Savings Account FAQ
Frequently Asked Questions about Savings Accounts.
- What is an online savings account?
- Why do I need online savings account?
- What other features do online savings accounts offer?
- Do online savings accounts charge monthly fees?
- How much money do I need to open an online savings account?
- What is an APY?
- How do I choose an online savings account?
- How do I open an online savings account?
- Do I have to change banks to open an online savings account?
- How do I deposit money in an online savings account?
- How do I access my money?
- How often can I access my money?
- Are online savings accounts insured?
- How does NextAdvisor.com come up with its reviews?
Search our blog archives and frequently asked questions for more information about Savings Accounts:
If you can't find the question you're looking for, you can ask it here. Due to volume, we aren't able to respond to every question, but we answer as many as we can on the NextAdvisor.com blog.
An online savings account is similar to a traditional savings account. This type of account allows you to store your money safely while also earning interest. Unlike the traditional savings account offered by your local bank, however, online savings accounts are offered by online banks. These banks conduct their business entirely or almost entirely over the Internet, rather than in brick and mortar locations. Typically, you can only set up such accounts online, through a bank's website. All transactions and customer service interactions occur online or, in some cases, over the phone.
A savings account offers guaranteed returns without risk. If you keep all of your money in a checking account, you are missing out on the opportunity to earn interest, and essentially throwing money away. Since online banks do not have to maintain brick and mortar locations, they are able to save on operating costs. Online banks can then pass that savings on to their customers in the form of higher rates. Online banks generally offer free online banking and often allow you to electronically link your online savings account to one or more existing external bank accounts. This makes it easy to manage and transfer your money. An online savings account offers liquidity, flexibility, convenience and high yields.
Many online savings accounts offer features such as automatic savings and online bill pay. With automatic savings, you can schedule recurring transfers from an existing external account to your online savings account, in order to grow your savings quickly and effortlessly. With online bill pay, you can pay bills directly from your online savings account. Many online savings accounts also offer direct deposit, which allows your employer to automatically deposit all or a portion of your paycheck straight into your online savings account. And a few online savings accounts, such as ING Direct, allow you to create subaccounts, or multiple accounts, to help organize your budget and save toward specific goals or purchases.
Some online savings accounts do charge monthly fees, and some charge monthly fees only when your balance drops below a certain minimum. However, most of the savings accounts reviewed on NextAdvisor.com have no monthly fees and no minimum balances.
Many of the online savings accounts reviewed on NextAdvisor.com have no minimum balance requirements. Some, though, require an initial opening balance of at least $1, or at least $100.
"APY" stands for "annual percentage yield." This refers to the amount of interest earned in one year. This percentage is determined by factoring the interest rate with the frequency of compounding. A higher interest rate and a greater frequency of compounding results in more interest earned for a particular account. This rate can change at any time. Banks can offer a high APY to entice customers, and then lower the APY over time.
While a high APY should certainly be a factor, rates change, so it is not wise to choose an online savings account based on interest rate alone. Some banks with the highest rates also have many strings and conditions, such as a high minimum balance requirement, or an APY that shifts based on your balance or drops dramatically after an initial promotional period. When selecting an online savings account, you should read the terms carefully while considering how much you are likely to deposit in your new account. It is also worth considering the quality and availability of an online bank's customer service, as well as ease and convenience of the online banking interface.
Once you have chosen an online bank account, you can apply online. Some online banks also require a paper application to be signed and mailed. The ease and speed of this process varies widely, depending on the bank. Once your account has been approved and opened, you can deposit funds, which will immediately begin earning interest.
No. Most online banks do not require you to maintain a checking account in order to open an online savings account. You can usually create an electronic link between your existing checking account and your new online savings account, in order to facilitate transfers.
Deposit methods vary depending on the particular online bank, but there are several different methods of transferring funds electronically. Most banks will allow you to conduct transfers online. You can set up direct deposit or automatic transfers. You can also send a check or wire money. Some online savings accounts include an ATM card, which allows you to deposit or withdraw funds from any ATM.
Generally, you can electronically transfer money from your online savings account to your checking account. You can also request that your online bank mail you a check. And if your account includes an ATM card, you can use it to withdraw cash from any ATM.
Federal law limits the number of withdrawals and transfers from all U.S. savings accounts to six per statement cycle. There is usually a $10 fee for each transaction that exceeds this limit. In general, online savings accounts are not designed for frequent access. Although your money is liquid and always available, this type of account should not replace a checking account. There is never a limit to the number of deposits you can make per month.
All of the online savings accounts reviewed on NextAdvisor.com are FDIC insured up to $250,000 per depositor.
We thoroughly test and research all the services in the category. We order each and every service ourselves and test out every feature available. We contact customer service and cancel and reorder each service to make sure that process works as well. After our initial tests, we continue to use all the services and update our reviews as situations change. We also monitor the providers' sites for any service changes or specials. In addition, we research each provider by reading all news and ordering and reading third-party research reports. We only include providers on our site that we believe offer a good value proposition. If there is a provider you know of that is not on our site, you can be fairly certain we did not rate that provider highly enough to include in our comparison. If you think we are missing a quality provider or have any other suggestions or comments, please visit our contact us page.
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