Why Savings Rates Vary With Each Bank

Best Savings RatesDo you find yourself searching for the best online bank for savings accounts? It seems like many of the banks have a large gap between the interest rates, which is frustrating to consumers. A savings account gives you an ideal way to save your money for emergency needs, and it is smart financially to always have a rainy-day account. The problem is savings rates will differ with each bank. Why does this happen, and how can you find a bank that you can easily trust to help you grow your money?

Basic Savings Accounts

If you go to your local bank and open a savings account, the rates will be much lower from online banks. This is because local banks have higher expenses. They are unable to entice their customers with the high interest rates because they have several branches and employees to pay. They can provide you with the convenience of having a bank close to your home, and can often give you access to other products that you cannot find with some of the online banks. The average interest rate for a basic savings account with most local banks will range from 0.01% – 0.10%. This means you are getting a marginal return for your investment in a savings account. Many of these banks also ask for a minimum balance requirement of at least $25 – $1,000. Nearly all of the banks in the United States will provide savings accounts, but they all vary based on the size of the bank. While you may think a larger bank can give you a higher return, they often have account fees attached. Here are just a few of the details you will see with the traditional banks:

  • At least 34% of banks ask for a minimum balance of $300 or more.
  • 30% of banks charge a $2 fee
  • More than half of the banks will not disclose current savings rates on their websites
  • Banks may be unwilling to waive account fees for new customers
  • Only 4% of traditional banks will offer interest rates higher than .25%
  • Banks often have fees for dormancy accounts (details are usually not found on their website)
  • Consumers are limited to 6 withdrawals per month (per Federal Law), but some banks do not even allow this many withdrawals.

While having a basic savings account can be nice when you are dealing with an emergency, there are other options to consider. Online banks can give you a little more flexibility, and higher interest rates.

Online Savings Account

At Banktruth.org, we have current charts showing online savings rates. Why do we prefer the online savings account? It’s simple, higher interest rates, and more account features. Our top three banks continue to thrive, and they continue to give consumers the best interest rates for savings accounts. Online banks can give you so many other options like 24/7 access to your account, no or low account fees, and excellent customer service.

What hinders a lot of people from taking the leap to an online bank is security. Online viruses, hackers, and other threats can scare a lot of people away from taking the leap to an online bank. While data theft is real, the best thing you can do is work with a trusted bank with a great reputation. Ally Bank is one of our personal favorites. Not only do they have excellent savings rates, they have a great reputation for security. It’s also important to arm your computer with an excellent virus protection program that protects against Malware and Adware. Do yourself a favor and use a good account password that is different from other accounts. It’s also a wise decision to change this password every 3-6 months. Always work with an online bank that is backed by the FDIC. This can give you back up to $250,000 if there is a security problem, and your account is hacked and you lose money. The FDIC’s Bank Find Tool is a great way to verify if your bank is backed. Most banks will also list this information on their website.

Ally Bank doesn’t require a minimum deposit amount, neither do a lot of the online banks. The high-yield savings accounts normally require an initial deposit amount. The other great thing about the online bank accounts is how most of them do not have fees. Most online banks do not require a monthly requirement amount. One other area to look for bank fees is when you make ATM withdrawals. Check the bank to find the nearest ATM locations without fees. The online banks do not have physical branches, so your only option is to work with their ATM network.

To use all the features of an online bank, establish a monthly deposit with the bank. Using your checking account, you can schedule monthly deposits to the online bank. This is a great way to build your savings since it is held in a separate account from where you may typically do your banking. Several online banks will give you the ability to use mobile deposit. This is a great feature as it gives you the chance to deposit a check without mailing it in (since online banks do not have physical branches where you can deposit them with a bank teller).

As you may already know, the online banks hand out higher interest rates. This is a great option for customers as you can easily find interest rates that are six times higher from a basic savings account. Our favorite banks for higher interest rates include the following (from our recent savings rate chart):


If you have ever dealt with poor customer service with your bank, you may enjoy the switch to an online bank. Not only do many of the online banks have excellent customer service ratings, they usually have 24/7 customer service. The online banks always have someone available to help you with your questions. Many of the best banks online will offer several different loans and accounts to make it easier on customers to get exactly what they need. If you need a loan, you can easily fill out the paperwork online and often have a decision in minutes.

The Banktruth Preference

So what do we like about the online banks? Just about everything! Currently some of our team members have some online savings accounts with ING Direct and Ally Bank. Here are some of their favorite things:

  • Easy-to-use account access (and mobile access)
  • Easy transfer options (usually hits my bank in 3-5 business days)
  • Higher interest rates, and I can set up multiple savings accounts for different things like a rainy-day account and a vacation account.

Our take with online banks is if you like easy-to-use banking, and you are a fan of technology, give it a try. Most banks won’t charge you to cancel the account, so if you don’t like it and want to try another online bank, it won’t cost you a penny!

Written by Nicole