This post contains references to products from our advertisers. We may receive compensation when you click on links to those products. The content is not provided by the advertiser and any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any bank, card issuer, airline or hotel chain. Please visit our Advertiser Disclosure to view our partners, and for additional details.
Having a savings account is pretty much taken as an article of faith among those in the personal finance world. You are supposed to have a savings account — and you are supposed to look for the highest yield or interest rate.
In many cases, the highest yield is likely to come from an online source because of their limited services and low overhead.
Pros and Cons of Online Savings Accounts
Before you decide to open an online savings account, it’s important to research your options and understand the realities that come with online savings accounts.
Better Interest Rates
The main advantage to an online savings account is the higher yield. Traditional brick and mortar banks are paying yields of between 0.1% and 0.3% right now. But if you put your money in an online savings account, you could earn a yield of .40% and more. While this is hardly “high yield” when compared with the 4% and 5% yields common prior to 2008, it is still better than what you will get at a brick and mortar bank.
Inconvenient Access to Funds
The biggest downside to an online savings account is your access to the funds.
While you can mail paper checks to some online banks for deposit, it’s more common to transfer money from your checking account into your online savings account. And, if you want to withdraw your money, chances are that you need to transfer it from your online savings account to your primary checking account. This can take three to four business days — which can problematic if you need your money immediately.
Some online savings accounts have ways around this, though. You might be able to link your online savings account with an online checking account with the same bank. You can then instantly transfer the money to the linked checking account and use the debit card to withdraw the money from the online checking account.
Finally, there are some banks that will send you an ATM card for use in withdrawing money from your account. You need to be careful in these cases, since you might end up paying ATM fees. Your bank might not charge you, but the bank that owns the ATM may. Some online banks reimburse consumers for all fees, though. This can be a way to access your money quickly and conveniently without worrying about ATM fees.
Which Online Savings Accounts Are the Best?
When deciding which online savings account is likely to work best for you, start out by looking at interest yields. You need to look beyond the Annual Percentage Yield (APY), though. Some of the items to consider include:
- Minimum balances
- Fees
- Introductory periods
- Customer service
- FDIC insurance
With an online savings account, it is also important to consider how you will manage your funds. An easy-to-navigate website is essential if you plan to do the bulk of your banking via the Internet. Many online banks provide live chat so that customers can contact support quickly and easily.
Here are the best online savings accounts, all of which are FDIC-insured.
CIT Bank
CIT Bank’s Savings Builder is a tiered interest rate account that offers up to 0.50% APY.
A minimum $100 deposit is required to open an account. There are no fees to open or maintain an account. You can call customer service 24/7 or contact them online through the website.
Click here to open an account now!
Source: wisebread.com