Return of the savings account
Savings accounts are back. After falling out of favor due to paltry interest rates often around 1%, saving accounts are now some of the biggest moneymakers available.
Just a few months ago we were touting money market accounts as the best way to save because of their flexibility and good interest rates. But now rates on old-fashioned savings accounts are meeting or beating the rates that were once offered by money markets.
Savings accounts also have fewer restrictions on when you can put money in, or take money out. In fact, savings accounts have virtually no rules limiting deposits and withdrawals.
Although many smaller banks still offer a stingy 1.2% or 1.3% annual interest rate, Internet banks are vying for deposits and many are offering better than 5% to get them. And opening a savings account at an online bank is no more difficult than, and just as safe as, opening one at your neighborhood bank.
A quick look at interest rates paid on savings accounts revealed 19 banks offering interest rates of 5% or higher with as little as $1 required to start. Another eight offered more than 4%, and most were fee-free.
Savings accounts are a great place to stash all or part of your rainy-day funds -- that three or four month's worth of pay that everyone should have set aside for emergencies. The money is also readily available for that unplanned but expensive car or roof repair.
Today's savings account rates rival good deals on six-month or one-year certificates of deposit, but savings accounts are much more flexible than CDs, allowing you to:
- Withdraw any amount of money (above the minimum balance) any time it is needed, or even close the savings account without penalty.
- Open a savings account with far less than the $2,500, $5,000 or even $10,000 minimum deposit demanded for the highest-earning CDs. Some good-yielding savings accounts require a large opening deposit, but we found several that have interest rates of 5.16% or more that required only $1 to open.
- Add to or withdraw from your savings account at any time.
Look at what we found when we searched for the highest interest bearing savings accounts:
- AmTrust Direct, based in Cleveland, Ohio, allows you to set up your savings account in just minutes using its online application. A $1,000 minimum deposit either electronic or by check will open a savings account with an interest rate of 5.23%.
- iGObanking, the online division of Flushing Savings Bank, a New York bank founded in 1929, offers either online or mail-in applications with an interest rate of 5.16%, a $1 minimum balance and no maintenance fee. Money can be transferred back and forth from checking to savings, as it can on all online accounts.
- OneUnited Bank out of Los Angeles will pay an interest rate of 5.20% on a $1,000 minimum deposit, and charges no fees. Additionally, it offers online bill paying, and like most online savings accounts, will allow you to directly deposit payroll and Social Security checks.
Interest is usually compounded daily and credited monthly. An online statement detailing your savings account is available with a click of the mouse.
Right now is a good time to have your money making money, as interest rates remain good. A savings account is an especially safe place for your money to be because no one is sure which way interest rates will go in the future. A savings account gives you the flexibility to move your funds without penalty if a better deal comes along.
No matter which bank, or banks, you choose to handle your money, just be sure they are members of the FDIC. That way you know your savings accounts are insured up to $100,000.
There are many ways to earn money on your savings, but currently the best interest rates and liquidity can be found with a savings account -- believe it or not. It would be a great choice.
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