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Instead of keeping your rainy-day cash in an envelope, let it earn some money for you. Photo: StockMonkeys.com via Flickr.
For the past few years, interest rates on savings accounts have paled in comparison with their historical averages. In fact, many national banks currently pay 0.01% interest, which is next to nothing. Yet it's still important to keep some money in cash in case of an emergency so that you won't have to sell investments in order to cover these expenses. With that in mind, Barclays' online savings products can help you squeeze a little extra interest out of your cash.
Even the basic savings account is pretty generous
Barclays' online savings account is significantly more lucrative than most, if not all, traditional banks. Its 1% interest rate was 11 times the national average as of October 2014, and the account has no monthly maintenance fees or minimum deposit requirements.
Deposits and withdrawals are easier than you might expect from an online bank account. Transactions that can be conducted from your computer or smartphone include depositing a check remotely or transferring funds from a linked checking account. You can also have some or all of your paycheck directly deposited into your account.
Extra rewards for being a smart saver
If you want a little extra motivation to develop strong saving habits, Barclays has another savings product known as the Dream Account.
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The Dream Account pays a slightly higher interest rate (1.05% as of April 1) and offers the opportunity to earn two bonuses. If the account holder makes deposits for six consecutive months, he or she will earn a 2.5% bonus on the interest earned during that time period. And if there are also no withdrawals made for those six months, an additional 2.5% bonus will be paid.
Earning both bonuses increases the effective APR to slightly more than 1.1%, which is among the best in the business as far as online savings accounts are concerned.
The only potential downsides are a maximum opening deposit of $1,000 and a monthly deposit limit of $1,000. If you plan to save more than that amount, the Dream Account may not be your best choice.
Some of the best CD rates in the business
Barclays offers online CD rates that are well beyond those offered by most brick-and-mortar banks, and they have no minimum balance requirement to open an account. Just look at how some of the rates currently offered by Barclays compare to the national averages.
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Note: Barclays' interest rates current as of May 14, 2015, and national averages obtained from WalletHub's 2015 Banking Landscape Report.
Of course, CDs are only a good choice for those who won't need access to the money before the maturity date. For withdrawing from a CD early, you are penalized 90 days' interest for accounts with terms of less than two years and 180 days' interest for longer-dated accounts. Make sure you can commit before investing in a CD. After all, withdrawing $10,000 early from a five-year CD will cost you a penalty of more than $110 based on the current interest rates.
Barclays offers online savings options that make great alternatives to traditional savings accounts and CDs. While a 1% return on your money won't make you rich, it's a great alternative to letting a brick-and-mortar bank hold on to your rainy-day savings essentially for free.
The article Barclays Online Savings: A Good Place to Park Your Cash originally appeared on Fool.com.
Matthew Frankel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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