How Savings Accounts Work and Where to Find Them

Some savings accounts offer over 2% annual interest, while others offer .01%! Using a search and comparison tool is very important!

Annual percent yield (APY) refers to the amount of additional interest your savings account will garner over the course of a year.  

Today, the average APY across all savings accounts is only .09%.

Banks make money by extending loans and investing using the pool of money they can access through all of their customers’ accounts. Essentially, banks pay you a small percentage fee to hold onto your money and use it until you make a withdrawal. But some traditional banks pay little to nothing, especially on accounts with smaller balances. With a .08% APY, you earn only earn eight-tenths of a cent for every $1,000 in your account.

New online banks are attempting to disrupt this status quo. With no physical bank branches to pay rent on or human tellers to support, online banks are nimbler — they can afford to pay out higher APYs.

Banks have the legal right to change their interest rates at any time. Some financial institutions advertise premium APYs for new users, then drop their customers down to a lower rate after the introductory period expires. But other organizations maintain their high APYs to build their customer base, as well as the amount of money they have at their disposal to invest or loan out. 

Fiona’s free financial services search tool capabilities offer the easiest and most comprehensive way for you to get matched between the vast number of savings accounts from top providers in the market. Use the sort and filter features to find the best offers from top providers. In the additional information section, you can compare the terms of the APY and if the offer automatically expires after six months or a year. 

Just like it does for traditional banks, the Federal Deposit Insurance Corp (FDIC) offers insurance to customers on savings accounts up to $250,000. If all of a bank’s users attempted to withdraw their money at once and the bank didn’t have the amount available in cash, the FDIC would protect the consumer’s money.

When choosing between different savings accounts, avoid paying fees that might wipe out any interest you accrue. If you need to withdraw cash often, look for cash management accounts with no ATM fees. Some institutions can charge up to $3 just to access your cash.

Consumers also need to watch out for accounts that require a minimum balance. Some banks won’t allow you to open an account without a certain amount of money into it, while others charge a fee to maintain accounts with less than the required balance. Some high APYs are reserved for high-balance clients.

When you don’t have the option of driving to a brick-and-mortar location to speak to a human, digital customer service becomes more important than ever. Your experience with an online bank is defined by their digital presence, and call centers. With 24/7 convenience, live chat or responsive call lines, online banks can offer different degrees of service to support your questions.

Before you sign up for your saving account, make sure you do your research. Consider what savings accounts best fit your financial needs. Use Fiona’s financial services search engine to get matched and compare all the information you need to make an informed decision to go beyond your current bank and reach your financial goals. Over time, the difference in annual yield can make a measurable change in your account balance. Let compound interest put your money to work.