Best Online Savings Rates May-June 2018

The best online savings rates continue to move higher for May 2018 and heading into June 2018. For about a decade now, we have been talking about online savings rates and money market rates moving lower. Then finally, about 18 months ago, we started writing about interest rates moving higher.

Online savings rates moved higher the past 18 months because the Federal Reserve increased the federal funds rate six times. Those six rate increases totaled 1.50 percent, which brought the rate up to a targeted range of 1.50 percent to 1.75 percent. If you're wondering how the rate could only be at 1.50 percent when the total increases were 1.50 percent, that's because the rate was near zero percent!

You also might be wondering what the fed funds rate and what does it have to do with online savings rates. The fed funds rate is the rate that banks and credit unions lend reserve balances to other institutions overnight. Banks and credit unions also set consumer rates for deposits and loans using the fed funds rate.

When the rate moves higher these rates also move higher. I have to warn you banks and credit unions are quicker to increase loan rates then they are to increase deposit rates. The opposite happens when interest rates are moving lower, financial institutions are quicker to lower deposit rates than loan rates.

During this cycle of rising interest rates, the fed funds rate was increased 1.50 percent but online savings rates and money market rate increases have been slightly less.

About 18 months ago the best online savings rates were around 0.85 percent, the best savings rate in May is at 1.85 percent, only a 1.00 percent increase. The highest money market rate has done slightly better over the past 18 months, going from 0.90 percent to 2.01 percent, a 1.11 percent increase. Listed below are the best online savings rates as of today.

1: Best Online Savings Rates: Radius Bank High-Yield Savings 1.86% APY ($100 Minimum Opening Balance)

Radius Bank, headquartered in Boston, MA, is currently offering the best online savings rate at 1.86% APY. The savings account rate is tiered so in order to earn the top rate of 1.86% APY you have to have a minimum balance of at least $25,000. Savings account balances of $2,500 and above still earn a respectable rate of 1.49 percent. Account balances below $2,500 earn a rate of 0.05 percent, a rate that isn't much higher than rates offered by the big banks. There is also a monthly fee of $2.50 percent if your daily account balance falls below $250.

2: High Online Savings Rate: Salem Five Direct eOne Savings 1.85% - APY ( $100 Minimum Opening Balance)

Salem Five Direct's eOne Savings Account has a small opening deposit of only $100. You can earn 1.85 percent on balances up to $1,000,000. Make sure to keep your balance under a million to earn the 1.85 percent rate. Otherwise Salem Five reserves the right to transfer balances over $1,000,000 to a Statement Savings Account. The current rate on that account is only 0.05 percent. There are no minimum balances and no monthly fees. Opening an account is done online quickly and easily. eOne Savings eligibility is limited to consumers who apply online. You're not eligible if you already have an account. There is an exception for consumers with an existing eOne Checking Account are eligible for the eOne Savings Account.

3: Best Online Money Market Rates: VirtualBank eMoney Market 2.01% APY ( $100 Minimum Opening Balance)

VirtualBank currently has the best money market account rate on our list with 2.01% APY. Money market accounts and savings accounts are variable rate accounts, meaning the interest rate can change at anytime. VirtualBank guaranteeing a rate for 1 year is good news, I wonder if the bank will increase the rate if rates move higher. The 1 year introductory APY is available to customers opening a new eMoney Market account. Also the money you use can't be currently held in any of your accounts that are at VirtualBank.