What’s Your Annual Percentage Yield (APY)?

MONEY TALKS - Did you know the average annual percentage yield (APY) for savings accounts nationwide is just 0.09%? Despite the recent rate increases by the Fed, many brick-and-mortar banks have been reluctant to reward their customers with higher earning savings accounts. Bank of America, whose consumer banking business serves one in two U.S. households, offers a dismal 0.03% on their Rewards Savings Account. Thankfully, there’s been increased pressure for traditional banks to compete in the “high-yield savings account” arena. In fact, many of these banks are creating separate online divisions without physical locations or hefty staffing requirements to reduce overhead so they can offer their customers higher interest rates. As a result, it’s now possible to get a return of 20 to 25 times the national rate. Before you lose out on any more free money, here are a few banks worth checking out.   

VIO Bank - VIO Bank is the online division of MidFirst Bank, one of the five largest privately owned financial institutions in the United States. Their High Yield Online Savings Account offers a competitive 2.11% APY on all balances. There is no monthly fee; however, they do require a $100 minimum deposit to open an account. The savings account allows for 6 free withdrawals per monthly statement cycle, but withdrawals are limited to $5,000 per day or $25,000 per month.

Northfield Bank - Northfield Bank, founded in 1887, is primarily a brick-and-mortar bank headquartered in Woodbridge, NJ. However, their Platinum Savings Account offers an industry leading 2.25% APY on balances below $100,000. For balances that exceed $100,000 the APY drops to 0.90%. There is an $8 monthly service charge for accounts with an average daily balance below $2,500.

CIT Bank - CIT Bank has more than $50 billion in assets and provides financing, leasing, and advisory services to middle-market companies and small businesses. Their Savings Builder Account offers a 2.15% APY but there are some prerequisites in order to qualify for this rate. In order to open an account there is a $100 minimum initial deposit. Account holders must then make subsequent deposits of at least $100 per month or maintain an account balance of at least $25,000. There are no opening, monthly servicing, online transfer or incoming wire fees.

Salem Five Direct - Salem Five Bank, primarily known for their brick-and-mortar locations in northern Massachusetts, has entered the online space with their Salem Five Direct division. Their eOne Savings account offers a 2.05% APY on balances up to $1,000,000. There is a $100 minimum deposit to open an account; however, there are no minimum balances or monthly fees.

Digital Federal Credit Union (DCU) - As the name implies, DCU is not a traditional bank but rather a credit union, so not everyone is eligible to join. However, you can bypass membership requirements by joining a sponsorship organization such as Reach Out for Schools for as little as $10. Once a member, those enrolled in a Primary Savings account can enjoy an unprecedented 5.12% APY on balances up to $1,000. There is a $5 minimum balance requirement; however, there are no monthly maintenance fees. For balances that exceed $1,000, the APY drops to 0.25%.

When evaluating which bank is best suited for your needs it’s important to look beyond the annual percentage yield. First and foremost, the bank deposits should be insured up to $250,000 per owner by the Federal Deposit Insurance Corporation (FDIC), or the National Credit Union Administration (NCUA) for assets held at credit unions. Next you should look at the monthly service charges. It’s not uncommon for banks to charge a monthly service fee if you don’t maintain a minimum balance. These fees eat into your investment returns and often negate higher interest rates. Also be sure to look into any transactional costs or restrictions when making deposits or withdrawals. Some banks charge transactional fees and may limit the amount you can deposit or withdraw. Lastly, you should look into the APY as it relates to your projected balance. Depending on your account balance it may make sense to choose one bank over another or even use multiple banks to get the most bang for your buck!