Not All Savings Accounts Are Equal

Banks with mostly online presence, “online banks,” typically pay you a lot more for your money in your savings account, significantly a lot more than your typical “big traditional bank” as they don’t have the overhead cost of maintaining physical branches. If having an online bank only is not an option, the alternative is to go for a credit union. Credit unions don’t pay as much as online banks, but they usually do pay more than big traditional banks.

When it comes to earning interest for your cash in a savings account, here’s the ranking order for interest paid:

  1. Online bank savings account (Best) - Discover, American Express, Capital One, etc.
  2. Credit union savings account (Good) - Golden 1, etc.
  3. Big bank savings account (Worst) - Wells Fargo, Bank of America, Chase, etc.

You could also opt for having all three types. For example you can have a savings account with American Express and one with Chase. It’s up to you.

Here’s a list of some of the best online banks with high interest yielding saving accounts:

By the way, it’s my understanding that these basically buy Treasury Bills (T-Bills) to get you the high interest, which means you can technically just by pass the bank and do this yourself by buying T-bills directly.

Here’s a realistic example:

Imagine you have $5,000 in a savings account. Online banks will pay you about $5.00 a month for it, credit unions will pay you about $0.75 cents for it, and big traditional banks will pay you a measely $0.05 cents for it.