Online Savings Account

An online savings account earns higher interest rates and as a result is a great place to put excess cash. While some may worry that having an online savings account means not having access to your funds nothing could be further from the truth. Electronic banking has come a long way, baby, and today’s online savings account (depending on who you bank with) is accessible almost anywhere.

What Are The Benefits of an Online Savings Account

There are a number of benefits to having an online savings account, and we’ll try to run through as many of them as we can think of for you. Here’s a quick list I was able to come up with in just a few seconds:

• Pays higher interest rate
• Interest rates adjust quickly upward as economy improves
• Accessible anywhere there is internet access
• (Usually) is FDIC insured – be sure to check with bank
• Can access funds with credit card or debit card
• Works with your personal finance software (quicken, money, etc.)
• Many allow online bill payment
• Low or no fees – usually none with minimum balance
• Low minimum balance requirement – usually just $100

Earn Higher Interest with an Online Savings Account

While right now online savings account interest rates are only about 1% higher than your local savings bank, online interest rates will climb rapidly once the economy has recovered. Your local bank’s rates are going to stay right where they are, in the hopes that most people will be too scared or stupid to move their funds to a higher rate account online.

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How high can we expect interest rates to go? Well the last time the economy was more or less normal online savings account rates more or less followed the Federal Reserve Funds Rate plus a premium, so if the Fed jumps rates up to 3% at some time in the not too distant future then as you can imagine online savings rates will probably be in the 3.5%-5% range depending on their offers at any given time. Although we may be some time off from seeing 5% rates again with an online savings account one never knows what the future will bring economically. Things have been getting better after all.

Access Your Online Savings Account Anywhere You Can Reach the Internet

This should basically be a “well, duh!” moment for just about everyone reading but when you think of opening a savings account at a local bank, one of the criteria that is usually important is the ability to walk in to a branch and access funds. Things are done a bit differently with an online savings account. The way funds are accessed is via the internet. That is how you will check your balance. That is how you will (many times be able to) pay bills. That is how you will transfer funds into and out of the account.

Now here’s the best part: given most everyone today has a phone that is capable of accessing the internet – it is literally possible for you to access your online savings account wherever you take your phone! While I don’t advocate running around accessing your savings account with your phone all over the place, the point is that if you absolutely HAD to move money from your account to pay a bill or help a friend or family member… it is literally possible to do it with a couple of clicks on your smart phone touch screen. Try THAT with your local savings bank (although truth be told some are getting better… slowly…).

Low or No Fees and Minimum Balances

Another advantage of the online savings account model is that there is a very low overhead structure – meaning the online bank doesn’t have to rob you blind with fees in order to pay salaries and heating bills. As a result they can offer accounts with low fees, easy access, and very small (usually $100) minimum balances.

Truth be told it’s a great time to open a online savings account. They’re safe, they’re accessible, and the interest rates simply can’t be beat.