If you’re looking to earn higher interest on your savings, you’ve probably reached a new stage in life — a level of financial security that lets you think about the future. So first off, congratulations!
Synchrony Bank may offer what you’re looking for. Let’s take a closer look at the bank to see how well it would fit your needs.
Synchrony Bank Review
- Products & Services
- Interest Rates
- Fees & Charges
- Website / App
- Customer Service
Synchrony Bank is an online-only bank that offers some of the highest interest rates for online savings accounts, money market accounts, and certificates of deposit (CDs). Synchrony Bank has no minimum requirement to open a savings account, no regular monthly fees, and an excellent online platform. The biggest downside is the lack of a checking account. If all you need is a place to park your cash in a high-interest account, Synchrony Bank is a great option. But if you are looking for a full-service bank, you might consider other options.
Synchrony Bank Features
Synchrony Bank is owned by Synchrony Financial, the Stamford, Conn.,-based lender that offers a variety of consumer finance programs and holds more than $90 billion in assets.
If you’ve ever gotten a Care Credit card to pay for medical expenses or an Old Navy or Banana Republic store credit card to buy new clothes (you know, before you got your finances under control), you’ve probably dealt with Synchrony Financial.
Synchrony Bank is a wholly owned subsidiary of Synchrony Financial, but it’s actually been around longer than its parent company.
It started back in 1988 as Monogram Bank, and its name has changed several times over the past 30 or so years. Most recently, Synchrony Bank was known as GE Capital Retail Bank, until 2014, when it adopted the name Synchrony Bank.
The bank’s headquarters are in Utah, but that hardly matters if you’re looking to partner with Synchrony Bank because it interacts with account holders primarily online.
You may find the Synchrony name on the store credit cards in your wallet, but you won’t find it on a bank branch sign because Synchrony doesn’t operate in the brick-and-mortar realm.
This can be a drawback if you’re the type of person who likes to build a personal relationship with a neighborhood bank. But there’s a big advantage to online banks: the potential for greater earnings on your savings since Synchrony (and other online bankers) can offer a much higher savings rate than most traditional banks.
And, Synchrony has stable ratings from credit agencies such as Moody’s, and its FDIC-insured, so you shouldn’t have to worry about your money.
Why use an online bank?
The average savings account in the United States will earn you between 0.07 and 0.17 percent interest on your money.
Let’s say you have saved $50,000. At 0.16 percent interest, you’d earn about $401 in interest over five years, assuming you left the money alone and didn’t add to it.
Now let’s say your bank offers a significantly higher interest rate. Let’s use offers a savings rate of 1.55 percent as an example. So instead of earning $401, you’d earn more than $4,000 over five years.
The savings account interest rates at Synchrony Bank are typically among the highest in the nation. You can view a list of the highest interest rates here.
That’s a much more significant source of passive income and one that will yield even more if you’re able to add even more to the principal in your account.
Plus, Synchrony doesn’t charge monthly maintenance fees or penalize you for letting your balance fall too low, which can be a drawback at some of the other online banks.
Why would anyone not want to use Synchrony Bank?
Some people are more comfortable handing their money over to a bank that has a branch or two (or ten) in their community, a bank where you can sit down with someone and have a conversation about financial products.
That’s understandable. For years, banks have been marketing themselves as neighborhood partners for your financial needs, and there is something reassuring about knowing exactly who to call when you have a question.
If that sounds like you, Synchrony or any other online bank won’t be a good fit.
Synchrony isn’t the only dog in the show when it comes to online banks that offer high savings rates. If you’re comfortable in this arena, you’ll probably want to take a look at Synchrony’s competition, too.
We’ll do that below. But first, let’s look a little closer at what else Synchrony can offer.
Synchrony Bank – Types of Accounts
Synchrony Bank primarily offers accounts tied to savings. These include Savings Accounts, Money Market Accounts, Certificates of Deposit (CDs), and IRAs using savings or CDs.
Savings Accounts and Money Market Accounts
A savings account offers a super-safe way to earn a return on your money. And a high-yield, online savings account can grow your money more quickly than a traditional brick-and-mortar savings account could.
This is where Synchrony Bank shines. Their savings account interest rates are among the industry leaders. Rates frequently change, so I recommend visiting their site for the current interest rates.
In addition to the high interest rates, your account is FDIC insured and there are no monthly fees.
Money Market accounts have some similar features to savings accounts, but their interest rates may be slightly different.
Synchrony Bank’s CDs
Wouldn’t it be nice if you could combine the safety of a savings account with a way to earn a higher return? Certificates of deposit (CDs) and Individual Retirement Accounts (IRAs) can help you there.
When you buy a CD, you’re essentially putting that money into a savings account, but you’re also agreeing not to access that money for a specific period of time, usually ranging from 3 to 60 months.
In exchange for leaving your money alone for that long, the bank pays a fixed interest rate that, in most cases, is higher than a regular savings rate. The longer the term of your CD, the higher your rate in most cases.
And, unlike a savings account whose rates fluctuate with the market, the interest rate on a CD is guaranteed to stay the same until the CD matures, even if the Fed lowers its rates.
Let’s look at an example.
Say you buy a 60-month CD at 2.6 percent interest. If you bought a 60-month (five year) CD at $10,000, you’d have $11,369 at the end of the five-year term. That means you would have earned $1,369 in interest.
If you’d left that same $10,000 in savings, even at that nice rate of 1.55 percent, you would have earned about $805 over five years. That’s a difference of about $558.
No, it’s not earth-shattering, but it can add up, especially when you’re dealing with bigger numbers, and if you reinvest that money in a new CD when the first one matures, repeating the process.
If you’re interested in CDs, check the CD rates at several banks before making a commitment because once you buy the CD, you’re stuck with it for the agreed-upon term unless you’re willing to pay a fee to cash in early.
And remember that at Synchrony, unlike some other banks, you’ll need at least $2,000 to buy a CD.
Synchrony Bank’s IRAs
IRAs. That’s old people talk, right?
Wrong. IRAs, or individual retirement accounts, are for anyone wondering how they’ll spend the last decades of life. If you’d like to have enough money so that you can quit working when you’re 70 or so, an IRA can help.
People tend to think of an IRA as something you buy, like an investment. But it’s actually just what it says, an account that you can open when you start earning income. Even a 16-year-old with a part-time job bagging groceries could open an IRA.
What is an IRA?
It’s an account that helps you save for retirement while also saving on taxes.
How does it save on taxes?
Contributions from your income up to $6,000 a year (if you’re younger than 50) are tax deductible. If you’re 50 or older, you can deduct $7,000 in annual contributions.
People like IRAs because you can save money on taxes while saving for retirement.
If you have a traditional IRA, your contributions to the account can be tax deductible so long as you don’t exceed $5,500 a year (if you’re younger than 50) or $6,500 a year (if you’re 50 or older) in contributions.
In other words, by setting aside part of your income for retirement, you do not have to pay taxes on that income. You will have to pay taxes on the money later in life, when you begin to withdraw from your IRA.
There’s a newer kind of IRA called a Roth IRA that works in the opposite way. Your contributions are not tax-deductible, but when you retire and withdraw money from the account, you can avoid taxes (as long as you follow the rules for withdrawals).
Why partner with Synchrony for an IRA?
An IRA is only as good as what you’re putting into it. With a bank like Synchrony, which has great rates on CDs and savings accounts, you can use those vehicles to help your IRA grow faster.
For example, you could open an IRA and deposit a $5,000 CD, tax-free. That $5,000 would grow to $5,685 at 2.6 percent interest over the next five years. Then, you could put that $5,685 into another five-year, IRA-protected CD and it would become $6,463 at the end of the next five years.
You won’t get rich quick, but with enough time and enough savings, you will be moving in the right direction. And keep in mind that you don’t have to wait for that first five-year CD to mature before buying another one. You could buy one a year, tax-free, and create an ever-expanding account.
Synchrony is careful to point out — and we are too — that only a tax professional should be trusted for advice about what IRA best suits your needs. IRAs come with a variety of rules and modifications that can work to your advantage or your disadvantage. So it’s important to know what you’re doing or to find an advisor who knows what’s what.
Synchrony vs. the Competition
You can open an IRA just about anywhere, and pretty much any bank will sell you a certificate of deposit, too.
Yes, as an online bank, Synchrony can offer higher saves and CD rates than most traditional banks.
But Synchrony isn’t even the only bank filling that niche. So why should you consider Synchrony? When should you avoid it?
To find out, let’s take a look at how it holds up against its competitors. To make comparing banks fairer, we’ll stick with banks that, like Synchrony, offer accounts with no maintenance fees and no minimum deposit requirements.
Synchrony vs. Barclays
Old meets new in this matchup. Barclays Bank, a London-based bank that dates back to the 1600s, has three centuries more experience than Synchrony. Yet both institutions offer similar products in the American market: savings accounts and CDs with favorable interest rates.
The savings rate at Barclays is usually about the same as Synchrony’s. The banks’ CD rates are similar too, though Barclay’s are usually about 0.4 percent higher on five-year CDs.
So how would you decide between these two? For starters, take a look at each bank’s CD minimum deposits. Barclays does not require a minimum amount for a CD while Synchrony requires at least you to bring at least $2,000 to the table before taking advantage of the benefits a CD can offer.
Barclays offers a more minimalistic approach to online banking. For example, Barclays does not issue ATM cards to account holders, so to make a deposit or a withdrawal, you’d need to connect your account to another bank, make a transfer, and then use that bank’s ATM or branch to access those funds.
This extra step can work in your favor if you want to leave your money alone and think you may be tempted to spend impulsively given the chance. But if you want to access your money at any time from just about anywhere, you’ll want to go with Synchrony.
That being said, Synchrony doesn’t operate its own ATMs. You can use your Synchrony card at other institutions’ ATMs. Synchrony will even pay you back up to $5 a month if those ATMs charge you.
Key differences: Synchrony gives you ATM access but requires $2,000 to buy a CD.
Synchrony vs. Ally
Ally Bank, another leading online, spun off of General Motors’ finance division in 2009. Ally offers a more complex array of products than Synchrony or Barclays.
For example, Ally offers graduated interest rates on its CDs based on how much you invest. A $5,000 CD earns a higher rate than a $1,000 CD, even though both mature in the same amount of time.
So, if you’re starting out smaller with your CD, you might not earn the highest rate with Ally.
Ally can also sell you a no-penalty CD in case you’re not sure whether you can leave your money alone for the duration of the certificate. The rates on these, naturally, are lower than a traditional CD at an online bank.
Ally also offers a checking account, which neither Barclays nor Synchrony offers. So if you want to use one online bank for checking and savings, you’ll want to give Ally a closer look.
Key difference: Ally offers a checking account but graduates CD rates.
Synchrony vs. Capital One 360
Capital One 360, another newer bank that has been gaining traction on the Internet over the past 10 years, offers savings, checking, and CDs through its banking arm. (The firm also finances a lot of cars and consumer credit cards in its other divisions.)
Capital One’s savings rate isn’t as high as what you’ll get at Synchrony, Barclays, or Ally Bank. Despite this shortcoming, you may like Capital One if you’re looking for one-stop banking among online bankers. Capital One also operates branches in several well-populated states including California, Texas, Florida, New York, Pennsylvania, along with Washington, D.C.
So Capital One serves as a unique hybrid among online bankers, offering higher-than-average savings and CD rates like an online bank while still operating branches in many areas like a traditional bank.
Still, if you ultimately want to earn money on your savings, interest rates matter, and the added convenience and more diverse product line Capital One offers won’t make up for that. If that’s the case, the nod goes to Synchrony here.
Key differences: Capital One has branches and checking accounts but its savings rate is lower than Synchrony’s.
Synchrony Bank Advantages & Disadvantages
- Great savings rate
- Great rates on CDs
- Good option for IRAs
- ATM access
- $2,000 minimum deposit for CDs
- No checking account option (check out these banks that offer free online checking)
- No physical branches
Other things to know before partnering with Synchrony
You can’t compare savings accounts and CDs without talking about interest rates. Often, though, a quoted rate is about to change. We do have a dynamic economy after all.
So before committing to a savings account or a CD, make sure you’re looking at the bank’s current rates. The bank’s website is probably the best source for this. All the banks we’ve discussed offer online customer service, so if you have a question, don’t hesitate to ask.
Make sure you’re also looking at the rate for the kind of account you’d like to open. For example, Synchrony offers several kinds of savings accounts. These kinds of savings accounts also limit your withdrawals to six a month, per federal law. But again, if you’re trying to save money, this shouldn’t matter.
Online banking can give your savings a boost. If you’re looking for a great rate, simple options on CDs, or a new IRA partner, give Synchrony a close look.
If you need more complex options, bank branches, or a checking account, look elsewhere.