Online banks commonly offer highly competitive interest rates on savings accounts. Online banks have reduced overhead costs compared to the costs associated with operating a physical bank location. Money market accounts and traditional savings accounts with online banks are both viable options for obtaining the best savings rates. Money market accounts offer liquidity, or easy access to cash from your account via a debit card. Traditional savings accounts are not designed for easy cash access and sometimes have restrictions on the number of monthly cash withdrawals you can make.

Best Traditional Savings

With over 50 million customer accounts as of December 2009, Capital One Direct Banking is one of the nation's largest deposit institutions. Capital One Direct Banking offers the best traditional savings interest rate nationwide with an Annual Percentage Yield (APY) of 1.60% and no monthly fees on the InterestPlus Online Savings Account. The minimum to open this account type is $2,500. Additional incentives include an extra 10% quarterly bonus on interest earned for balances of $15,000 or more, or you can qualify by using your Capital One debit card. All Capital One deposits are backed by the Federal Deposit Insurance Corporation.

Best Money Market Account

As of December 2009, Ally Bank boasts no fees or minimum deposits on any of its account types. Ally Bank bank offers the nation's best interest rate of 1.49% on its money market account. Additional incentives include refunds on ATM fees up to $6, a free check card and 50 free checks, and daily compounded interest. Compound interest is interest paid on the original principal balance and on the accumulated past interest, which maximizes your earnings. All deposits are FDIC insured.

Additional Options

Interest rates can change at any time and as often as the market reflects any fluctuation and/or as the internal priorities of banks change. At times of heavy inflation, savings interest rates will usually be at a peak. You can review interest rate changes at Bankrate.com or Bankaholic.com, two websites dedicated to financial rate information, before you open a savings account.

Source:

Bankrate.com - High Yield Rates for MMA and Savings Accounts

Definition of Compound Interest

More Information:

Ally Bank - Money Market Account

Capital One - InterestPlus Online Savings