With the economic downturn, most people are now realizing the need to save when they can. This realization has sparked an increase in personal savings, which only goes to confirm that there is more control on the spending and people are resorting to more frugal ways. Now that you have joined the league of spend less and save more, what do you do with the extra cash every month? If you need high liquidity with the best interest rate but do not want to pay any fees, an online savings account is the best option.
Online savings vs. traditional savings account
An online savings account is different from the savings account offered by traditional banks. Unlike traditional savings account that you may be familiar with, an online savings account gives you a higher interest rate and often requires no fees for processing and transacting. Also, these accounts have no minimum balance requirements, which gives you enough liquidity. Contrary to the traditional form of banking, an online savings account allows you to conduct all activities electronically.
If you are apprehensive about the online bank’s reputation, then there is a reason to smile. Most online banks operating today offer excellent security for your hard earned money and offer FDIC insurance protection up to $250,000. With such high level of assurance, it will be a waste to stash away your cash in a traditional savings account that gives you a fraction of the interest rate offered by online banks.
There are many online banks operational today. Before you settle in for one of them, it is best to do some research and compare the offers from different banks. There are mainly three criteria that need to be evaluated to compare the offers.
- Interest rates – Obviously, the interest rate has to be the most important factor for comparison. Though the interest rates fluctuate with the economic policies of the government, some banks are able to offer consistently higher rate of interest than others. Check for banks, which have been able to give the highest rate of interest despite market conditions. Some people try to open accounts in multiple banks and try to take advantage of the higher interest rates. This may not be feasible unless you have plenty of time to check the interest rates and keep transferring money from one bank to the other.
- Minimum Balance requirement – Most of the online banks do not require you to maintain a minimum balance, but it is better to check for any hidden terms and conditions. You will not want to be taken in for surprise at a later date since banks charge a fee for not maintaining a minimum balance. Some banks also offer a higher rate of interest if you maintain a minimum balance.
- Simplicity of operations – You will do all transactions online. This means that the website of the bank should be easy to navigate and user friendly. You may also want to check the uptime of the site.
You can also check for other features like online payment of bills and free unlimited online transactions. Open your online savings account today to stash away cash for a rainy day and also enjoy the power of e-banking!