In recent years, the banking industry has moved away from specialization — which is unusual. These days, most businesses have found that mastering their craft and becoming the best is vital to their success. The goal is to develop expertise and leadership within a limited range or products or services to achieve maximum productivity. By maximizing productivity, those businesses stand a better chance of becoming profitable.
Banks, however, haven’t seemed to follow that path. For some reason, banks continue to expand their offerings.
Technological advancements have made it possible for financial institutions to experiment with new products and services without sacrificing quality. And the numbers suggest that consumers are pleased with these new online offerings. As of 2017, more than 50% of traditional in-branch bank transactions were conducted online.
British-based Barclays is a well-established brand that has entered the online-only consumer banking industry thanks in part to the lower barrier to entry brought on by technology. While Barclays is the second largest bank in the United Kingdom, it’s a relative unknown in the US so you might not know much about the Barclays brand. But don’t dismiss Barclays just yet.
Barclays has some standout features such as excellent annual percentage yield (APY) on savings accounts and certificates of deposit (CDs) that merits your attention. With that in mind, I decided to take a look at Barclay’s savings products. Here’s what I found.
What is Barclays?
Originally founded in 1690, Barclays is well-established to say the least. Barclays is headquartered in London and currently operates in various facets of the financial sector in more than 40 countries. Among other things, Barclays offers services for wealth management, credit cards, and loans.
As I mentioned earlier, I want to focus on Barclays online banking options – specifically their savings and CD accounts.
Barclays is an online bank with no local branches. Unlike other primarily online banks like Varo or Capital One 360, Barclays isn’t trying to become your one-stop-shop for all your banking services. Instead, Barclays wants to be one piece that fits into your overall personal finance puzzle. After all, Barclays doesn’t offer a checking account so it’s unlikely that Barclays could fulfill all of your banking needs. What Barclays wants to do is entice you to take advantage of their competitive savings and CD rates. Barclays’ excellent rates are part of what has made them a desirable online bank for consumers to use in tandem with other financial institutions to address their banking needs.
There’s no minimum deposit required to open a new account with Barclays. Plus, there aren’t any monthly maintenance fees or fees for regular activity on this account. There’s a $5 non-sufficient fund fee. But since you won’t have a checking account to issue checks from, you shouldn’t ever get hit with that fee!
Barclays Online Savings Account
The Barclays Online Savings Account gives consumers an opportunity to stash away any amount of cash with a solid APY. At the time of publication, the APY sits at 2.05%. It’s worth noting that the APY can change at any time as market rates fluctuate.
By comparison, major banks like Chase and Wells Fargo tend to pay 0.01% on their standard savings accounts. Yikes! To put it into perspective, Barclays 2.05% APY is 22 times the national average!
Barclays Online CDs
CDs tend to be popular savings vehicles because they are easy to understand. Deposit funds and lock in your APY. Don’t touch the money for a set period of time. If you do, it kills your return.
Barclays CD Accounts are no different. But they do have some unique features that aren’t standard across the industry. Most noteworthy is that Barclays doesn’t have a minimum fee to open a CD Account.
When you place funds in one of their CD options it will give you a list of term lengths with corresponding rates of return. Here are their current rates:
Another nice feature is that you can immediately withdraw any accrued interest penalty-free at any time. You can even set up automatic transfers so that your monthly interest payments are sent directly to a checking or investment account.
For example, let’s say you choose the 5-year term with a 3.10% APY. You might want to set up automatic transfers to any send accrued interest to your Wealthfront brokerage account on a monthly basis for the life of the CD. Once that money hits your investment account, you’re basically playing with house money. This concept might give you a little more courage to take some risks with your investments.
In contrast, if you want to use the CD Account to accumulate funds for a specific life event, you can always leave the money right where it is.
Early Withdrawal Penalties
Lastly, Barclays levies reasonable penalties if you need to withdraw some money from your initial deposit before the CD reaches maturity. Here are the early withdrawal penalties:
- 90 days’ worth of interest for CDs of 24 months or less
- 180 days’ worth of interest for CDs longer than 24 months
Barclays also has a nifty tool to help you create a CD ladder. A CD ladder is a series of CDs with maturity dates that are staggered over time. Creating a ladder makes it possible for you to never be too far away from being able to access a portion of your savings. Or, if you really need to close a CD, you can do so by forfeiting interest on a single CD account rather than losing interest on your entire CD balance.
Where Barclays Can Improve
You might actually be able to interpret the most common complaint about Barclays as a positive. The complaint? Barclays doesn’t offer checking accounts or other many other traditional banking features. That means most Barclays customer have to look elsewhere for a standard checking account. Admittedly, that can be more hassle than a 2.05% APY is worth. But for many, getting a high savings account yield is worth the extra effort.
Consider this: if you’re using a Barclays Online Savings or CD Account to hold your down payment funds for your future home, you might not want easy access to that money. Plus, it’s not that difficult to transfer funds between your Barclays account and a checking account at another institution. It can be done with just a couple clicks.
Excellent Interest Rates. Barclays’ interest rates for Savings and CD Accounts are among the best in the industry.
- Fee Friendly. Barclays accounts are light on fees.
- No Minimums. There’s no minimum deposit required to start earning interest with a Barclays Savings or CD Account.
Limited Account Options. You won’t find any checking or money market accounts here – just Savings and CDs.
- No ATM Access. Customers can only withdraw funds by electronic transfer from another linked bank account.
Is Barclays Right for You?
Barclays operates as a mature company with longstanding consistency. They have solid, though not superb customer service ratings. But most importantly, Barclays Savings and CDs feature top-tier interest rates. If your sole motivation is to earn every last penny of interest available, then you can do better elsewhere by the slimmest of margins.
With Barclays, you know you’ll maintain a solid rate of return year after year. This means you won’t have to worry about searching for a new bank to maximize returns every few years.
Finally, Barclays isn’t in the business of offering a wide spectrum of banking services. That makes Barclays a logical choice only if you’re pleased with your current banking service but looking to improve upon their savings or CD rates.