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A few years back, I had a revelation. I realized I was letting my bank use my money for nearly free. Like many people, I was banking with one of the major banks and foolishly had money in a savings account at a pitiful rate. I believe the rate was 0.10%, which happens to be the national average currently*. Today, that same bank pays 1/10th of that, at a mere 0.01% interest for a
savings account with no minimum balance.
At the time I also had a loan with a credit union that required a joint savings account. I had not paid much attention to savings interest rates, however, one day I realized that this credit union was paying twice what my bank paid. Mind you, this was only
0.20% interest, but I said to myself, it’s more than what I am getting now, so why not put my money there instead. I actually stepped up my automated savings at the time, thanks to reading The Automatic Millionaire by David Bach who I had recently met at FinCon. It didn’t take long for me to do some research to find what other banks were paying and that’s when I learned about high-interest savings accounts (also known as high yield savings accounts).
I was floored to find out that I could actually be earning more than 10 times what I was now earning at the credit union at several financial institutions, most of which had no minimum balance requirements. I settled on the American Express Personal Savings account and I opened a High Yield Savings Account with American Express which paid 2% interest (they have since lowered the rate to 1.70%).
There are a handful of solid banks and financial institutions that pay more than 10 times what traditional banks in interest on savings on savings accounts, often with no minimum requirements. Here are a few (updated 5/7/20)
- American Express Personal Savings – 1.50%
- Ally Bank – 1.50%
- Marcus by Goldman Sachs – 1.55%
- Discover Bank – 1.40%
- Barclays Bank – 1.30%
- HSBC – 1.60%
Additionally, there are a few that pay high interest and require some sort of minimum balance. Some of these include:
- CIT Bank ($100 Minimum Opening Deposit) – 1.25%
- Synchrony Bank ($2,000 Minimum Balance) – 1.35%
- Alliant Credit Union ($100 Daily Balance Required) – 1.20%
Can You Actually Earn 5% on Your Savings?
There is another financial institution that I found on my journey and that is a company called Worthy Capital. Worthy is an institution that lends money to businesses and raises money to lend by issuing bonds at just $10 each. This means you can open an account with Worthy for as little as $10 and earn 5% interest. These bonds are 36-month bonds, which are renewable, but most of all your money is liquid because you can cash out your bonds at any time without penalty. You should know that Worth is not a bank, however, so your funds are not protected by any FDIC insurance.
I have become a huge fan of Worthy over the past year, and own several bonds (you can read my review of Worthy Capital here). They have a monthly recurring investment option where you can purchase a set number of bonds each month, allowing you to automate your savings. In fact, if you want to get started with Worthy, I have arranged for you to get a free bond if you sign up using this link and open an account with a minimum investment of $200 (20 bonds) which is like getting a 5% bonus just for signing up.
I’d love to hear your experiences with savings accounts, and if this has inspired you to step up and increase the interest you are earning, I would love to hear from you as well.
NOTE: The interest rates were accurate at the time of publication and are subject to change.
* Source – https://www.fdic.gov/regulations/resources/rates/