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If you’re still earning next to nothing in your savings account or unaware that interest-bearing checking accounts exist, it’s probably time to consider switching banks.
Money magazine and Bankrate.com’s latest analysis of various type of banks offers a starting place for your research.
The publications evaluated 75 brick-and-mortar banks, 50 credit unions and 15 online banks in search of what Bankrate describes as “the ideal combination of accounts — a free checking account (or one as cheap as possible) and a savings account that pays a high interest rate (or at least keeps the monthly fees at bay).”
The winners in the main categories are:
- Best online bank: Bank of Internet USA
- Best credit union: Alliant Credit Union
- Best big bank: Capital One
- Best regional bank: Banner Bank (which has locations in California, Idaho, Oregon and Washington)
Using banks that offer competitive interest rates is especially important as the Federal Reserve continues to hike its federal funds rate. Customers of such banks stand to see their interest rates inch higher with future Fed rate hikes.
Why these banks are best
Bank of Internet USA’s Rewards Checking account stood out for its annual percentage yield, or APY, of as much as 1.25 percent. That’s compared with a current national average of only 0.04 percent APY on interest checking accounts.
To get that rate, however, you must receive direct deposits totaling more than $1,000 each month and make at least 15 debit card transactions totaling at least $3 each month. This caveat illustrates the importance of comparing bank account terms in addition to rates.
One noteworthy term Bank of Internet USA offers is a refund of all domestic ATM surcharges. Bankrate describes the institution, founded in 1999, as a pioneer in online banking that has long been regarded as a deposit rate leader.
However, the honor of having one of the highest interest rates for a savings account goes to another online bank. Ally Bank’s Online Savings account pays 1.2 percent APY — which compares with a current national average of 0.06 percent.
Money magazine also named the best bank in each state. Two banks stood out, with each named No. 1 in four different states:
- Washington Federal — named the best bank in Arizona, Idaho, Nevada and New Mexico
- First National Bank of Omaha — named the best bank in Colorado, Kansas, Nebraska and South Dakota
For more help comparing bank accounts, check out Money Talks News’ bank account search tool. It allows you to search for savings and money market accounts, certificates of deposits (CDs) and checking accounts. Just check the boxes for the account types that interest you.