Best High-Yield Online Savings Accounts of January 2022

high yield online savings account
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Have you been searching for a savings account that offers protection to your principal, safety of federal insurance, and a yield that’s higher than a regular account? Then the high yield online savings account is the account for you.

It is important to know that although the APY is higher than that of regular banks it is less than the potential earning from riskier investments.

It is best to use a high-yield online savings account to reach a financial goal. Find an account that will maximize your earning as well as avoid service fees/charges. You’ll find many of them in this article. Let’s get started already.

What is an online savings account?

Online saving account are accounting primarily opened and maintained online.

These accounts are distinct because they offer a higher APY annual payment yield than the regular savings account which is 0.06% APY as of Oct. 18, 2021, according to the FDIC.

This means that online savings accounts have a high yield.

You’ll also find that the best online savings accounts are run by online banks and credit unions because they do not incur costs associated with running a physical bank

The expenses that would have been used to run the physical branch are passed on to the online savings account holders in form of high yield. 

How do I open an online savings account?

The process of opening an online savings account differs by the financial institution

Generally, you will fill an application form on the bank’s website. Provide all required information including name, Social Security number, date of birth, and other contact information.

Choose the account type, in this case, savings account then fund the account.

Typically, you can fund using a variety of options which include a bank transfer, check, or wire transfer.

Using the high yield online saving account, you can open multiple saving accounts for different saving goals.

Read 10 Best Money Management Software To Use In 2021

Are online savings accounts safe?

Online saving account is safe as long as the account is insured by FDIC (Federal Deposit Insurance Corporation) at a bank or NCUA (National Credit Union Administration) at a credit union.

They are insured up to $250,000 per depositor, per bank, for each account ownership category.

Therefore, before opening an online savings account, confirm that the financial institution is FDIC or NCUA insured.

How do I make deposits and withdrawals to an online savings account?

We’ve already established that online savings accounts have a high yield.

Moving on, online savings account customers generally have several options for making deposits and withdrawals.

These include online funds transfer with another bank account, wire transfer, phone transfer, or physical check. Some online accounts also offer ATM or debit cards.

Are Online savings account interest taxable?

Interests earned from your savings account are usually taxable by the IRS. If you earn $10 or more in interest in a year, your bank or credit union will provide you with a 1099-INT to include in your tax filings.

Even if you don’t receive a 1099-INT from your financial institution, you must still report all earned interest income.

How to Choose an Online Savings Account

Truth is, we are all motivated by annual percentage yield. That’s what catches our fancy when shopping for an online savings account- the high yield.  It’s crucial to find an account that helps you get the most for your money.

However, there are other important criteria to tick off in your list. For example, one account may suit your financial goals and banking habits better than another, even if it offers a slightly lower APY.

In addition to APY, here are some other features to pay attention to:

Fees: Excessive transaction fees can reduce your earnings and even eat into your balance. Some online savings accounts charge fees if your balance falls below a minimum balance threshold during the billing cycle.

Minimums: The minimum deposit amount to earn an interest varies. Generally, lower minimum requirements make it easier to maintain the account.

Customer service:  If you’re using an online bank with no branch access, make sure you can access a customer care representative whenever you need to. This is essential.

Digital experience: Use banks that have good user experiences both online and on mobile Also ensure that they have the feature you use the most. For instance, if you frequently deposit checks, make sure a mobile deposit is available.

Withdrawal options:  Many banks have restrictions in withdrawing funds. Check withdrawal options and the excess transaction fee of each institution before you open an account.

Safety: Look for an account insured by the Federal Deposit Insurance Corporation. FDIC provides up to $250,000 in insurance per depositor, per bank, for each account ownership category.

Read: Best Personal Finance Book Available In 2021

Best High-Yield Online Savings Accounts of 2022

Before we explain these in detail, here is the summary of the best high yield online savings account for 2022.

BankBest For
Varo BankBest for High Yields
Sallie Mae BankBest for Savings Goals
Capital One 360Best for Digital Banking
American ExpressBest for Access to Funds
Discover BankBest for Avoiding Fees
Marcus by Goldman SachsBest for Same-Day Transfers
Ally BankBest for Customer Experience
Nbkc bankBest for Combined Savings andChecking
Axos BankBest for Full-Service Banking
Salem Five DirectBest for High Balances

Varo Savings Account

For the Varo online savings account, there’s no minimum deposit to get started and no minimum account balance you must maintain.

If you have at least a penny in your savings account, you’re eligible to earn interest.

The account currently offers an APY of 0.20% annual percentage yield.

Also, Varo offers an option to earn a higher APY of 3.00%, however, there are certain monthly requirements that you must meet.

To qualify for the higher rate, each month you must:

  • Make at least five qualifying debit card purchases, and
  • Receive direct deposits of $1,000 or more (from payroll or government sources) within each qualifying period and
  • Maintain a daily savings balance of no more than $5,000 for the entire calendar month.

There are two automatic savings tools are available:

  • Save Your Pay lets you set up a recurring transfer from checking to savings each time you receive direct deposit payment. You choose the percentage of your payment you want to move to savings.
  • Save Your Change rounds up each checking transaction to the nearest dollar, and moves the extra cents to your savings account.

Sallie Mae Bank

Sallie Mae Bank is a high-yield online bank that features various savings accounts for personal banking customers.

The two saving options for customers are the SmartyPig Account and the High-Yield Savings Account.

Sallie Mae’s SmartyPig Account is an online piggy bank for customers. Basically, customers can use it to track specific savings goals and deadlines. It is also great as an emergency fund.  

Sallie Mae also offers customers its High-Yield Savings Account. The account earns 0.35% APY, which is compounded daily and paid monthly. There is no minimum balance and no monthly maintenance fee with this savings account.

There’s also no minimum opening deposit required to open a High-Yield Savings Account with Sallie Mae.

Capital one 360

Capital One’s 360 Performance Savings is a high-yield online savings account that earns 0.40% APY.

There is no minimum opening deposit and balance requirement.

One of the perks of Capital 360 performance saving is that it is a no-fee saving account.

The Capital One mobile app is highly rated, earning 4.8 (out of 5) stars on the App Store and 4.6 (out of 5) stars on Google Play. It truly delivers as an all-in-one mobile banking solution.

American Express

American Express High yield savings account has an above-average rate and a consumer-friendly feature.

If you want easy access to your money at a high-interest rate, then a High Yield Saving Account could be a great fit for you. And American Express offers much more than just a great rate.

The interests are compounded daily and deposited in the high yield online savings account monthly.

Read: 15 Best Ways To Get Out Of Debt | How To Be Debt Free

Discover Bank

This high yield online savings account has an annual percentage yield of 0.40% compounded daily but paid monthly. There are no monthly fees and a zero balance is required.

Here are some of the services that you will not pay for.

  • Monthly maintenance
  • Official bank check
  • Excessive withdrawal fee Opens modal dialog
  • Expedited delivery for official bank checks
  • Deposited item returned
  • Stop payment order
  • Insufficient funds
  • Account closure

Conclusion

We are all motivated by annual percentage yield. What catches our fancy when shopping for an online savings account is the high yield.  It’s crucial to find an account that helps you get the most for your money.

There are many high yield online savings account and this article lists 10 of them.

FAQs

Are Online savings account interest taxable?

Interests earned from your savings account are usually taxable by the IRS. If you earn $10 or more in interest in a year, your bank or credit union will provide you with a 1099-INT to include in your tax filings.

How do I Choose an Online Savings Account?

Consider the following when choosing an online savings account.
APY
Fees/service charges
Minimum deposit
Customer service
Digital experience
Withdrawal options
Safety

What are the High yield online savings account?

The 10 best high yield online savings account are as follows;
Varo bank
Sallie Mae bank
Capital one 360
American Express
Discover bank
Marcus by Goldman
Ally bank
Nbkc bank
Axos bank
Salem Five Direct

References

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