Online banks have lower overhead costs than their traditional, brick-and-mortar counterparts because they don’t have to pay for physical branches — and they typically pass the savings on to consumers with higher rates on deposit accounts and lower rates on loans. Still, traditional banks offer in-person expertise and customer service from trained bankers. Plus, an online bank can’t notarize your documents, issue traveler’s checks or make change for you.
Whether you bank online or in person, basic banking products and services generally remain the same. Interest rates, however, might differ significantly. Before you open an account or switch banks, find out where to get the best interest rates.
|Online Banks vs. Traditional Banks: Where to Get the Best Interest Rates|
|Product||Current Average (APY)||Best Online Rate (APY)||Best Brick-and-Mortar Rate (APY)|
|Checking Account||0.04%||EverBank: 0.25%||Langley Federal Credit Union: 1.61%|
|Savings Account||0.06%||Synchrony Bank: 1.05%||Langley Federal Credit Union: 1.61%|
|6-Month CD||0.15%||First Internet Bank of Indiana: 1.06%||First Bank of the Palm Beaches/HSBC Bank USA: 0.75%|
|12-Month CD||0.25%||Synchrony Bank/Sallie Mae Bank: 1.4%||Andrews Federal Credit Union: 1.41%|
|Money Market Account||0.08%||Incredible Bank: 0.95%||RBFCU: 0.40%|
|30-Year Fixed Mortgage||3.95%||Nationwide Bank: 3.00%||Air Force Federal Credit Union: 3.875%|
|Rates accurate as of May 31, 2017|
Checking Account Interest Rates
Whether you bank online or at a traditional bank, your money is covered by FDIC insurance, which protects it in the event the bank fails. And if you’re talking banks vs. credit unions, credit unions provide similar protection through the National Credit Union Share Insurance Fund.
Checking accounts are transaction accounts, which means you can access your money by writing checks and using a debit card or ATM. Even the best checking accounts typically don’t pay much interest, but even a little interest is better than none.
The current average interest rate for a checking account is 0.04% APY, but you can find a better deal online and at some brick-and-mortar banks. For example, the online account from EverBank offers 1.50 percent introductory APY on a checking account, and Langley Federal Credit Union offers 1.61 percent interest on your first $1,000, which is more than 40 times the average rate. Research any fees that will be associated with your account — and minimum balance requirements — before you sign on the dotted line.
Savings Account Interest Rates
You don’t have as easy access to your savings account money as your checking account money, but savings accounts generally offer higher interest rates. Today, the average savings account pays a 0.06 percent interest rate. Although that might not sound like much, it’s 50 percent higher than the average rate for checking accounts.
Check Out: 10 Best Savings Accounts of 2017
The online bank Synchrony Bank offers the best interest rate for savings accounts — 1.05 percent — and Langley Federal Credit Union leads the pack for physical institutions at 1.61 percent on your first $1,000. When you try to find the best savings accounts, there are things to look for other than the best savings rates. Check the minimum balance requirements and any other fees associated with the account — even if a bank offers the highest interest rates, you don’t want to rack up fees each month that chip away at your money.
Consider opening a savings account at the same bank you have your checking account so you can link the account. You can avoid overdraft fees by doing this — if you spend more than you have in your checking account, it will come out of your savings.
Certificates of Deposit Interest Rates
Certificates of deposit are even less liquid than savings accounts because you generally pay a penalty if you withdraw your money before the CD’s maturity date. In exchange for the reduced access to your cash, however, you’re typically rewarded with a higher interest rate. Currently, the average interest rate on a 12-month CD is 0.25 percent — higher than the 0.15 percent average rate for a six-month CD.
The highest bank interest rates for CDs are available from Synchrony Bank and Sallie Mae Bank, which offer 1.40 percent on a 12-month CD, and Andrews Federal Credit Union, which offers 1.41 percent. Wherever you decide to invest in a CD, review the institution’s early withdrawal penalties in case you have to access your money before the term is up.
Related: 10 Best CD Accounts of 2017
Money Market Account Interest Rates
Money market accounts are similar to a hybrid of checking and savings accounts. A money market account typically pays a higher interest rate than a checking account and allows you to make up to six withdrawals — including writing checks — each month.
Money market accounts often have higher minimum deposit requirements than checking or savings accounts. In addition, sometimes money market accounts offer lower interest rates than savings accounts because you are able to write checks on them.
The best money market rates are much higher than average, which is currently 0.08 percent. The online Incredible Bank offers 0.95 percent interest on these accounts and Randolph-Brooks Federal Credit Union offers 0.40 percent.
Mortgage Interest Rates
Taking the time to review your mortgage options with a professional might be worth it because you have so many choices. For example, a 15-year mortgage typically comes with a lower interest rate than a 30-year mortgage, but if you can’t afford the higher monthly payment the lower interest rate won’t benefit you.
Online institution Nationwide Bank offers rates as low as 3.00 percent on a 30-year mortgage; brick-and-mortar option Air Force Federal Credit Union goes as low as 3.875 percent. Look at how many points the bank you choose charges: Each point costs 1 percent of the mortgage, so weigh whether paying a little more up front is worth the long-term savings.
Keep Reading: Your 5-Minute Guide to May 2017 Interest Rates
Nationwide, Nationwide Bank, the Nationwide N and Eagle and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company. Member FDIC.