Top 4 Savings Account Alternatives in 2021
If you’ve been poking around financial news recently you may have heard a bit about the fintech uprising happening online today. Banks aren’t the only players in the financial game anymore and savings accounts may not be the best place for your money. If you want safety and interest on your money, these are the best savings account alternatives for you today.
If your bank offers less than 2% annual interest on your savings account, you’re not saving. You’re losing money to inflation.
Unfortunately, shopping around for savings accounts with different banks won’t help you much. Savings account interest rates are continuing to fall across the US. The old ways of safely saving money no longer save you money.
But fortunately, the number of online savings account alternatives continues to grow, providing you the opportunity to beat inflation and grow your savings over time.
These are the best savings account alternatives available for investors right now.
Savings account alternatives to try today
Peer-to-Peer (P2P) lending pool accounts
Peer-to-peer lending, or P2P lending, is a new and exciting way to invest money and gain interest over time with reasonable security.
The concept of P2P lending is simple. It’s essentially the model banks use to give you interest on your savings minus the banks and with more interest.
Instead of a bank taking your money in savings and lending it out, you lend your money directly to borrowers in return for interest when they pay back. You get a much higher cut of the interest than the banks give you because P2P platforms don’t have the same operating costs.
When you invest in P2P lending, you’ are in control of the rates and terms of the loan. Many platforms offer varying risk and interest levels from loans that you get to choose from.
Once an agreement has been made, you will be paid back with interest over the agreed period. The process is quick and easy and provides a great low-effort source of passive income.
Key benefits of P2P lending
By cutting out banks as the middleman, P2P lending offers investors the following key benefits:
- Higher interest rates typically ranging from around 7% up to 35.99%.
- High transparency.
- Multiple avenues for diversifying your portfolio.
When you invest with a P2P platform like MyConstant, all loans are backed by collateral so you have to worry about your borrower defaulting. This helps offset some of the risks associated to operating on a third-party platform.
Online banks give you savings accounts, except better
Today there is a growing number of online banks offering savings accounts. These have no physical branch which means all transactions are made through the internet.
While their rates are frequently better than banks, it’s important to remember that interest rates with online banks generally do not beat inflation either. However, today they tend to offer at least 1%. The award-winning online bank Aldermore, for example, offers 1.35% fixed interest for five years. The online banking group Paragon offers 1.2% APR fixed for one year.
This is significantly higher than the 0.09% national average for traditional banks.
Why online banks are a smart alternative to savings accounts
When you bank online, you get:
- Higher interest rates,
- Mobile and web friendly features.
- You can access your funds from anywhere in the world and never have to step into a physical branch.Online banks are usually still FDIC insured, meaning they offer the same level of protection to your cash as traditional banks.
- They can help you manage your money while still netting a significant sum over the years.
- Today many online banks offer nice features like high rates of cash back on purchases or low ATM fees to attract customers.
High-yield checking accounts
Typically, savings accounts offer better interest rates than checking accounts along with easier transactions since they are tied to you debit card. However, many of these accounts also have limitations like:
- A minimum balance to open an account
- A limit on interest rates based on your balance
- High ATM fees or account fees
While an easy way to leverage some extra interest, overall, high-yield checking accounts still offer comparatively low-interest rates when reviewed against other savings account alternatives.
Certificate of Deposit Accounts (CDs)
A certificate of deposit (CD) is a savings tool that lets you earn slightly more interest with relatively low risk. They are a classic savings tool that your parents or grandparents may have experience with. When you invest in a CD it’s very similar to putting your money in a savings account except you aren’t allowed to touch your funds for a certain period.
Interest rates tend to be higher for CDs the longer you commit to keeping your money locked in. If you are willing to lock in your money for 4+ years, you can earn upwards of 2.5% APY.
How can I invest in CDs?
You can purchase a CD through a bank, credit union, or similar financial institution. Some CDs will have a minimum investment requirement and minimum lock-in period.
The best way to invest in CDs is to open separate CD accounts at different times. Called “laddering” you split your deposit into four CDs that mature in one, two, three, and four years. That way you can earn a healthy yearly or even monthly income from your interest down the line.
To maximize your earnings, renew and convert each CD when it reaches maturity. That way, you can continue to grow your investment over time.
Earn 4% APY and unlimited anytime withdrawals with a MyConstant investment account
MyConstant is a new lending platform allowing you to earn high interest through collateral-backed automatic lending pools. While we believe it is important to not put all your eggs in one basket. We believe we are a decent savings account alternative if you want to earn real interest on your savings.
When you open a MyConstant investment account, you get access to a whole range of features and benefits including:
- Free anytime withdrawals
- No limits on the amount you have in your account
- Plaid ACH integration
- Investment in either fiat or stablecoins (and easy arbitrage)
- Fully-collateralized loans
- No fees
- 24/7 customer service to help you on your way.
Don’t leave your money to lose value in your savings account. Give our MyConstant investment account a try and see how you could be earning more today.
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