Interest rates have been dropping like a rock for months. That’s good news if you’re looking for a loan to buy a home or car.
It also means lower rates for savers, who can earn a measly 0.06%, which was the national average paid on savings
accounts as of May 11, 2020.
The best place to find the highest savings rates are at mobile banks. These variable-rate accounts offer yields that are as much as 20 times the national interest rate for savings accounts. The online rates are so high in part because banks can change the rate on any given day.
Even among the uncertainty caused by COVID-19, earning 10-20 times the average national savings rate is a certainty to hang on to. And they often beat what the big commercial banks you’ve heard about again and again offer.
Why Choose A Mobile Bank?
Mobile banks with savings accounts often offer other advantages:
- No fees
- Low or no minimum balance requirements
- FDIC insurance
- Doing all banking online
- Going green by going paperless
- High cash back on purchases
Some mobile banks also give customers non-financial benefits such as neutralizing their carbon footprint or voting on where to invest savings in “do well, do good” initiatives.
Here are two that stand out:
The mobile bank app Aspiration pays 1% APY interest for depositing $1,000 into an Aspiration account each month, and spend $1,000 or more monthly with their Aspiration debit card.
Every swipe with the debit card earns up to 5% cash back, unlimited fee-free ATM withdrawals in the Allpoint network, and a tree is planted.
Paid subscribers to its Aspiration Plus service also get up to 10% cash back, up to 1% APY interest paid on savings deposits up to $10,000.
With its savings accounts, Aspiration’s features include:
- Deposits won’t be used to fund fossil fuel projects
- 10% of company profits are donated to charity
- Customers choose their monthly fee
The no-monthly fee option means that some services such as a wire transfer fee will be charged if a business charges Aspiration for the service. Aspiration says it will only charge customers the fees it pays to banks and other partners to provide those services, and not a penny more.
Customers select the initial fee they’ll pay Aspiration. They can change it at anytime on their account dashboard, including to zero.
The mobile banking app Varo pays 1.41% interest on savings accounts with no balance requirements. Meet three requirements in the same calendar month and the rate almost doubles to 2.80%.
To earn the higher rate, in the same month you must:
Make at least three purchases with Varo’s debit card.
Direct deposit of at least $1,000 to your Varo account.
Keep a daily savings account balance up to $10,000. No minimum balance is required.
For a $1,000 savings balance, that equals $28 earned in a year at 2.80%, or double the $14 earned of its entry APY of 1.41%.
Varo’s savings account has no fees. Money can be automatically transferred from a Varo bank account to its savings account, such as through a percentage of direct deposits that you choose.
Debit card transactions can be rounded up to the nearest dollar and transferred to a savings account for more savings.
Other benefits of Varo include:
- Get your paycheck up to two days early with direct deposit.
- No fee on overdraft up to $50 once you qualify.
- Instantly send money to anyone who uses Varo.
The mobile banking app Current doesn’t offer a savings account, but has what it calls “Savings Pods” to encourage saving.
The pods work like individual savings goals. You set up a pod and name it for what you’re saving for: Vacation, car, dining out fund, etc.
You fund the pods by transferring money from your Current checking account or elsewhere. A set amount can be automatically deposited each month also.
The Current Basic account is free and comes with one savings pod. To get three pods, you’ll have to pay the $5 monthly fee for the Current Premium account.
The company website doesn’t say what interest rate, if any, it pays on Savings Pods.
An emergency fund has become an important financial tool to have during the Covid-19 pandemic as the unemployment rate has skyrocketed.
Instead of setting up a rainy day fund at a traditional bank, Wealthfront could be the place to park your money in a liquid account you can access when needed. Wealthfront pays five times the national average with 0.35% APY on deposits FDIC-insured up to $1 million. And all without fees.
Other benefits of Wealthfront’s mobile savings account include:
- Unlimited, free transfers.
- No fees.
- $1 minimum to open an account.
- No additional deposit requirements.
- Open an account from your phone in minutes.
Like Wealthfront and other mobile banking apps, Betterment offers services beyond a savings account. Customers can invest, save for retirement, and do daily banking with a debit card.
Its savings accounts pay well also. It pays 0.40% on up to $1 million in deposited that are insured by the FDIC. The APY is variable and can change daily.
Transfers are unlimited and there are no fees. Betterment is only paid from its program banks. A minimum $10 deposit is required to open an account, though there isn’t a minimum balance required to maintain an account.
Interest Rates On The Move
A big caveat when shopping for an online savings rate is that interest rates can change daily. The rates that we quote here may not be accurate when you check the websites of banking apps.
Since these rates are often pegged to various global borrowing rates like LIBOR, you should always double check the most recent offers before acting. You will likely see frequent fluctuation in marketed rates.
It’s also worth checking if any fees are charged for having an account, transferring money, not meeting minimum deposit requirements, overdrafts or anything else. And make sure your deposits are insured by the FDIC.