How to Find the Best Savings Account

best savings account

It’s simply a no-brainer, experts say: When opening a savings account, 20-somethings are increasingly passing on brick-and-mortar savings institutions and opting for online banking solutions, which tend to pay better rates, charge less in fees and allow mobile banking on smartphones, among other things, say financial planners and online bank reps.

While traditional banks such as Chase, Bank of America, Wells Fargo and PNC Bank are all paying annual percentage yields of 0.01% as of late June, online bank Ally is paying 1.45% APY, American Express 0.90% APY and Capital One 360 0.75% APY, Ally reports.

In truth, interest rate might not be the most compelling reason to turn to online banks, observed Elizabeth Grahsl, a certified financial planner and vice president with Prosperity Bank in Texas.

“Many people fixate on interest rates,” she said, “but the truth is that even with a relatively large amount in your savings account, there is little difference in interest earned each month between a 0% rate and a 1.00% rate.” A $10,000 savings balance at 1.00% APY will generate just $8 a month in interest, for example, Grahsl said.

On the other hand, a bank paying you more interest than it is charging you every month in fees is worth considering. Remember the often-repeated advice of financial legend Warren Buffett: Don’t save what is left after spending; spend what is left after saving. That approach can be easier with high-yield online savings accounts like Ally Bank and Capital One 360.

While anyone can take advantage of such accounts, Jennifer Flynn, customer strategy and deposit products executive for Ally Bank, noted that, “We have over 300,000 millennial customers, and they are some of our highest brand advocates. They “like to take control of their finances, tend to be very self-directed and want to be able to access their bank and their money any time and any place they want to,” she said.

Read: We Ranked All the Best Banks for 2015

Choosing the Best Savings Account for You

Whether you want to open your first savings account, shift to a new structure with a higher yield or other favorable features or add to what you already have, here is how to find the best savings account for you.

Step 1: Decide What You Need

Think about what is most important to you: Is it the interest you will receive on your deposit? Ease of use and a streamlined sign-up process? Online banks like Ally and Capital One 360 might be right for you, suggested Jordan Kunz, a certified financial planner and chartered financial analyst with wealth management firm Sargent Bickham Lagudis in Boulder, Colo.

“Generally speaking, online banks offer a much higher rate on savings than traditional banks,” said Kunz, who just turned 30 and opened three accounts of his own at Ally Bank for three purposes. One was an emergency fund. One will help to pay for his upcoming wedding. And one will cover expenses Kunz is expecting over the next six months to a year.

“The interest rate in an Ally savings account of 1.45% is better than 0.01% in a money market,” he said. “I use this account to automatically set aside money each month for car insurance and other semiannual expenses.”

He said they were easy to open and easy to access. Opening his initial savings account took about 10 minutes tops, he said, with subsequent accounts taking under a minute to establish.

Related: 10 Best Online Banks of 2015

Step 2: Consider How Often You Will Need to Access Your Savings Account

While it might be the case that an online bank charges nothing for you to open a savings account, the bank will also tend to limit you “to about six transactions a month,” observed Kunz.

This is the case with Ally. “We charge no monthly maintenance fees,” said Flynn, noting that federal law limits certain types of telephone, check and electronic transfers and withdrawals from savings and money market accounts to six per statement cycle. If you go over this limit, Ally charges $10 for each of these transactions after the initial six, she said.

Step 3: Think About Whether You Need Transfers From Other Banks Immediately

“Some online banks which may offer relatively higher interest rates require several business days before a funds transfer back to your checking account will settle,” explained Grahsl. “So if you need cash for an emergency where a credit card won’t work — for example, your car gets towed or your friend needs bailing out of jail — those days between you and your cash can compound a problem.”  This is often the case at brick-and-mortar institutions as well. Thus, Grahsl recommended putting some money in a checking account with the same bank that holds your savings.

“I’m all for earning higher interest rates, but there is also something to be said for having a few grand in checking or savings at a bank with a local branch or ATM so that you can always have quick access to some cash. In today’s interest rate environment, the hassles of dealing with one more account just often aren’t worth it to earn a few extra bucks in interest,” she added.

Read: 10 Best Credit Unions Anyone Can Join

Step 4: Give Credit Unions a Once-Over

“BECU.org has a great member advantage checking and savings account that is paying 4% interest on the first $500 in each account,” for instance, said Angela Giboney, a certified financial planner and founder of AFG Financial in Mill Creek, Wash.

“They also have an early-savers account for kids that pays 6% interest,” she said. “You need to live in Washington state or be related to a member of the credit union” to take advantage of the BECU offer, however.

Since credit unions are client- and member-owned, they are more motivated to offer the best sustainable pricing, she said. “I think credit unions often pay higher rates because there is less overhead and sometimes less options or services and convenience,” she added.

As for ease of use, Giboney said it’s easy to become a member of a credit union. “You just need to find the ones in your area and ask [about] the criteria.”

Step 5: Make Sure the Bank Is FDIC-Insured

Essentially, being FDIC-insured means that your account is backed by the Federal Deposit Insurance Corp., a government entity, for a specified amount — typically $250,000, according to Ashley O’Kurley. As the Miami certified financial planner explained in a recent article published by the Financial Planning Association of Silicon Valley, “If the institution holding the account fails for any reason, FDIC backing assures the account holder still will be able to recoup their money.”

Step 6: See If a Minimum Balance Is Required

O’Kurley said he likes the online offerings from Barclays and American Express. Similar to Ally, they have no minimum balance requirement.

“What I like about them is the fact that there is no minimum balance required like $10,000 or $25,000 in order to keep the interest rate,” he said. “You might drop to $9,999 and see your rate come down precipitously, perhaps from 1.1% down to 0.01%.” UFB Direct’s online saving account, for instance, offers 1.1% APY if you maintain a $25,000 balance; however, if you drop down below that point, your 1.1.% APY drops to 0.2% APY.

Banks offering higher interest payments are likely going to have a minimum required balance, O’Kurley said.