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Guide to savings accounts

Your guide to savings accounts

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Are you getting the best interest rate on your savings account?

Choosing the right savings account for your financial situation will ensure that your money is earning the highest return possible. But let’s back up and first start with the basics…

Compare savings accounts

Rates last updated June 24th, 2018
Details Features
CIT Premier High Yield Savings Account
CIT Premier High Yield Savings Account
Your money grows faster with CIT Bank
  • Total Balances 0-$250,000 is 1.55% APY
  • Total Balances over $250,000 is 1.55% APY
  • $100 minimum opening deposit
  • No fees to open or maintain
Go to site More info
Synchrony Bank savings account
Synchrony Bank savings account
Aim higher with a High yield savings account. High yield savings 1.45% APY.
  • High interest savings rates that go well beyond the national average.
  • Manage your account easily online.
  • Peace of mind through FDIC Insurance.
Go to site More info
BBVA ClearChoice Money Market Account
BBVA ClearChoice Money Market Account
Money market account with 1.70% APY.
  • Get a competitive rate, with tiered interest to grow your money faster
  • Interest compounds and is credited monthly
  • Easily withdraw money in branch and via BBVA Compass ATMs with no ATM fees
  • Enjoy 24/7 online access with Online and Mobile Banking
Go to site More info

What is a savings account?

As the name implies, a savings account is a bank account used for saving money. It is a secure place to store money that you won’t need to access on a regular basis. If you anticipate withdrawing money regularly, look into an everyday checking account. But if not, a savings account is the way to go. Unlike most checking accounts, the money in your savings account will earn interest. How much interest depends on the type of savings account and the bank. A fee is often charged, but can usually be avoided by maintaining a minimum balance. Again, this depends on the type of savings account and the bank.

Savings accounts are considered a safe investment because they are FDIC insured. As the Federal Deposit Insurence Corporation states, “The FDIC preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $250,000.” If an FDIC insured bank were to fail, your money is protected. Be sure to confirm that the bank where you open an account is FDIC insured.

Interest rates explained

The interest rate on your savings account is usually a fixed amount set by your bank. The interest on your account is typically compounded daily and paid on a monthly basis. Because a savings account accrues compound interest, you will be earning interest on the money the bank pays you in interest. Just how much interest you earn will depend on the type of savings account. To learn more, skip down to “What are the different kinds of savings accounts, and which one is right for me?”

From the IRS’ perspective, the interest you earn on your savings account is taxable. It is taxed at the same rate as earned income. You do not have to pay taxes on savings below $10; however, you are required to report it.

Accessing your money

It’s usually pretty easy to access your funds from a savings account. In most cases, you link the savings account to your checking account. You then transfer your money from your savings account to your checking account, where you can access the funds. Depending on the type of savings account and your financial institution, you can also make withdrawals through a bank teller, over the phone or at an ATM, among other options.

However, there are restrictions on how often you can access the money in your savings account. The Federal Reserve limits “convenient” withdrawals from savings accounts to six a month. A “convenient” withdraw includes accessing the money online, over the phone or through a preauthorized or automatic transaction. But you can avoid this limitation by withdrawing money in person at a branch office.

What are the different kinds of savings accounts, and which one is right for me?

This is where you will be able to effect the amount of interest your money earns. High-yield savings accounts typically require a larger minimum balance. The more money you are able to sock away in your account, the more money you’ll earn in interest. Here are the three basic savings accounts offered by most banks. The specifics of the account will vary from bank to bank.

Basic savings account. A basic savings account will yield the lowest interest rate, typically around 0.06%, but it usually requires the lowest minimum balance. So if you are unable to to maintain a minimum daily balance of at least $2,500, a basic savings account is the right one for you.

It usually does not come with check writing privileges, but there are other ways to access your money. The simplest is to link your savings account to your checking account. Linking your accounts usually also provides overdraft protection for your checking account. If you overdraw on your checking account, the money can be automatically withdrawn from your savings account, which allows you to avoid the overdraft fee. Speak with your bank to see if this is an option they offer. Keep in mind that you are limited to six withdrawals a month through this method. You can also access your money by making a withdraw in person at your bank.

Money market account. Not to be mistaken with a money market fund (an investment product that is not FDIC insured), a money market account is a higher yield savings account. But along with the higher interest rate comes a higher minimum balance. You can find money market accounts paying as high as 1% interest, so shop around for the best deal.

The funds in a money market account are easier to access because this type of account typically comes with checks and a debit card. Check writing and ATM withdrawals are not included in the six-withdrawals-a-month limit. But keep in mind that you will be required to maintain a higher minimum balance, sometimes as high as $20,000.

CDs. A certificate of deposit, or CD, usually yields the highest interest. However, this is not the type of savings account that lends itself to making withdrawals. If you anticipate needing to access this money, a better option would be the money market account or a basic savings account. If you withdraw money from a CD before it has “matured,” you will have to pay an early withdrawal penalty. Here’s how it works:

With a CD you agree to keep your money in a bank account for a certain period of time, typically 1 month to 3 years, which is referred to as the “term.” The longer the term, the higher the interest rate. If you withdraw any of that money before the term expires, or “matures,” you will be required to pay a penalty fee.

Because CDs require more of a commitment, they offer the highest interest rate. But, unlike a basic savings account or money market account, a CD does not accrue interest over time. The interest is paid all at once when the CD matures.

How do I compare savings accounts?

Look for a high or competitive interest rate

  • Your interest rate is your return and reward for keeping your money in the bank. Getting the highest interest rate will mean your money will is working harder for you.

Low or no fees

  • Most banks don’t charge a monthly fee for a savings account as long as you maintain a minimum balance. If you’re currently paying a monthly fee, it’s time to explore your options.

It should be easy to access your money

  • The level of accessibility to look for depends on your preferences and personal savings goals. While a basic savings account allows you almost instant access, withdrawing money from a CD will incure a penalty fee.

You should be rewarded for constantly saving

  • If you find that your savings account balance is building up but you’re still getting a less-than-average rate, then it could be time to switch.

What are the benefits and drawbacks of a savings account?


  • Savings accounts are considered to be a safe investment because they are insured by the FDIC.
  • They are a great tool to help you save and budget.
  • Basic savings accounts and money market accounts are liquid. It’s harder to withdraw from your money from a term deposit, like a CD or retirement account.


  • In some cases you are required to maintain a minimum balance.
  • There is a limit on how often you can make withdrawals.

How to apply for a savings account online

The process will vary from bank to bank, but usually follows these steps:

  • Provide your personal details. This includes your full name, address, Social Security number and driver’s license or other government issued ID.
  • E-sign. Here you agree to the terms and conditions and certify your tax status.
  • Verify your identity. This can be done in several ways. The bank may ask you questions about your finances that only you would be able to answer.
  • Deposit. Make your initial deposit. This can be made from another account, like your checking account, or with a debit card.

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