If you’re here to learn more about savings accounts, we’ve got some great news for you. Thanks to a handful of high-yield savings account options, you no longer have to settle for next-to-nothing annual percentage yield (APY) earnings — and you don’t need a bunch of cash to put down, either.
Whether you’re new to the world of saving money or not, opening a high-yield savings account can be a smart move. And having one with no minimum can be a major advantage. Not only could it come through for you when you need an emergency fund, but it can earn you about 20X as much as traditional savings accounts while still allowing you to start small.
What is a high-yield savings account?
To be considered “high yield,” a savings account has to earn more than what most traditional banks offer. While most conventional savings accounts earn less than 0.10% APY, a high-yield savings account can earn somewhere in the 2.00% APY range. Said another way, a high-yield savings account can earn you about 20X more in interest than a conventional savings account.
Consider this example: If you were to deposit $10,000 into a traditional savings account with a 0.10% APY, you’d get a $10 return after a year in an account that compounds daily. However, by depositing $10,000 into a high-yield savings account with a 2.00% APY, you’d earn $202.01 in that same time frame. And that’s without making any other deposits for the year.
Another benefit to these kinds of savings accounts is that they often don’t charge monthly maintenance fees or other fees that most conventional savings accounts do. This is particularly possible with online-only banks, which have lower overhead costs compared to brick-and-mortar banks.
What does it mean to have a required minimum balance?
Simply put, minimum balances are the amount of money you need to keep in your account for it to remain open or earn any interest. This is important because some banks require that your average daily balance meet a minimum while others don’t.
Banks calculate your average monthly balance by adding the end-of-the-day balances from each day of the month and dividing that sum by the number of days in that month. So for July, a bank would add 31 daily-balance numbers together and then divide that by 31 for your average.
If you choose to open a savings account with a minimum-balance requirement, be sure to always maintain that amount or else you’ll likely be charged a monthly maintenance fee, which goes into effect when you average even one cent less than the minimum balance. On the other hand, if you choose a savings account with no minimum balance, you don’t have to worry about penalty fees for going below a certain amount.
Why you shouldn’t settle for a minimum balance
The problem with savings accounts requiring a minimum balance is that it can be unrealistic for most people. For the account owner, having to abide by a minimum balance can be a hindrance, since this often means you can’t utilize all your money if the need arises — or you’re stopped from opening a savings account to begin with.
On the other hand, when you open a savings account with no minimum balance, you have far more freedom to use your money as you please. Because you won’t need a bunch of cash to get each account started, you can even open multiple savings accounts for any kind of goal imaginable (e.g., a house, college education, car, or wedding).
To make the most of your return on investment (ROI), search for a high-yield savings account with no minimum balance. This is the ideal situation if you end up needing to take out your savings for a dire situation — such as medical bills — or for an investment opportunity with higher returns.
The best high-yield savings accounts that don’t require a minimum balance
Here are our recommendations for the best high-yield savings accounts with no minimum balance, including some pros and cons for each:
Barclays Online Savings Account
Barclays, one of the oldest banks around, is a prominent U.K.-based bank. One of the reasons it’s so popular is that you can earn 2.20% APY (as of July 2019) when you open a Barclays Online Savings Account. Just like other accounts on this list, there are no monthly maintenance fees and no minimum balance to open the account.
The downside to getting this account is that you likely won’t be able to do any cash deposits or withdrawals since Barclays doesn’t have an ATM network and there are only five U.S. branch locations.
Marcus by Goldman Sachs Online Savings Account
The Marcus by Goldman Sachs Online Savings Account has a 2.15% APY (as of July 2019), no minimum balance or deposit, and no monthly service fees. On the downside, Marcus doesn’t have many branches or in-network, fee-free ATMs. There’s also no mobile app.
Ally Online Savings Account
The Ally Online Savings Account offers 2.10% APY (as of July 2019), and you don’t have to pay any monthly maintenance fees or maintain a minimum balance. Although it’s online-only, Ally Bank provides customers access to over 43,000 ATMs through the Allpoint network. However, there are no physical bank branches where you can deposit cash.
Other things to be aware of are its $25 overdraft item fee, $10 excessive transaction fee, $7.50 returned deposit fee, $20 outgoing domestic wire fee, and a few other fees that may or may not apply to your situation.
Discover Online Savings Account
The Discover Online Savings Account offers a lot of benefits, like a 2.10% APY (as of July 2019) and, of course, no minimum balance or monthly fees. In fact, in June of 2019, Discover announced it was removing all fees on checking, money market, and savings accounts, including the $30 insufficient funds fee. Discover also gives you access to your FICO credit score for free. The main downside to this account is that Discover only has one physical branch in Delaware, and its APY is less than both Barclays and Marcus.
What to remember when comparing high-yield savings accounts
As robust as the above high-yield savings accounts are, it’s important to compare your options before choosing one. Also consider the following:
- Minimum opening deposit: This is the least amount of money required to open an account at a financial institution.
- Fees: Be sure to research what kind of fees each savings account might have.
- APY: The annual percentage yield is the annual return on your balance, which includes the effect of compounding.
- ATM card: It can be helpful to have an ATM card so you can easily make deposits or withdrawals. Another thing to keep in mind is ATM fees; if you use an ATM outside the financial institution’s network, you could be charged fees.
- Inactivity Fees: Although it may seem counterintuitive, some places charge for inactivity in your savings account. A typical fee can be $10.
- Online portal or app: If the bank has a website or a mobile app, it can help you manage your account easily.
Every bank offers something different, so don’t just settle for the first one you find, no matter how good it sounds.
Overall, the most important thing is to get started. Don’t let the idea of a savings account requiring a high minimum balance slow you down or prevent you from taking steps toward your financial goals. Opening a savings account with no minimum balance is a simple way to get started on your financial journey.