We receive advertising fees from the brands we review that affect the ranking and scoring of such brands.
Advertiser Disclosure

Discover Safe and Better Alternatives to Savings Accounts

Garret Geitner Updated: August 8, 2023 • 7 min read
saving money

Traditional savings accounts are a great way to get started building your emergency fund, but they are generally not the best place to maximize your returns. According to the FDIC, the national average interest rate on savings accounts stands at 0.35% APY.

Luckily, if you have cash that you'd like to store away, there are plenty of other products like money market accounts, certificates of deposit and more that are safe alternatives to savings accounts, and can help you earn more money in the long run.

Here are some of the better alternatives to savings accounts:


High-Yield Savings Accounts

High-yield savings accounts are a lot like traditional ones, but they allow you to earn more interest on your money. The current average interest rate for these accounts is about 3% APY, compared to around 0.3% on traditional savings accounts. That means that if you put $1,000 in a high-yield savings account, after a year, you would have $1,030.

Many banks may have a set of rules and restrictions that you must follow when opening a high-yield savings account. For example, they may require a minimum initial deposit to open an account – typically between a few hundred dollars to a few thousand, depending on the bank. Some banks may have no minimum deposit requirement at all.

They may also require a minimum balance, and a restriction on the number of withdrawals you can make per month, typically up to six per month. That means that if you take too much money out of the account and drop below the minimum balance requirement, you could be penalized with either a lower interest rate or be charged a penalty.

Pros: Cons:
Higher interest rates than standard savings accounts Minimum initial deposit requirement
Ability to make certain amount of withdrawals without penalty Minimum balance requirement
Low fees Harder to withdraw money than from a standard savings account


Money Market Accounts

Money market accounts are very similar to high-yield checking accounts. The rates you can expect are similar as well, ranging between 0.01% APY and 3.45% APY, depending on your balance. The main difference between the two types of accounts is the way that you can access your funds. You usually receive a debit card and checkbook when you open a money market account. Although you are still limited to the number of withdrawals that you are allowed, you can simply swipe your debit card or write a check to access the funds.

In contrast, with a high-yield savings account, you must either go into a branch and submit a withdrawal slip or transfer money electronically from your high-yield savings account to your checking account using your bank’s online banking portal.

It's important to note that money market accounts may often require that you make a minimum initial deposit to open the account. Again, just like a high-yield savings account, the minimum deposit that some banks may require can range anywhere from a few hundred dollars to a few thousand.

In addition, money market accounts also may require that you maintain a minimum balance in the account or be subject to a lower interest rate or charged a penalty fee.

Pros: Cons:
Higher interest rates High minimum initial deposit
Easy access to funds in the account with a debit card and checkbook Minimum balance requirement


Certificates of Deposit

If you can make a confident assumption that you will not need to withdraw money for a set period of time, opening a Certificate of Deposit (CD), is often much better than a savings account. CDs require that you do not touch the money at all for a designated period of time, unlike high-yield savings and money market accounts where you can easily make a limited number of withdrawals.

Certificates of deposit can typically come with a term that can range anywhere from three months to five years or more. The longer the term of the CD, the higher the interest rate. The main consideration is that if you need to access the money in a CD before the maturity date, you could be charged an early withdrawal penalty and possibly other fees. Here are the average interest rates you can expect:

Average CD rates based on term length as of March 2023:

Length: Average APY:
3 Months 0.57% - 4.25%
6 Months 0.81% - 5.00%
1 Year 1.28% - 5.00%
2 Years 1.21% - 4.80%
3 Years 1.16% - 4.84%
4 Years 1.11% - 4.75%
5 Years 1.21% - 4.70%
10 Years 2% - 5%

If you are able to maintain the CD until its maturity date, then you will be given unrestricted access to the original amount of the CD plus the promised interest.

Certificates of deposit typically require a minimum deposit of $500 to $1,000 with the maximum deposit amount being $250,000. Although some banks may allow you to open a CD with a value greater than $250,000, it is never a good idea. The FDIC only insures CDs for the amount of $250,000 per depositor, per account ownership type, and per financial institution.

Pros Cons:
A safe investment with a guaranteed return and FDIC-insured for up to $250,000 Unable to access the funds until the maturity date
Higher interest rates than regular savings and money market accounts Early withdrawal penalty
No monthly maintenance fees High minimum deposit


Peer-to-Peer Lending

Peer-to-peer lending companies offer a bank account alternative in the form of a platform that connects people seeking personal loans with people looking for a way to earn higher returns on their savings. Although all potential borrowers are thoroughly screened by peer-to-peer lending companies, you could still be at risk of losing some money if a borrower should happen to default on a loan.

However, this risk is reduced greatly by structuring the loans in a way that spreads the loans across numerous lender accounts. Your money will fund no more than $25 to $50 of any one loan. For example, if a borrower takes out a loan of $5,000, then their loan will be funded by 100 different lender accounts each contributing $50.

To open a peer-to-peer lending account, the process can often be completed 100% online in as little as 10 minutes while only requiring a minimum deposit of $25. You are free to add additional funds to the account at any time. Returns on peer-to-peer lending accounts have the potential to be much higher than interest rates on high-yield savings and money market accounts.

Average ROI on peer-to-peer lender accounts:

Historical returns can range from 3.5% to 7.5%, with some accounts getting consistently higher returns of 10% or more. 

Pros: Cons:
Potential for much higher returns than other savings account types Potential to lose money
Choose the level of risk you are comfortable with P2P lending accounts are not FDIC-insured


Retirement Accounts

Retirement accounts like 401(k)s, traditional IRAs, and Roth IRAs are set up to help you achieve your retirement goals. These are long-term savings accounts that have the potential to help you accumulate a large sum of money to live off for the rest of your life after retirement.

The main difference between retirement and traditional savings accounts is that retirement accounts typically use your funds to invest in stocks, mutual funds, and ETFs. Also, another difference between a savings account and some retirement accounts is that some retirement accounts may have limits on the amount of money you can contribute each year.

With a savings account, there is no limit to the amount of money you can contribute to the account and you earn interest on your balance. Savings accounts do not invest funds into stocks or mutual funds and the money can be accessed much easier than a retirement account. If you need to take money out from a retirement account before the designated retirement age, you could face a 10% penalty on top of other possible tax implications.

The exception to this is the Roth IRA. With a Roth IRA, since the money contributed is considered after-tax dollars, you can withdraw from the account at any time without penalty.

  • Average yearly return 401(k): 5% to 8%
  • Average yearly return Roth IRA: 7% to 10%
  • Average yearly return Traditional IRA: 7% to 10%

Retirement accounts are long-term forms of savings that can accumulate wealth over decades. You keep the account open for as long as you need, however, for 401ks and traditional IRAs, you are not allowed to make withdrawals until you are at least 59 and ½ years old.

Early withdrawals can come with penalties and tax implications. With a Roth IRA, since the money deposited into the account has already been taxed, you are free to make withdrawals at any time without penalty.

Pros: Cons:
Potential to accumulate a large sum of money over a long period of time Early withdrawal penalties on most accounts (not Roth IRA)
Some retirement accounts have compound interest Taxes on annuity
Also acts as a form of life insurance Subject to market fluctuations



Although it is always a good idea to put away money any way you can, it is important that you consider alternatives to savings accounts to help make sure you are getting the highest return on your money. Traditional savings accounts are a good place to start. However, many banks offer higher interest rates for their high-yield savings and money market accounts.

Additionally, certificates of deposit, P2P lender accounts, and various other retirement accounts can make excellent long-term savings options with potentially even higher returns.

Either way, it is important to understand the requirements and conditions of any savings account before you apply. By taking your time and doing your research, you can make sure you are making the best decision for your financial situation.

Written by Garret Geitner linkedin-icon

Garret Jacob is an experienced financial writer with experience covering topics in the mortgage industry, personal and business loans, real estate and more. Earlier in his career, Garret spent 13 years working in the supply chain and logistics industry.