Lantern’s Best High Interest Savings Accounts

Q: Is savings account interest taxable?

Yes, the interest you earn on your traditional or high-yield savings account is considered taxable income. You will pay a savings account tax on any interest you accrue during the year. This interest is taxed at your earned income tax rate. If the Internal Revenue Service learns that you earned interest on a savings account that you didn’t report, you could get hit with fees.

Q: Can I have more than one savings account?

Certainly. In fact, some people recommend it to achieve different goals. One savings account could be for your three to six months’ worth emergency goal while another is earmarked for building up savings’ interest. Some people create different savings accounts for more specific purposes such as a home down payment, tuition, or a vacation. It’s important to remember that some bank accounts require you to keep a minimum balance to avoid fees. If you split your money among different accounts, you then risk dipping below those minimum thresholds and getting charged.

Q: Is it better to have a savings account with a bank or a credit union?

Both have advantages. A credit union might be able to offer better interest rates on savings accounts, while a bank has more branches and, more often, has mobile apps and online technology. Banks might also be more flexible in their criteria. If you’re eligible for membership, credit union savings accounts could be worth looking into.

Interest rates across savings accounts can vary quite a bit. Lantern by SoFi has helped find some of the top providers and what rates they currently offer. Compare today’s high-yield savings rates including fees and balance minimums.

This savings offering is provided by Engine by MoneyLion. See links above for Engine's privacy policy. Engine by MoneyLion will pay SoFi in the event you create an account.

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What Is a Savings Account?

A savings account is a bank account that allows you to store your money securely while it earns interest.It’s not the same as a checking account, which is the bank account that you can write checks from and make frequent withdrawals from. Checking is meant to be your go-to, daily transaction bank account to buy groceries, pay for gas, and so on. A savings account is not intended for daily life transactions. Instead, it’s a place to put the money you aren’t ready to use yet – and to hopefully see some growth while it’s stashed away. The savings account’s main goal is usually to keep your money in reserve for when you really need it. The widely held objective is to keep three to six months’ worth of living expenses in your savings account.Savings accounts are often insured. That coverage is automatic whenever a deposit account is opened at an FDIC-insured bank or financial institution up to $250,000. You will not lose your money if the bank fails because the government is essentially guaranteeing it. Check to make sure the bank or financial institution you’re considering has FDIC insurance. Not all online banks and financial institutions have it.

Online Savings Account vs Traditional Savings Account

One of the most significant differences between online savings accounts and traditional savings accounts is the amount of interest your account earns. The traditional banks’ savings account interest rates have been near zero for years. As of Oct. 17, 2022, the FDIC reported that the National Deposit Rate, or weighted average interest rate, for savings accounts is 0.21. Online savings accounts can often offer higher interest. When looking for the best savings account for you, you may notice that high-yield savings accounts offer the most appealing rates. (This is sometimes made possible because the lender is making certain investments to enable it to increase the interest amounts offered.) Traditional Savings Account

Pros	Cons
Can bank in person	Lower interest rates
FDIC insured	Higher monthly fees
Network of branches with ATMs	Opening an account may take a while
Can connect to checking

Online Savings Account

Pros	Cons
More competitive APYs	Can’t bank in person
Lower fees or no fees	Online support may rely on bots
Speed of opening account	Might not be FDIC insured
Flexibility of innovative apps

Do All Savings Accounts Earn Interest?

There are exceptional cases where some savings accounts do not earn any interest, but most do and you should take advantage of interest! The interest rates with traditional banks have been so low that the rate may look as if it is 0, but you are actually earning interest every day. The interest is typically paid to your savings account monthly.

How Often Do Savings Account Interest Rates Change?

Your interest rate can change at any time. The Annual Percentage Yields (APYs) on deposit accounts, including traditional savings accounts and high-yield savings accounts, are variable.The rates on high-yield savings accounts tend to fluctuate fairly often and can depend on current market conditions.

What Is Considered High Interest for a Savings Account?

As of October 2022, many high-yield savings accounts reached 2% APY and went as high as 3.00%. There are even higher interest rates to be found with some online banks and fintech companies. Above, you can compare some of the top savings accounts by interest rate, using real time data. You should strongly consider high-yield savings accounts as you can effectively earn more money on your money. It’s a great way to save and accumulate more wealth without any additional work. For example, assume you deposited $1,000 to a traditional savings account with 0.02% annual interest rate. Over a year, you’d earn a whopping $0.20! But, if you took that same $1,000 and deposited it to a high-yield savings account that provides 2% annual interest, you’d earn $20 instead. It’s not going to make you rich, but hey, it’s more free money. Deposit more and your earnings potential will be higher too.Still, keep in mind that interest rates may not be the only thing to consider when selecting a savings account. Annual fees may eat into your return. Some accounts may also limit interest rates to only up to a certain amount or have additional deposit requirements. Depending on your preferences, you may also want to consider banks with strong contact support or a robust mobile app experience.

Are Savings Account Annual Fees Worth It?

You might be so busy looking for the best savings account interest rates that you don’t focus on fees. Many traditional banks charge a fee of $5 a month on a savings account (or more), but you can have that waived if you maintain a certain minimum balance in the account. Monthly fees can also be waived if you link your savings and checking accounts or if you set up regular transfers from checking to savings. You can avoid the fee some banks impose for excessive withdrawals by keeping on top of that maximum.High-yield savings accounts with traditional banks often charge higher monthly fees, as much as $25, and it can be a little more challenging to have them waived.Interestingly, online banks often charge no fees or very low monthly fees on savings accounts because they don’t incur the same expenses as a brick-and-mortar institution. There could be charges for excessive transactions, however. Annual fees are not as much of a concern as monthly ones. Banks assess maintenance fees every 12 months. They charge inactivity or "dormancy" fees if a certain amount of time went by with no deposit or withdrawal activity.

What Are the Typical Requirements to Open a High Interest Savings Account?

Some high interest savings accounts require a minimum amount from new customers, such as $100. You could also be required to set up an immediate electronic transfer to open it rather than supply a check. You may have to maintain a minimum threshold for the account to stay open and not make more than five or six withdrawals a month.It generally takes about 10 minutes to open a high-yield savings account online.

Additional resources

Guide to High-Yield Savings Accounts

High-interest savings accounts offer higher yields than typical savings accounts, but those rates can fluctuate over time. Learn more about them.

Opening a Savings Account in 2023

If you're thinking about opening a savings account, our guide will teach you everything you need to open a savings account and what to expect.

Checking vs Savings Account Differences

Checking and savings accounts share a lot in common and are often opened together, but there are some critical differences between them. Learn more.

FAQ

Is savings account interest taxable?

Can I have more than one savings account?

Is it better to have a savings account with a bank or a credit union?