SOFI vs. ALLY: Which HYSA should you open in 2024?

Summary

This video offers a detailed comparison between two online banks, Ally and SoFi, focusing on their high yield savings accounts (HYSA). It covers the benefits of HYSA, including liquidity, low risk, and minimal fees, and highlights key features such as FDIC insurance, no maintenance fees, and overdraft protection. The video also discusses the annual percentage yield (APY), mobile banking experience, and unique features like savings buckets and vaults. The presenter shares personal pros and cons of each bank and advises viewers to try both to find the best fit, emphasizing the importance of letting money work for them.

Takeaways

• 🏦 A high yield savings account (HYSA) is a place to save money with higher interest rates than traditional savings accounts, without the need to invest in the stock market.
• 💰 HYSAs offer liquidity, meaning you can withdraw funds at any time, and are considered low risk with few to no fees.
• 🏦 Both Ally and SoFi are online banks that offer HYSAs and are FDIC insured, protecting deposits up to $250,000.
• 💵 Both Ally and SoFi do not charge maintenance fees or require an initial deposit, making it easy to open an account.
• 💰 SoFi offers a sign-up bonus of up to $300 for setting up a direct deposit, and potentially $325 with a referral link.
• 🚫 Neither Ally nor SoFi charge overdraft fees, which can be a significant benefit for account holders.
• 📈 The annual percentage yield (APY) is a key factor in choosing a HYSA, with SoFi offering 4.6% and Ally offering 4.2% as of July 25th.
• 📊 A 2% difference in APY can have a noticeable impact over a 5-year period, especially on larger deposits.
• 🏦 Ally offers additional features like CDs (certificates of deposit) and a lower APY on checking accounts, which might be appealing to some users.
• 📱 Both Ally and SoFi have user-friendly mobile apps with features like savings buckets or vaults that help organize and visualize savings goals.
• 🚫 A potential drawback of online banks like Ally and SoFi is the lack of physical branches, which can make certain transactions more challenging.

Q & A

What is a high yield savings account (HYSA)?

A high yield savings account is an account where you can save money to make more money without having to invest in the stock market. It is liquid, meaning you can withdraw funds whenever you like, and it is low risk. Typically, there are few to no fees associated with these accounts.

Why are high yield savings accounts often offered by online banks?

High yield savings accounts are often offered by online banks because these banks do not have the overhead costs like brick and mortar institutions, which allows them to offer higher interest rates to their customers.

What is FDIC insurance and why is it important for a bank account?

FDIC insurance guarantees that your money is protected up to $250,000 in the event of any bank failure. It is important because it provides a safety net for your deposits.

What are the benefits of having no maintenance fees or initial deposit requirements for a high yield savings account?

The benefits include the ease of setting up an account without stressing about an initial deposit and not having to worry about ongoing fees that can eat into your savings.

What is a sign-up bonus and how does it work with Sofi?

A sign-up bonus is an incentive offered by some banks to new customers who meet certain conditions, such as setting up a direct deposit. With Sofi, you can receive a sign-up bonus of up to $300, and it can even be $325 if you use a referral link.

Why is the annual percentage yield (APY) an important factor to consider when choosing a high yield savings account?

The APY represents the interest you can earn by depositing money into the account. A higher APY means more potential earnings on your savings, making it a crucial factor when comparing different accounts.

What is the difference between the APY offered by Sofi and Alli as of July 25th?

As of July 25th, Sofi offers an APY of 4.6% while Alli offers a 4.2% APY on their high yield savings accounts.

What are the benefits of having an APY on checking accounts?

Having an APY on checking accounts means that you can earn interest on the money you keep in your checking account, which is typically used for everyday transactions. Although the rates are small, it's an additional way to earn interest on your money.

What are the 'buckets' or 'vaults' feature in the banking apps and how do they help with financial management?

The 'buckets' or 'vaults' feature allows you to create digital envelopes within your account to organize your money. This helps you visualize where your money is going and manage your savings more effectively, such as setting aside money for specific goals like an emergency fund or a car fund.

What are some challenges associated with online banking accounts like Sofi and Alli?

Challenges include the lack of physical branch access, which can make handling transactions that require in-person assistance difficult. Additionally, cash deposits are not directly accepted, and customers may need to find workarounds. Lastly, there can be considerations regarding ATM access and fees.

What are some personal pros and cons the speaker has experienced with Sofi and Alli?

Pros of Sofi include a sign-up bonus, referral program, and the ability to connect all accounts for a comprehensive financial view. Cons include limited auto-pilot frequency for savings and only one checking account. For Alli, pros include more options for auto-pilot frequency, buckets in checking accounts, and a straightforward user interface. The main con is a lower APY compared to Sofi.

What is the speaker's recommendation for someone considering opening a high yield savings account?

The speaker recommends trying out Sofi for six months and then switching to Alli for another six months to see which one better suits their needs. They emphasize that both accounts are free to open and close, so there is no financial loss in experimenting.