The main places to open a savings account
You can open a savings account at a traditional bank, a credit union, or an online bank. Each type holds your money differently, charges different fees, and pays different interest rates. The choice depends on whether you value in-person service, lower fees, higher interest, or some combination of those three.
A traditional bank is a brick-and-mortar institution with physical branches where you can deposit cash, speak to a person, and withdraw money at a teller window. A credit union is a member-owned cooperative that typically offers lower fees and better interest rates than banks, but you must meet membership requirements and have access to fewer branches. An online bank exists only on the internet—no branches, no tellers—but usually offers the highest interest rates and lowest fees because it has no physical locations to maintain.
Key Takeaways
- Traditional banks offer in-person service and cash deposits but typically charge monthly fees and pay lower interest rates than online banks.
- Credit unions often have lower fees and better rates than traditional banks, but you must meet membership requirements and may have fewer ATMs and branches.
- Online banks pay the highest interest rates and charge the lowest fees, but you cannot deposit cash in person or speak to someone face-to-face.
- The account you choose should match how you actually use money—whether you need to deposit cash regularly, prefer talking to a person, or want the highest possible interest.
- You will need a government-issued ID, proof of address, and your Social Security number to open an account at any institution.
Traditional banks and what they cost
A traditional bank is useful if you deposit cash regularly, need to withdraw cash without planning ahead, or prefer handling money with a person. 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. Some waive the fee entirely if you maintain $500 to $1,500 in the account at all times.
Interest rates at traditional banks are usually low. As of early 2024, many pay 0.01% to 0.05% annual interest on savings accounts, meaning $1,000 in the account earns less than $1 per year. The trade-off is convenience: you can walk in, deposit a check or cash, and leave with a receipt in your hand. If you need to dispute a transaction or have questions, you can sit down with someone at a desk.
Large national banks like Chase, Bank of America, and Wells Fargo have thousands of branches and ATMs across the country. Smaller regional banks may have fewer locations but sometimes offer better rates or lower fees. The FDIC insures deposits up to $250,000 at any bank that displays the FDIC logo, so your money is protected if the bank fails.
Credit unions: membership requirements and benefits
A credit union is owned by its members, not by shareholders, so profits go back to members through lower fees and better interest rates. Credit unions typically charge no monthly maintenance fee and pay 0.05% to 0.25% interest on savings accounts—higher than most traditional banks. However, you must meet membership requirements to open an account.
Membership requirements vary by credit union. Some are open to anyone who lives or works in a specific county or city. Others require you to work for a particular employer, belong to a union, attend a certain school, or be related to an existing member. A few credit unions are open to anyone in the United States. You can search for credit unions you may join at CO-OP, a network that lets you use any credit union's ATM for free, or at Alliant Credit Union, which is open to anyone.
The downside is fewer branches and ATMs than large banks. If you live in a rural area or travel frequently, you may find it harder to access your money in person. Credit union deposits are insured by the NCUA (National Credit Union Administration) up to $250,000, the same protection as FDIC insurance.
Online banks and the highest interest rates
An online bank has no physical branches. You open an account on a website or app, deposit money by transferring it from another bank account or mailing a check, and withdraw by transferring to another account or requesting a check. You cannot walk in and deposit cash or speak to a teller in person.
The payoff is interest rates and fees. Online banks pay 4% to 5% annual interest on savings accounts as of early 2024—roughly 100 times higher than traditional banks. They charge no monthly maintenance fee. Because they have no buildings, employees, or ATM networks to maintain, they pass those savings to customers. Popular online banks include Ally, Marcus by Goldman Sachs, American Express Personal Savings, and Discover Bank.
The catch is that you cannot deposit cash directly. If you receive cash and want to save it, you must go to another bank, deposit it there, and transfer the money to your online account. You also cannot speak to a person by phone at most online banks—you communicate through email, chat, or a help center. If you need when ready help with a problem, this can be frustrating. All online banks that are FDIC-insured display that information clearly on their website.
How to choose based on how you actually use money
Start by asking yourself three questions: Do I deposit cash regularly? Do I need to speak to a person? Do I want the highest possible interest?
If you deposit cash regularly—from a job that pays in cash, tips, or selling items—a traditional bank or credit union is necessary because online banks cannot accept cash deposits. If you rarely or never deposit cash, an online bank becomes an option.
If you like having a person to talk to when something goes wrong, or if you are uncomfortable managing money entirely online, a traditional bank or credit union with a branch near you is worth the lower interest rate. If you are comfortable with email and chat support and rarely need when ready help, an online bank works fine.
If your main goal is to earn as much interest as possible on money you are saving and not touching, an online bank is the clear choice. If you need the account for everyday spending and occasional withdrawals, the interest rate matters less than convenience and fees.
What you need to bring or have ready
All three types of institutions require the same basic information to open an account: a government-issued photo ID (driver's license, passport, or state ID), proof of your current address (a utility bill, lease, or bank statement from the past 30 days), and your Social Security number.
For a traditional bank or credit union, you can bring these documents in person or upload photos of them online. Some banks now let you open an account entirely online by taking a photo of your ID with your phone. For an online bank, you upload documents through the website or app. The process usually takes 5 to 10 minutes, and the account opens the same day or within one business day.
You do not need to bring an initial deposit to open most savings accounts, though some banks offer a small bonus (usually $25 to $200) if you deposit a certain amount within a set time frame. Read the terms carefully—these bonuses often require you to maintain a minimum balance or set up direct deposit.
Comparing fees and interest across institutions
Before opening an account, compare three numbers: the monthly maintenance fee, the annual interest rate, and any other fees (overdraft, ATM out-of-network, wire transfer). A high interest rate does not matter if you pay $10 per month in fees.
| Account Type | Typical Monthly Fee | Typical Interest Rate | Best For |
|---|---|---|---|
| Traditional Bank | $5–$15 (waived with conditions) | 0.01%–0.05% | Regular cash deposits, in-person service |
| Credit Union | Usually $0 | 0.05%–0.25% | Lower fees, better rates, membership available |
| Online Bank | $0 | 4%–5% | Highest interest, no cash deposits needed |
Many banks publish their rates and fees on their website. You can also call or visit in person to ask. Do not rely on promotional rates—these are temporary and revert to a lower rate after a set period, usually three to six months. Ask what the regular rate is after any promotion ends.
Frequently Asked Questions
Can I open a savings account online if I do not have a physical address?
Most banks require proof of a current address. If you are homeless or living temporarily, some credit unions and online banks may accept a P.O. box, a shelter address, or a letter from a social service agency confirming your situation. Call ahead to ask what they accept before you try to open an account.
What happens if I need to close my account after opening it?
You can close a savings account at any time by visiting a branch (for traditional banks and credit unions) or requesting closure online (for online banks). Withdraw or transfer any remaining balance first. Some banks charge a fee if you close an account within a certain period, typically 90 days to one year—check the terms before opening.
Is my money safe at an online bank if the company goes out of business?
Yes, if the online bank is FDIC-insured. The FDIC protects your deposits up to $250,000 even if the bank fails. Check the bank's website for the FDIC logo or call the FDIC at 877-275-3342 to confirm coverage. Online banks are required by law to carry this insurance.
Can I have savings accounts at more than one bank?
Yes. You can open accounts at multiple banks, credit unions, and online banks. Each account is insured separately up to $250,000, so if you have $250,000 at Bank A and $250,000 at Bank B, both are fully protected. Some people keep one account for everyday spending and another for long-term savings at a higher-rate institution.
Do I need a minimum deposit to open a savings account?
Most banks do not require a minimum deposit to open an account. Some offer bonuses if you deposit a certain amount within 30 days, but the bonus is optional. You can open an account with $0 and deposit money later, though some banks may close accounts that stay empty for a long time.