Switching from Traditional Banking: 9 Higher-Paying Banking Alternatives

Did you know that the average bank pays.06% interest on its savings accounts? It’s crazy enough that the average bank pays.06% interest on their savings accounts.

My bank pays a fraction of ….the average interest rate on savings, or.01%. My bank (U.S. Bank), has paid a paltry interest rate for many years.

My bank is hating me. You can relate to this?

The screenshot below shows you exactly what I am referring to. In the month that I took this picture, I had more than $329,000 sitting in our savings account. I earned only $2.88 interest.

It’s sad, but I’m sure I’m far from alone. The majority of people who read this post probably earn about that amount on their savings, if they do.

Banks are unable to offer much because interest rates have been at record lows or close to them for many years.

We don’t need to accept earning almost nothing on our savings account. There are many banking options that will allow you to earn more than the traditional banks.

This post includes a link to a bank that charges 850X the amount of a traditional bank.

It is important to create an Emergency Fund before we discuss the best banking alternatives. You never know when you might lose your job, or have an unexpected financial emergency. Your long-term savings may be all you need to avoid financial chaos.

Some experts recommend that you have an emergency fund of three to six month’s expenses. I tend to agree. But I believe you should tailor your emergency fund size to your specific situation and needs.

You may need a larger emergency fund if, for example, you are self-employed, have children, or have low expenses. However, you can manage with a smaller one if, on the other hand, you’re a single person, have very few expenses, or have a job that is highly secure.

The banking alternatives that I will discuss below are for your emergency savings. You want to store your electronic fund in a safe account that is insured by the FDIC. With a traditional bank, you may not get much interest, but your money will be safe.

You can also listen to my podcast about banking alternatives on Spotify, if you’d rather not read. The podcast episodes can be found here, and is available here.

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Bank Alternatives: Earn More Interest

The banking alternatives that I recommend are for any extra money you may have, in addition to the true emergency savings. You can now take more risks with money that you don’t need for the next few decades.

What banking alternatives am i referring to? Below, I will explain all nine.


Neobank is a hipster-style term that describes an online bank without any physical locations. Neobanks are real, but you won’t be able to drive into one. These banks are able to lower their overheads because they don’t have a physical branch. They can then pay you a higher interest rate on your savings.

Recently, I read that there are more than 300 digital bank around the globe. One of the largest is SoFi which began as a student loans refinancing firm. Chime is another online-only provider that is worth mentioning. It currently pays a 0.50% annual percent yield (APY).

Lending Club has been an online bank for quite some time. Lending Club was a peer to peer lender but now offers an online savings account with a yield of 0.60% per year.

Treasury Inflation Protected Securities (TIPS).

Treasury Inflation Protected Securities (TIPS), if you believe inflation will only continue to rise, could be a great place to store your excess cash. TIPS adjusts automatically based on CPI Index. This is the Consumer Price Index which measures the prices for different goods and service. It is a great alternative to traditional banking.

You can read more on TreasuryDirect.gov about the TIPS and other government bonds.

TIPS are only issued in $100 increments, so you need to invest at least $100. TIPS also allows you to avoid paying state and local taxes. You will not be required to pay federal tax on your gains if you use TIPS.

Online Investment Apps

Online investment apps, also known as online brokerage services (or online brokerage services), are another great alternative to traditional banking. Online brokerage services, such as Robinhood and M1 Finance, are a great alternative to traditional banking. Most people automatically think about meme stocks and crypto investing when they think of these companies. These apps have a cash-management account that offers a good rate of return.

Robinhood has, for instance, a cash management app that includes a savings component which pays.30% APR. This account is also free of hidden fees. Your account can be used to withdraw cash from more than 75,000 ATMs across the country that do not charge fees. Robinhood offers FDIC insurance on its cash management account.

M1 Financial boasts a “super app” for finance that costs $125 per annum. This account offers a 1% rate of interest and a debit card which pays you 1% back each time you use the card.

Although paying $125 a year for a debit card and online account may seem expensive, you will earn 33X more than the average national savings rate. You can quickly make up the fee by using your debit card.

With a Robinhood Portfolio, you can invest as little or as many dollars as you like.

High Yield Bonds

Bonds are considered to be extremely safe by most people, and that is true. People buy bonds in a very different way than they used to several decades ago.

Baby boomers bought individual bonds from issuers, whether it was municipal bonds or other bonds. Many investors today purchase bonds via mutual funds or exchange-traded funds.

The American Century High-Income Yield Fund is an example of a fund that invests in high-yielding bonds. This fund’s current yield is 5.12%. However, this fund has a higher risk. Your balance is likely to fluctuate over time.

Nuveen High Yield Municipal Bond Fund, which has a 3.09% yield, is another example. This is another high-yielding bond that carries a higher level of risk. Your balance may fluctuate in the long run.

There are a number of ETFs that offer high-yielding bonds, including the SPDR Bond ETF with a yield rate of 4.75 percent. The JNK symbol is funny because this type of bond is a junk bond.

You won’t need to search far to find out where you can buy high-yielding bonds. High-yield bond investments are available through the usual online brokerages and apps such as M1 Finance and E*TRADE. All of these could be excellent alternatives to traditional banking for surplus funds.

#5: High Yield Stocks

High-yielding stocks are structured to pay a dividend. This makes them an excellent alternative to traditional banking. These stocks can offer a higher return than what you earn at your bank. However, there are also more risks involved.

For the most, I am talking about stocks listed in the Dividend Aristocrats. This is a listing of 65 dividend stocks listed in the S&P 500 that have a long history of increasing dividends. The majority of these are blue-chip companies with a history of creating returns.

AT&T, for example, is part of this group and has a dividend yield that is 7.79%. McDonald’s is another company that has a current dividend yield of 2.11 percent. Verizon, which has a dividend yield 4.79%, is also included.

If you’re a novice investor or stock trader, it is important to choose the right broker.

Online stockbrokers such as Robinhood can guide you to make the best investment of your hard-earned money. Click below without a second’s thought.

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Blended Portfolio #6

Sixth, I would like to discuss a blended portfolio which includes some of these options. You can invest some of your surplus savings in high-yielding stocks and then another portion into high-yielding bonds.

If you already have a Robinhood or M1 Finance account, this strategy is simple. Once you have a cash management account and become familiar with these apps, it is easy to branch out into other investment types.

Keep in mind that some apps are better suited to creating a blended investment portfolio. Robinhood is one example where you have to select your own funds, and then rebalance over time. M1 Finance, on the other hand, offers a variety of investment “pies” that can be tailored to different investors depending on their risk tolerance.

Betterment allows you to customize your portfolio according to your goals and timeline. This company, however, is a roboadvisor which uses technology to assist you in selecting investments for your portfolio. Betterment is a better option for those who are looking to access investment management services that they cannot get from a standard investing app.

A blended approach will help you achieve a greater rate of return without having to “bet the farm” by focusing on one strategy.

#7: Real Estate Investment Trusts (REITs)

Although some stocks are classified under REITs, I am not talking about them here. Instead, I am talking about options which allow you to get exposure in real estate while also offering a nice return.

First, I’d like to discuss an ETF. The iShares US Real Estate (IYR), which is an ETF, has had a return of 11.25% in the past ten years and a dividend yielding 2.06%. This is not bad, especially when you take into account that you don’t have to step foot in the buildings you invest in.

Investing in ETFs for real estate is a great way to get exposure to the market without having to hunt down properties or deal with the grunt work of being a landlord. You can get exposure to real estate without having to find properties or do the gruntwork of being a landowner. You put your money on the line, but there is a potential for a higher return.

Fundrise is another option that I use and love. This online real estate platform allows you to invest directly in a REIT, without having to deal with the ETF middlemen fees.

My account has been open for several years. I began investing in Fundrise in 2018. My current return on investment is 13.2%. You can see it in the screenshot below.

Fundrise also has the benefit of not requiring a large amount of money to start. Fundrise’s minimum investment is only $10 and their starter level starts at $1,000.

You can invest in real estate for a fraction the amount of money you would have to spend on a physical property. Fundrise also makes it simple to understand the properties that you are investing in. This could be a commercial rental property, an apartment complex, or a shopping mall.

Please read my Fundrise Review before you decide.

#8: Short Term Note

You must be an accredited investor to take advantage of the banking alternative #8. You must earn $200,000 annually on your own, or $300,000.000 with your spouse. Your net worth should be more than $1,000,000 dollars, excluding the value of your main residence.

Continue reading to learn more about how Short-Term Notes work if you meet the criteria. If you do not meet these criteria, please move on to alternative banking option #9.

Companies like YieldStreet offer short-term notes in both cases. You can earn up to 40X the average national money market yield with a short-term loan from this online platform.

These notes are free from fees and expenses. They’re also a short-term, liquid product that can be accessed in as little time as six months. The company’s short-term notes also pay interest directly into your YieldStreet account.

The minimum investment in the YieldStreet Series XLIV Short Term Notes is $500. These investments are aimed at accredited investors who have large portfolios. You can start with a small amount and see what happens.

Crypto Savings Accounts

Let’s discuss how you can make money with crypto that you already own without selling it. Crypto Savings Accounts give you interest on your crypto deposits, just as you would on a traditional savings account. It was a few years ago that I heard of this investment from a fellow investor. It almost seemed like it could not be true.

On the recommendation of a friend, I also have a crypto platform called Celsius.

I have currently just under $200k in my Celsius account, which pays a yield rate of 8.5%. It is interesting to note that Celsius pays their interest out weekly, rather than monthly as other exchanges do.

You can see in the screenshot that I earn over $224 per week from Celsius. This is more than $900 per month in interest, and over $11,000 over a year.

It makes me feel like I want to vomit!

Keep in mind that investing in crypto and making money with crypto involves a lot of risk. You can’t rely on FDIC insurance and you have no guarantee that your investment won’t be lost.

Note: On the 13th of July 2022, Celsius Network filed for voluntary Chapter 11 bankruptcy .

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The Bottom Line

This list of alternative banking options should have you thinking about how to grow your money. It’s natural to want a better return on your money, whether it’s your emergency fund, or any other cash that you’ve saved for the future.

It’s important to keep in mind that higher yields are always associated with a greater level of risk. You may get more interest from alternatives to traditional banks, but at the cost of security.

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