Do you want free money? My guess is that your answer is yes, and I have a way for you to do it that you probably aren’t taking advantage of. If you are trying to save money then hopefully you have a savings account (makes sense, right?) But did you really think about what bank you chose to put these savings in? Like did you really think about it, compare different bank options and everything? If you are like most people (including me) you probably did not. Most likely you use the savings account connected to your checking account. It is so easy and it was already there. What you didn’t realize is this: you are losing out on free money.
Many of us don’t shop around for the best bank to park our savings in and this is a huge mistake. Because unless you are just insanely lucky, chances are that there is a bank out there with a better interest rate. This means you are losing out on free money (yikes). In recent years the emergence of online savings accounts have provided many high yield options. To keep you from making more money losing mistakes I will break down what they are and why you should get one.
What is an Online Savings Account?
An online savings account is just what it sounds like – a savings account that is accessed exclusively online. This has many benefits. It is accessible 24/7 and you can transfer money without having to visit a bank. It also offers savings to you. The bank isn’t having to pay for brick and mortar stores and tellers, and in return they can offer higher interest rates. There are a few pros and cons to these savings accounts, so read through them carefully and figure out whether or not an online savings account is for you.
The Benefits of an Online Savings Account
A quick list of benefits are:
- High interest rates
- Low fees
- 24/7 access
As mentioned before the interest rates are so much better – as in around 10x better than you are probably getting right now. There also aren’t as many fees associated with the account, which means more money for you to save. Everything is accessible online all the time. These are pretty straightforward.
The Cons of an Online Savings Account
However these benefits come at a small price:
- Must have an account to transfer from
- Online and call only – no bank to visit
- For long term saving
Perhaps the biggest downside of an online savings account is the fact that there are no ATMs for you to just go deposit cash or a check directly. In order to deposit money you would have to put it in your checking account, then transfer from your checking account to the savings account. This might be annoying to some people.
If you like to sit down and talk to someone face to face, this isn’t for you either. All matters will be dealt with online or on the phone.
This is a more long term option, many won’t let you keep transferring money out. So if you don’t think you will be able to keep the cash there for a while you might not want to do it.
Is an Online Savings Account for You?
Taking the information above into consideration you can decide whether or not an online savings account is for you. If you are planning to just move money from your checking to a savings account periodically without needing it much this should be just fine. Transfers are easy enough, and you shouldn’t need much assistance for that. If you have more specific needs than that you might want to consider if the benefits outweigh the costs. Remember that these accounts usually have significantly higher interest rates – the switch might just be worth it anyway.
Choosing Your Online Savings Account
If after careful consideration you have decided to make the switch then hooray! Now what? There are plenty of online banks out there, so go through the options carefully. I’m no financial advisor so I can’t give you advice but I would be glad to point you in the direction of the best resources and factors to consider.
Some things to keep in mind when choosing an online savings account for you are:
- Bank Credibility
- Minimum balance required
- FDIC backing
- Fees associated
- Any bonuses you could receive
Here are a couple lists of good online savings accounts for 2017
The Bottom Line
Online savings accounts offer high yield benefits and often have less fees associated with them. They do come with the catch of having to perform all actions online or through the phone and are harder to access in a short amount of time. They can be an excellent options for you if you are looking for a place to park some money and let it rack up interest.
Would you consider an online savings account? If so, with what bank?