3 Easy Steps to Finding the Best Savings Account Rates!

I’ve been rocking online savings accounts since 2009 when a typical interest rate was around 3.0% APY.  Even earlier than that, online savings account rates were as high as 6% APY!  (Crazy, huh?)  It can be so hard to tell who has the best interest rate and if you can trust them with your money, so I thought I’d write this post on a website I’ve been using for years to help me stay on top of it: www.bankrate.com.  Bankrate.com was first recommended to me by my college personal finance professor and it hasn’t let me down yet!

Who is Bankrate.com?

Bankrate.com is a consumer financial services website that offers calculators and tools for managing your finances.  They also operate several personal finance blogs on the website to help keep you up-to-date with money news and tips.  Since I don’t have a mortgage or any loans that need refinancing, I really only use the website to make sure I’m getting the highest online savings account interest rates.  However, I’m really happy with the content they provide so I’m sure they would be pretty helpful for your other personal finance needs.

Why should I care about finding the best interest rate?

If you’re already saving in a high-interest savings account, good for you!  You know that banks are competing with each other to hold onto your savings, and they’re willing to pay you more than other banks just to have your business!  It’s money you aren’t planning to spend at the moment, so you’re making it work for you until you need it.  Very smart!

If you’re not saving in a high interest savings account, chances are you think you (a) don’t have enough money for a savings account or (b) it would be too much of a hassle to open a new account somewhere else.  If you’re in the former group, the first and biggest step in growing your wealth is practicing the mantra “Pay Yourself First”.  You are responsible for yourself, and if you don’t look out for your future, who will?  Even as little as $10/month is a good start, and there are a lot of banks offering signup bonuses of $25+ with very little or even no minimum balance requirement.  (Keep your eye out for offers from ING Direct and Discover for promotions like I just mentioned.)  If you’re in the “signing up for new accounts is annoying” crowd, wouldn’t you say it’s annoying that everyone else is earning a lot of interest on their savings accounts except you?  In my honest opinion, savings account interest is the easiest way I earn extra money every year… free money is nicer than no free money, don’t ya think?

Finding the best savings account rates:

Bankrate.com aggregates interest rates from several financial institutions into one place, tells you what rating they give the bank, and then lets you sort through the information on your own.  You can search in three easy steps:

1.  On the Bankrate.com homepage, click the “Checking and Savings” tab on the header.

2.  In the center of the page, find the “MMA/Savings rate” search box and click Search.  There is no need to to change the options in question 1 or 2 unless you’re specifically searching for a local brick-and-mortar institution or you want to only look at jumbo sized MMA accounts where the minimum balances are typically higher.

3. To sort the banks by APY (Annuity Per Year), click the APY option on the ‘Sort by:’ drop down menu.  This will list the banks with the best interest rates on top so that it’s faster for you to search through.

Evaluating interest rates:

Here is the trickiest part so please pay attention!  You now have a list of banks with the highest interest rates available.  You can also see what their minimum balance and monthly fees are… but even more important than that are the number of stars that are listed under the bank name.  The ratings range from 1 to 5 stars and are indicative of the relative financial strength of the institution.  While the rating may vary from week to week, you can generally trust banks with 3 stars or more.

I remember searching and debating all the banks on Bankrate.com before I opened my first online savings account.  One of my roommates at the time told me she had used the website and opened an account with the bank at the very top of the list because it had the best interest rate (3.10 % at E*Trade I think).  She didn’t pay attention to the fact that the bank only had a two star rating, and within two weeks, the bank’s rating plummeted to 1 star and her interest rate was at 1.0%.  How annoying, right?  I had gone with a bank (www.FNBOdirect.com), that had a better star rating and a similarly high interest rate (2.80%) and it stayed extremely steady and competitive in its rates for more than the a year and a half before I finally decided to change banks.  What you have to watch out for are banks that are struggling financially or have a small business base.  You’ll identify them by their star ratings, and frequently they’ll offer the highest interest rates possible for a brief amount of time to try and attract as many new customers as possible.  However, it isn’t sustainable for them to offer high rates for too long, so the rates will get slashed after a while to something they can manage.  Obviously, this ends up hurting you because you’re not only stuck with a low interest rate, but you are always wondering about the financial stability of the bank that does this!  The ratings are there for YOUR benefit, so don’t forget to use them when you are using this website’s search tools.

Why are you recommending this website?

This post is 100% a factor of personal opinion and was not solicited by bankrate.com or any other interested party.  I am getting no money from the content of this post… I just wanted to share a helpful bit of advice!  Now that I have an Emergency Fund saved up, I evaluate my savings account interest rate every few months to make sure I’m still getting a competitive rate.  Thankfully, my Discover bank savings is still a top performer (yay!), but I’ll move onto the next bank if it ever drops to the middle of the pack.

If you’re curious about what bank interest rates were historically, I used to follow a spreadsheet on Sun’s Financial Diary that used to update each bank’s interest rate once a month for consumer comparison.  The owner is no longer updating the sheet, but it may be a helpful or interesting reference for some of you who want to know what interest rates looked like between 2007 and 2011.  I don’t know of any website or blog that is currently tracking this info.  (Sorry about that.)  Please let me know if you do.  Happy browsing!