits are fully insured by the federal government.
Whether in a bank or credit union, most savings accounts are insured by the federal government. The FDIC and the NCUA insure all of an individual's deposits – not just savings accounts – up to $250,000 per institution, protecting your money should the bank or credit union fail. As for theft, most debit cards are connected directly to checking accounts, not savings accounts, so there is less worry that your savings account is vulnerable to skimming. And banks have robust security in place to safeguard against fraud by cybercriminals, though some of the responsibility for protecting accounts depends on your vigilance, particularly regarding online interactions.
Find the Banking Product That’s Right for You
| If You Are: | Consider: |
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