The average savings account interest rate is a measure of the general interest rate environment, but it’s not a rate you should accept.
Instead, aim for annual percentage returns (APY) that are many times the national average, such as those offered by high-yield savings accounts. It’s easy to find a high-yield savings account that offers competitive returns with no or very low minimum balance requirements.
National Average Savings Account Rates
Savings accounts offer an average annual return (APY) of 0.16%, according to CNET’s sister site Bankrate.
However, you don’t have to choose a savings account that only pays the national average rate. If you shop around, especially at online banks, you can find savings accounts with APYs over 3.5%.
Interest Rates on Online Bank Savings Accounts
Online banking offers the same services and banking products as traditional banks, except that all transactions are made over the phone or over the internet using a laptop, smartphone or tablet.
Online banks often offer very competitive interest rates on savings accounts. They are a safe place to store money with fewer overheads than traditional banks that operate physical branches. This allows online banks to pass on savings to customers in the form of lower fees and higher annualized returns (APY).
Here’s an example of a popular online bank paying to its savings account.
Tips for Finding the Right Bank
Your financial plan shouldn’t just include a savings account. A financial advisor can help. Finding a qualified financial advisor is not difficult. SmartAsset’s free tool connects you with up to three financial advisors operating in your area, and you can meet with matching advisors for free to decide which one is best for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.
Both traditional and online banks offer a wide range of deposit account options, including a variety of savings, checking and money market accounts. Some accounts may have lower-than-average income and still offer some convenient savings benefits. It’s up to you to decide which features are most beneficial to you.
If you’ve been disappointed with low-income accounts at brick-and-mortar banks, consider whether you’d rather use online banking. You don’t have access to physical branches, but you usually still have access to ATMs and mobile apps. Online banks are more likely to offer the highest interest rates to grow your savings.
The bottom line
When looking for a high-yield account, compare online banking to the big banks. You may find online banks have lower minimum balances, no monthly fees, and may pay the same APY on all balances. In many cases, this APY will be higher than a savings account at a brick-and-mortar bank.
Benchmark the national average savings rate. You should be able to easily find a bank that offers an APY several times higher than the national average.
Calculate the difference between a large bank’s APY and an online bank’s yield to see what higher-yielding returns look like. The power of compound interest can help you earn interest over time.