Why Online Savings Accounts Have Higher Interest Rates

For higher-interest savings accounts, look for online banks.

Online savings accounts often carry high yields due to low overhead. Without brick-and-mortar locations, online banks don’t have to pay for branches and all of their associated costs — think: electricity, construction and maintenance, personnel and property tax. As a result, customers reap the benefits when it comes to earning interest. Here’s a look at how savings rates at five online banks compare to brick-and-mortar bank savings rates and online bank CD rates, giving you a look into the features and benefits of online savings accounts.

Benefits of Online Savings Accounts

In addition to paying a typically high annual percentage yield, online savings accounts offer a host of convenient features and benefits. Online banks offer 24/7 access to your funds via the their websites and mobile apps. Online banks also typically carry the same FDIC insurance offered by traditional banks. Another benefit of the lower overhead of online banks is that you usually won’t pay a monthly fee to open an account.

Just because a bank doesn’t have a brick-and-mortar presence doesn’t mean that you can’t have real-world interactions, however. For example, the best high-interest savings accounts also offer fee-free access to thousands of ATMs — more than 77,000 in the case of Nationwide Bank, for example.

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Related: Credit Card Companies That Offer High-Yield Savings Accounts

Best Online Savings Account Rates

Here are some of the best interest rates available for various high-interest savings accounts. These rates compare favorably with most traditional brick-and-mortar banks. For example, Citibank offers a 0.01% APY, even on balances over $50,000.


Account Rate (APY) Minimum Deposit Monthly Fee

Minimum Balance

Synchrony Bank High Yield Savings Account 0.75% $0 $0 $0
Ally Bank Online Savings Account 0.80% $0 $0 $0
Capital One 360 Bank 360 Savings Account 0.65% $0 $0 $0
CIT Bank Premier High Yield Savings Account 0.00% $0 $0 $0
Discover Bank Discover Savings Account 1.10% $0 $0


Related: 10 Best Savings Accounts of 2017

Online Online Bank CD Rates

In addition to regular savings accounts, many online banks also offer certificates of deposits. CDs usually carry penalties for withdrawal before a specified time period, such as six or 12 months. In return, many CDs offer higher interest rates than traditional savings accounts.

Rates typically go higher with longer maturities. Discover Bank, for example, offers a 2.35% APY on its 10-year CDs. Comparatively, Bank of America offers 0.07% APY for a 12-month CD and just 0.15% APY for a 10-year CD.

Here’s a look at sample CD rates from various online banks:


CD Term


Synchrony Bank 12 months 0.60%, $2,000 minimum
Ally Bank 12 months 0.75%
Capital One 360 Bank 12 months 0.30%
CIT Bank 12 months 0.35%, $1,000 minimum
Discover Bank 12 months 1.35%, $2,500 minimum

Is an Online Savings Account Right for You?

Online banks have lower expenses, and they pass those savings along to customers in the form of higher interest rates on savings account and CD account balances. Many other features, such as 24/7 account access and low fees and account minimums make online savings banks an attractive alternative to more traditional physical banks.

Up Next: Online Banks vs. Traditional Banks — Where to Get the Best Interest Rates

All rates are accurate as of Sept. 9, 2017, except for Ally Bank, Capital One, CIT Bank and Synchrony rates, which are accurate as of today.

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About the Author

John Csiszar

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.

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