These 3 banks now offer 5% on checking and savings accounts

The difference between a savings account at a traditional bank and the rates available at an online bank is significant.

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It has been more than a decade since savings rates have been this high. And at least three banks or credit unions are now touting high-yield savings and checking accounts with a 5% annual percentage yield, or APY — though in some cases you may be better off with a slightly lower rate. (many banks pay upwards of 4%) with fewer hurdles to jump through.

“As market volatility continues and inflation remains stubbornly high, higher yields on deposit accounts offer a potential measure of protection against financial instability,” says Ryan Burke, managing director of Invest at M1. (Note that check and savings deposits up to $250,000 at banks are generally insured by the FDIC (see details here) and at credit unions by the NCUA (see details here)).

Money professionals say finding the right account can mean the difference of hundreds or even thousands of dollars left on the table each year. And compared to the national average, the rate of return on some bank accounts can be significant: The national average savings account has an APY of 0.35%, according to government data. For a return of more than 14 times that amount, take a look at these three banks and credit unions, all of which are FDIC (for banks) or NCUA (credit unions) insured; details on these account limits are here.

  • Consumers Credit Union, Free Rewards Verification: 5.00% APY

    • Balances up to $10,000 qualify for one of the highest rates available in the high-yield savings market today with this high-yield checking account from Consumers Credit Union. What sets it apart from most high-yield savings accounts is its access to 30,000 ATMs and 5,000 shared branches across the country. Write unlimited checks and take advantage of online features.

  • Varo savings account: 5.00% APY

    • Make the required electronic deposits of $1,000 for your paycheck, pension, or government benefits with your employer or government agency, end the month with a positive balance in a Varo bank account and a savings account, and you are eligible. But be sure to read the details: balances that don’t meet the requirements and those over $5,000 only earn 3% APY. This bank is F

  • Centier Bank, Connect Savings: 5.00% APY

    • Link your current account and your savings account to benefit from this savings rate. Just make sure you make the minimum deposits and follow the fine print steps.

Key Considerations

How are some banks able to offer an APY that has not been seen since the 1990s? Melissa Weisz, wealth advisor and associate partner at RegentAtlantic Wealth, says it’s really the only tool some banks have in their arsenal to attract new customers to their various product lines.

“Online thrifts attract business by offering higher rates,” says Weisz, adding that deposits at banks like Ally, which currently offers 3.40% APY, are the primary gateway to its ” consumer digital capabilities”. Although traditional banks don’t offer the rates available at online savings banks, “they can offer a greater variety of services and in-person relationships at local branches,” she says.

“If the economy slips into a recession this year, we expect the Fed to cut rates and stimulate economic activity.”

Certainly, the difference between a savings account in a traditional bank and the rates available in an online bank is significant. If you were to maintain the $10,000 maximum balance required for the 5% APY in a Consumers Credit Union free rewards checking account, at the end of the first year, you would earn $500. While that may seem nominal, compare that with the average APY of 1.36% and that’s only $68. For the minimum of $5,000 with a Varo savings account, the annual earnings with an APY rate of 5% amount to $250.

Because banks typically don’t have many other ways to attract customers, other than bonuses and stability, MaxMyInterest CEO Gary Zimmerman says focusing your screening process for a new bank account saving on the interest rate offered is a good strategy. That is, of course, “as long as a bank is insured by the Federal Deposit Insurance Corporation,” he says. By verifying that the bank you use is FDIC-backed, your savings are also insured for the first $250,000.

Another key consideration, Zimmerman says, is liquidity. “Many banks offering high interest rates limit the amount of money you can deposit or withdraw,” he explains, adding that the high rates promoted by many banks “only apply to the first thousands of dollars in deposit, or you must set up direct deposit or make a certain number of debit card purchases each month.

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