If you've ever tried opening a savings account at a bank only to be frustrated with their numerous requirements and monthly fees, you're not alone. Thankfully, online savings accounts exist. Here are 5 reasons why online savings accounts are an easier and more fruitful way to save your money:
1. Higher interest rates means more money for you: Unlike traditional banks, online banks don't need to maintain branches and have less employees to pay, which means that they can offer you much higher rates. Currently, a savings account at Bank of America offers .01% APY, while Ally, one of the highest-rated online banks around, is offering a .90% APY on their savings account. Want to see how much money you can make with the top online savings accounts? Try our free online savings calculator.
2. No fees and no minimum balance requirements: Just as online banks can offer higher interest rates, they also don't feel the need to charge monthly fees. Additionally, they understand that everyone starts saving somewhere, whether it's $5 or $500. Thus, they usually don't require you to maintain a minimum balance, like most traditional banks. Of course there are exceptions, like Everybank's online savings account, where you are required to keep a $5,000 minimum balance or you are charged the monthly fee. On the other hand, if you have over $5,000, Everbank's interest rate is a high one at 1.25% APY for the first 6 months and 1.05% thereafter.
3. Convenience and flexibility: Upon signing up for an online savings account, you link your new account to a checking account you already have at another bank. From there on out all you need to do is sign on and transfer money with just a couple of clicks. You can do this from a computer or your phone, anywhere you go. These sites are user-friendly and easy to use, plus they usually have great customer service. An example of the service is the American Express savings account — their phone support is available 24 hours a day, 7 days a week. Read our full review of American Express savings.
4. Security: If you've been using a piggy bank or a shoebox under the bed to store your cash, chances are you're probably not being as safe as you can be. Online banks are just as secure as regular banks, while making you more money. Online savings accounts are FDIC insured up to $250,000 per depositor. They use SSL encryption, protecting all of your information from being intercepted, plus other security measures.
5. Less temptation, more saving: When you've got cash or an ATM card linking you to your savings, it's easy to spend. Transfers from your online savings account to your regular checking usually take about 2 business days, lowering the temptation to instantly spend your money.Online Savings Accounts