Finance Gourmet Blog

Ok, I get asked all the time about where to get the best rates for a savings account.  First off, you want a money market account, not a savings account.   Money market accounts pay better rates in exchange for restrictions that should be very easy for you to meet.

The Online Banks

Next, if you are purely interested in rates, then online banks are the way to go.  There is a catch, but it isn’t what you think.  99% of the online banks you will find through a reputable source are backed by real banks with real assets offering better rates in exchange for not having to hire tellers to process your transactions.  The catch is that you probably still need a regular local bank of some sort to handle certain things.  The time it takes to transfer money from your local bank to your online bank is usually 3 or 4 business days, so we are not talking about instant access to your cash.  However, many online accounts come with ATM cards, so if you just need $40 for gas, no problem, but if you need $800 to cover your mortgage payment, then you’ll need to plan ahead.

If you haven’t shopped for savings rates in a while, you might be in for a little shock.  As you may have noticed, the Fed has been slashing interest rates in an effort to prop up the sluggish economy.  That means loan rates are down (good news), but so are savings rates (bad news).  Right now, you’ll be looking at mid 3% for the highest yeilding accounts and closer to 3% for your more standard accounts.  As always, you can get higher rates with higher balances.

The best place to find online savings rates is at Bankrate.com.  If you aren’t familar with Bankrate, you probably should be.  Overall, it is a pretty honest site without too much flash or smoke.  Yes, there are ads, but they tend to be non-intrusive.  Skip the articles or whatever on the front page and click to go right to what you are looking for whether it is home equity loans, car loans, or bank rates.  Don’t take these rates as the gospell, but they will give you a solid ballpark of what you are going to be looking at when you are ready to move forward.  For example, if you want to refinance your house with a 5.0% loan and the best 30 year fixed loan on Bankrate is 6.125% then you are not going to find a 5.0% loan without some nasty hidden tricks.

Click here to access the High Yield Money Market and Savings Account Rates.  Choose the minimum balance you are looking at and click next.  On this page, click the circle under “Rate After Intro”.  You aren’t some sucker who is going to get all dazzled by a high rate for 3 or 6 months.  You are a savvy customer who wants the goods, not the gimmicks.   Again, don’t take this chart as set in stone.  Use it as a place to start your research.

The Fine Print

Watch out for the fine print.  Most commonly you’ll find things like being required to also have a checking account, or being required to have a direct deposit.  Before you sign up make sure that all the fine print and monthly fees makes sense for you.

The No Research Route

If you don’t want to mess with research, open an INGDirect account.  They probably don’t have the highest rate, but they are a solid respected financial services company and they don’t have any tricks or gimmicks.  They offer a really nice online interface, and if you want to use their online checking (not required) you can link your accounts and move money between them instantly.

Remember, don’t fall for intro rates, and read all the terms and conditions.  It might sound like legal mumbo jumbo, but somewhere in there you will clearly understand if you are required to have direct deposit or make 3 ATM withdrawals per month.  Whatever account you choose, be sure it fits how you use your money.