American Express is most commonly known for being a credit card provider, but did you know that they also offer online savings accounts and certificates of deposit (CDs) to consumers?
American Express has a high yield personal savings account that doesn’t require a minimum balance and charges no monthly fees to have open. The American Express Personal Savings account has is an annual percentage yield (APY) of over 2% (as of 7/22/19), which is nearly 20 times the national average percentage yield for savings accounts. It’s comparable to money market rates, which are much less flexible and more restrictive about money being withdrawn from the account.
It should be noted that this percentage yield is subject to change and does change regularly, based upon reaction to the many factors that influence interest rates in the US.
You might wonder how it’s possible for a company known historically for issuing credit cards to beat out traditional brick and mortar local banks with its savings account returns. Here’s why that’s possible.
Online Savings Accounts Versus Traditional Savings Accounts
Online savings accounts require much less overhead from financial institutions in terms of personnel (wages), real estate investments (offices), and other maintenance costs associated with traditional savings accounts. American Express’ personal savings account is impressive, but it’s also competitive with and similar to other online personal savings offerings, such as those available from Discover Bank, CIT Bank, Marcus (Goldman Sachs), FNBO Direct, Bank5 Connect, and Alliant.
Similar to traditional savings accounts, most online savings accounts from FDIC-associated financial institutions, including the American Express Personal Savings account, are FDIC insured. FDIC insures up to $250,000 for each depositor associated with an account.
How to Set Up an American Express Personal Savings Account
The process of setting up an American Express Personal Savings account is fairly simple.
1) Submit an Application Online
You’ll first need to submit an application to American Express through their online application. The application will ask you for the following information, so you’ll want to make sure that you have it handy. This information is required by American Express to identify you and to ensure that you’re legally eligible for an online savings account.
- Social Security Number
- Email Address
- Home Address
- Phone Number
- Date of Birth
- Routing and Account Number of Funding Account
An American Express Personal Savings account can be held jointly between a primary and a joint owner. Naturally, the funding bank’s routing and account number is only required from the primary account owner. A joint owner application doesn’t require that information to be provided, as there need only be one funding account.
2) Wait for Approval
After you’ve submitted your application, you’ll need to wait American Express to review your application, verify your information, and then send you a confirmation that your account has been set up. Once approved, you will receive an email confirmation from American Express as well as a welcome kit in the mail.
3) Fund Your Account
The last step in setting up your American Express Personal Savings account is to fund the account by transferring money from the account that you have connected to this new account. American Express requires that you fund your account (no minimum is required, but some positive amount must be transferred into the account ) within 60 days of when it is opened. If no amount is transferred into the account, it will be automatically closed.
Withdrawal Limitations on American Express Personal Savings Accounts
As with other online savings accounts, there are limits to the number of withdrawals you can make on your American Express Personal Savings account. You are allowed up to six (6) preauthorized withdrawals (this number is consistent with Federal Reserve Regulation D, which governs online bank accounts) from your high yield savings account each month. Preauthorized withdrawals are normally used to pay bills such as your mortgage, credit cards, or other monthly expenses.
Consistent with the limits on the number of monthly withdrawals, American Express does not provide an ATM card, a debit card, nor checks with its online personal savings account.
It is important to know that there is no limit to the number of deposits you can make into your American Express Personal Savings Account.
How to Use an American Express Personal Savings Account for Daily Finances
Many people might feel like having a limit of six monthly withdrawals (and nothing physical, like a debit card, to use to make those withdrawals) is a show-stopper for using an American Express Personal Savings account to conduct daily business and fund day to day activities. However, here is a scenario under which that could work.
If you use a credit card to handle most of your daily expenses, setting up an automatic payment from your American Express Personal Savings account to pay your credit card balance each month, you are left with five automatic withdrawals to handle your mortgage and four other account obligations you might have in any given month.
Many people who use online personal savings accounts also keep a checking account open with a traditional local bank so that they have a fluid mechanism for giving themselves the ability to do more transactions in a given month.
This setup, having an online savings account combined with a checking account provides a good opportunity to take advantage of high interest savings while still retaining the flexibility you need to pay bills and fulfill obligations that go beyond six transactions in a month period.