If you have worked hard to earn your money you want to make sure and save it. Better yet, you want your saved money to earn interest, so your money can make money. If you want your money to stay secure you should keep it in an FDIC insured bank account. If you want your money to earn the highest interest rates, you’ll want to look at an online-only savings account, rather than a regular savings account at your typical bricks and mortar bank. Let me tell you why.
A savings account from an online provider is able to offer you a higher interest rate than a standard retail bank because they have lower overheads than their branch-hungry peers. When a retail bank needs to cover the costs of running and maintaining their branches, paying their staff and the cost of their property, an online bank has only a fraction of these costs. As a result, a higher bank saves on their running costs and passes these savings onto you in the form of higher interest rates on your savings account.
Online banks will also offer higher interest rates as a way to convert new customers. While online banking and electronic statements are growing in popularity, there is still a mental barrier stopping a lot of people making that final jump to an online savings account. Therefore, providers offering online savings accounts will do so with a much higher interest rate to bridge that gap and encourage new customers to choose their products. That is why you can usually find an interest rate around one to two percent higher than a retail bank, with an online bank.
Just as an online bank account can pass on their savings to you in the form of higher interest, they can also often make your account fee free. That is because you are usually able to open your account entirely online and manage your account via internet banking. If you do have a question or need information you can email or SMS the bank and all of these easy communication methods are also easy and more affordable for the bank. As a result, you’re not only earning more interest on your savings online, you’re also taking home more of your money too because you’re not losing any of it to fees.
At the same time, online banks recognize that accessing funds in an online account isn’t always as easy as with a standard retail account as you can’t just walk into a branch or go to an ATM. Instead you’ll usually need to transfer the funds to another linked transaction account which can take several days. Therefore, online banks will compensate their customers for this inconvenience by giving them a higher interest rate.
Online banks are increasing in popularity as a newer generation is more accepting of doing things online. With higher interest rates, zero account fees, FDIC insured accounts and an easy to use account management system, who can blame them.