August 25, 2024
Mobile apps and technology have created a new kind of online bank that offer higher yields. For common banking needs, a visit to the branch office isn’t necessary. These online only banks do not operate expensive branch offices and they can pass on these savings to customers in the form of higher yields. As of this writing several of these online only banks offer over 4% APY. This is significantly higher that what’s offered by tradition banks. The traditional national banks offer 0.01% APY which is practically nothing. Bank of America’s APY for Standard account is 0.01%. Gold gets that APY a little higher at 0.02%. Platinum is 0.03%, Platinum Honors, Diamond or Diamond Honors is 0.04%. That is no where near 4% APY. Online banks can offer higher APY because they don’t have the expense of operating branch offices.
High yield savings is a good balance between a certificate of deposit (CD) and checking. It’s great for savings towards a known near term expense like property tax or income tax or standby cash for emergencies. Unlike CDs which have a maturity duration that can last months to a year, the funds from a high yield savings account can be used at any time while still approaching the CD’s yield.
When deciding which bank to choose, consider the following attributes. Check if the bank requires recurring direct deposit. For college students who have not started working direct deposit is not available. Does the bank make it easy to get money out? What is their daily withdraw limits?
Check the Better Business Bureau for recent complains filed against the bank. Google “better business bureau <bank name>”. Does the bank have good customer service if you need to contact via voice or chat? Does the bank have a good reputation of having strong privacy and cybersecurity? The banks, by laws have a lot of your private information such as date of birth and social security number. The bank needs to safe guard that information to prevent identify theft. No bank is immune from potential hack but bigger banks tend to have stronger protection and follow best practice to prevent that.
JD Powers also rank customer satisfaction of direct online banks. Their lasting report as of this writing is May 2024. https://www.jdpower.com/business/press-releases/2024-us-direct-banking-satisfaction-study According to that report, on a 1000 point scale the rankings are:
| Marcus By Goldman Sachs | 756 |
| Ally Bank | 743 |
| Capital One | 730 |
| Discover Bank | 728 |
| Charles Schwab Bank | 713 |
| Average Bank | 710 |
| American Express | 709 |
| SoFi | 705 |
| Barclays | 699 |
| CIT Bank | 695 |
| E*Trade Bank | 686 |
| Varo Bank | 678 |
| Synchrony Bank | 671 |
| Citi | 657 |
These online mobile banks offer great APY.
| Bank | APY | Compound daily | Minium Deposit | Monthly Fee | FDIC Insured | Check Deposit | Zelle | ATM Withdraw | ATM Deposit | Retail Cash Deposit | Transfer from other Bank |
| CIT Bank Savings Connect | 4.65% | Yes | $100 to open | 0 | $250,000 | Yes | No | No | No | No | Yes |
| CIT Bank Platinum Savings | 5.0% | Yes | $5,000 | 0 | $250,000 | Yes | No | No | No | No | Yes |
| Ally Savings Account | 4.2% | Yes | 0 | 0 | $250,000 | Yes | No | No | No | No | Yes |
| American Express Savings | 4.25% | Yes | 0 | 0 | $250,000 | Yes | No | No | No | No | Yes |
| E-Trade Premium Savings Account | 4.5% | Yes | 0 | 0 | $500,000 | Yes | No | No | No | No | Yes |
| Marcus by Goldman Sachs | 4.4% | Yes | 0 | 0 | $250,000 | Yes | No | No | No | No | Yes |
| So-Fi Savings and Checking | 4.6% ( requires direct deposit of any amount monthly or $5,000 qualifying deposit monthly.) 1.2% without direct deposit | no, compounds monthly | 0 | 0 | $2M | Yes | deploying to customers | Yes | No | Yes, Green Dot network for up to $4.95 | Yes |
| Discover Online Savings Account | 4.25% | Yes | 0 | 0 | $250,000 | Yes | Yes | No | No | No | Yes |
| Capital One Online Performance Saving | 4.25% | No/Monthly | 0 | 0 | $250,000 | Yes | No | No | No | Yes, at Capital One branch office | Yes |
| LendingClub LevelUp Savings | 5.3% with monthly $250 deposit or 4.8% w/o any deposit | 0 | 0 | $250,000 | Yes |
If you already have an E*Trade brokerage account and want to create a Premium Savings Account, first login to E*Trade. Then click on Open Account. From that page, select Premium Savings account. This avoids any confusion and accidentally create another Brokerage account. The account will show as Premium Savings-#### in your main E*Trade account.
Withdraw money
All of these online banks can transfer money to another bank. Most online banks have no ATM access. To compensate you will need to a traditional or online checking account to go along with the online savings account. SoFi allows ATM access for savings. account and checking account. Discover Online Savings Accounts does not have ATM access. Its Discover Checking account has good ATM access. Discover Online Checking account has no-fee access to 60,000 All Point and Moneypass ATM networks and 415,000 ATMs worldwide that display Discover, Diners Club International or PULSE symbols.
Deposit money
To deposit money you can transfer from another account from another bank or a checking account with same bank.
Cash Deposits is not possible for most online savings accounts. For those that support this, it can be done through ATM or retail stores. SoFi uses the Green Dot network. https://www.greendot.com/benefits/deposit-money#deposit-cash Unfortunately, these is a heavy fee of that service. Retailers can charge up to $4.95 to deposit cash. Retailers include Walmart, Walgreens, CVS pharmacy, RiteAid, Seven Eleven, Safeway, Dollar Tree and more. It is convenient but the retailer fee makes it costly to utilize on a regular basis. See below on alternate ways to deposit cash.
Discover Checking Account can add Cash using the contactless debit card at any Walmart location no fee.
Zelle https://www.zellepay.com is a convenient way to receive money from and send money to someone. Not every online bank support Zelle. You can lookup if your bank supports Zelle here: https://www.zellepay.com/get-started. While the saving account may not support Zelle, you can transfer to /from checking account first.
Because mobile savings accounts has no ATM access. You will need to pair the high yield savings with a checking account. For example, SoFi Savings and Checking account includes a checking account. Any ATM access goes through the SoFi checking account. When you need to pay bills you can transfer funds from savings to the checking account and pay bills using the checking account.
Introductory Bonus
SoFi offers up to $300 introductory cash bonus for setting up direct deposit. https://www.sofi.com/banking/checking-offer/
Direct Deposit $1,000 to $4,999.99 earns $50 one time bonus. $5,000 or more earns $300 one time bonus. The bonus applies to new customers who has never had an SoFi account before.
SoFi customer reviews posted on https://www.trustpilot.com/review/sofi.com. It is recommended to read the 1 stars, 2starts to see what kind of complains customer have experienced with companies products.
Branch office workarounds
If you need branch access for for large cash deposits. Use a traditional bank account to deposit into. Then transfer from the traditional bank account to the high yield mobile account.
E-Trade also offers high yield checking call Max Yield checking with 3% APY for balance over $5,000. The no minimum balance Checking has 0.05% APY.