The main choice is between a brick-and-mortar bank, a credit union, or an online bank—each has different fees, interest rates, and access methods
Where you open a savings account depends on what matters most to you: whether you want to walk into a physical branch, how much interest the account pays, what fees you'll face, and whether you already have a relationship with a bank. A traditional bank like Chase or Bank of America has branches everywhere but often charges monthly maintenance fees and pays almost no interest. A credit union typically charges lower fees and pays slightly higher interest, but you can only join if you meet membership requirements. An online bank like Marcus or Ally has no branches but pays the highest interest rates and charges the fewest fees because they have no physical locations to maintain.
The account itself works the same way regardless of where you open it: you deposit money, it sits there earning interest (usually a small amount), and you can withdraw it whenever you need it. The differences are in how much that interest is, what it costs to maintain the account, and how you access your money.
Key Takeaways
- Online banks typically offer the highest interest rates and lowest fees because they don't operate physical branches.
- Credit unions often charge lower fees than traditional banks and may pay higher interest, but membership requirements vary by location and employer.
- Traditional banks have branches for in-person service but usually charge monthly maintenance fees and pay minimal interest.
- Compare the interest rate, monthly fees, minimum balance requirements, and how you'll access your money before deciding where to open an account.
- Your choice doesn't have to be permanent—you can open accounts at multiple institutions or move your money later if rates or fees change.
Online banks: highest interest, lowest fees, no branches
Online banks operate only through websites and mobile apps, which means they don't pay for building leases, tellers, or branch staff. They pass those savings to you through higher interest rates and lower fees. Marcus (owned by Goldman Sachs), Ally, American Express Personal Savings, and Discover Bank are among the largest. Most online banks charge no monthly maintenance fee, have no minimum balance requirement, and currently pay between 4% and 5% annual interest on savings accounts—roughly 100 times what a traditional bank pays.
The tradeoff is that you cannot walk into a location to deposit cash or speak to someone in person. You deposit money by transferring it from another bank account or by mailing a check. If you need cash, you withdraw it to your linked checking account and then go to an ATM. Some online banks partner with ATM networks so you can withdraw at thousands of locations without a fee; others charge you if you use an ATM outside their network.
Online banks work best if you already have a checking account elsewhere, you don't need to deposit cash regularly, and you want the highest interest rate. They're also a good choice if you want to keep your savings separate from your everyday spending account—the slight inconvenience of transferring money can actually help you avoid dipping into savings.
Credit unions: lower fees, membership requirements, local focus
A credit union is a nonprofit financial institution owned by its members. You have to meet specific requirements to join—usually you work for a particular employer, live in a certain area, belong to a specific organization, or have a family member who is already a member. Once you're in, credit unions typically charge lower fees than traditional banks and pay slightly higher interest rates than banks (though usually less than online banks).
Credit unions range from small local institutions with one or two branches to large networks like Navy Federal (for military members and their families) or Connexus (which serves people across multiple states). Some credit unions participate in shared branching networks, meaning you can conduct business at other credit unions' branches even if you don't belong to that specific union. Many also participate in surcharge-free ATM networks.
To find a credit union you can join, start with CO-OP (co-opsharedbranch.org) or Alliant Credit Union's locator tool. Search by your employer, your location, or your membership in organizations like a union, professional association, or alumni group. If you may have access to for multiple credit unions, compare their interest rates and fees the same way you would with any bank.
Traditional banks: branches everywhere, higher fees, minimal interest
Banks like Chase, Bank of America, Wells Fargo, and Citibank have physical branches in most cities and towns. You can walk in to deposit cash, speak to a banker, and handle problems face-to-face. They offer savings accounts, checking accounts, loans, and other services all in one place, which can be convenient if you want everything with one institution.
The cost of maintaining all those branches shows up in your account. Most traditional banks charge a monthly maintenance fee (typically $5 to $15) unless you meet conditions like keeping a minimum balance or setting up direct deposit. They also pay almost no interest—many savings accounts earn 0.01% annually, which means $100 in the account earns about one penny per year. Some banks waive the monthly fee if you maintain a high balance (often $1,500 to $10,000), which defeats the purpose if you're trying to save small amounts.
Traditional banks make sense if you need regular in-person service, you want to deposit cash frequently, or you already have a checking account there and want to keep everything simple. They're less useful if your main goal is to earn interest on your savings or minimize fees.
Comparing interest rates, fees, and access across account types
| Account Type | Typical Interest Rate | Monthly Fee | Minimum Balance | In-Person Access |
|---|---|---|---|---|
| Online Bank | 4.00%–5.00% | $0 | $0–$25 | No |
| Credit Union | 0.50%–2.00% | $0–$5 | $0–$100 | Yes (if member) |
| Traditional Bank | 0.01%–0.05% | $5–$15 | $500–$10,000 | Yes |
Interest rates change constantly, so the numbers in this table are current examples, not guarantees. Check the actual rates at the institutions you're considering before opening an account. The difference between 4.5% and 5% might seem small, but on $10,000 it's $50 per year versus $500 per year.
Fees matter too. If a traditional bank charges $10 per month and pays 0.01% interest, you're losing money every month. An online bank with no fee and 4.5% interest turns that around completely. Even a credit union charging a $5 annual fee and paying 1% interest beats a traditional bank on both counts.
How to decide: questions to ask before opening
Start by asking yourself whether you need in-person service. If you deposit cash regularly or want to speak to someone face-to-face, a traditional bank or credit union is necessary. If you can transfer money electronically and handle everything online, an online bank will save you money and earn you more interest.
Next, check whether you may have access to for a credit union. If you do, compare its rates and fees to online banks and traditional banks. Credit unions often split the difference—better than traditional banks but not quite as good as online banks, though the difference is shrinking.
Then look at the actual numbers: the interest rate, the monthly fee, and any minimum balance requirement. Use an online calculator to see how much interest you'll earn in a year on the amount you plan to save. Subtract the annual fees. The account that leaves you with the most money at the end of the year is the right choice for you.
Finally, consider whether you want to keep your savings separate from your checking account. If you tend to spend money that's easily accessible, opening savings at a different bank (especially an online bank) creates a small barrier that can help you save more.
Opening an account and moving money between banks
Opening an account takes 10 to 20 minutes online or in person. You'll need your Social Security number, a government-issued ID, and your address. Most banks verify your identity immediately. Some may ask for additional information if they can't verify you right away.
Once your account is open, you can deposit money by transferring it from another bank account (usually takes one to three business days), depositing a check through a mobile app (takes three to five business days), or mailing a check (takes five to seven business days). Online banks don't accept cash deposits directly, so if you have cash, you'll need to deposit it into a checking account first and then transfer it to your savings account.
If you already have savings at another bank and want to move them, you can transfer the money yourself by linking the accounts, or you can ask the new bank to help you transfer it. There's no penalty for moving money between your own accounts at different banks.
Frequently Asked Questions
Can I have savings accounts at more than one bank?
Yes. Many people keep a savings account at an online bank for the high interest rate and another at a local bank or credit union for easy access to cash. There's no rule against having multiple savings accounts, and it can actually help you organize your money—one account for an emergency fund, another for a specific goal.
What if I need to withdraw cash from my online bank savings account?
You transfer the money to your checking account (usually takes one business day) and then withdraw it from an ATM. Some online banks partner with ATM networks so you can withdraw without a fee; others charge a fee if you use an ATM outside their network. Check the bank's ATM policy before opening an account if you withdraw cash frequently.
Is my money safe in an online bank?
Yes. Online banks are insured by the Federal Deposit Insurance Corporation (FDIC) the same way traditional banks are. Your deposits are protected up to $250,000 per account. The lack of a physical building doesn't make an online bank less safe—it just means you can't walk in to see it.
Do I need a minimum balance to open a savings account?
Most online banks and credit unions have no minimum balance or a very low one ($0 to $25). Traditional banks often require $500 to $1,000 to open an account and may charge a fee if your balance drops below that. Check the specific bank's requirements before opening.
Can I switch banks later if I change my mind?
Yes. You can close a savings account at any time and move your money to another bank. There's no penalty for switching, and you keep all the interest you've earned. If you want to keep the account open but stop using it, you can do that too—just make sure it doesn't have a monthly fee.