If you’ve been researching savings accounts, you might find that online banks offer higher interest rates than your typical big bank. An important thing to keep in mind for both online savings accounts and traditional savings accounts is to make sure they are FDIC-insured before you make your decision. Continue reading to learn more about how online savings accounts work.
American Express® High Yield Savings Account - You earn 0.40% interest rate along with no minimum deposits or monthly fees. Amex High Yield Savings account has been my favorite Hub account for the past 7 years. Using this account to Pull/Push your money is absolutely necessary when you have many accounts. Here's why:
*No dollar limitations for ACH transfers - When you find a top bank rate account, you don't want to be limited to just $5K or $10K transfers. Amex Savings will let you transfers as much as you want whether you are pulling or pushing money from and to an external bank account.
*1 to 2 business days ACH transfers speed - With top-notch user interface, you get your money to another external account or pull money from another bank account within a day or two.
*No loss of interest during transfers - On the day you initiate your transaction on the high yield savings account website, the funds will be reflected in your Current Balance and begin earning interest.
Some other features from American Express High Yield Savings Account include Free Wire Transfers, 3 maximum linked accounts, and maximum 6 ACH withdrawals per month.
Savings account offers are frequently updated. Find the best nationwide Savings/Money Market rates here, and the best Savings account bonuses here. The Axos Bank and CIT Bank accounts offer great rates available nationwide which I recommend.
|Discover Bank Online Savings||$200 Bonus + 0.40% APY||Review|
|Aspiration||1.00% APY + $150 Cash||Review|
|Axos Bank High Yield Savings||Up to 0.61% APY||Review|
|Quontic Bank High Yield Savings||0.55% APY||Review|
|CIT Bank Money Market||0.45% APY||Review|
|American Express High Yield Savings||0.40% APY||Review|
Table of Contents
How Online Savings Accounts Work
Just like a traditional savings account, you simply deposit your money into your account. Then, the bank can use that money to lend out to customers through personal and business loans. The borrower pays interest on their loan to the bank.
The reason why online banks can offer much higher interest rates on their savings products is because they do not incur the overhead cost of maintaining physical branches. Keep reading to learn more key differences between having an online savings account and a traditional savings account.
Online Savings Vs Traditional Savings Accounts
Consider these variables when choosing which type of savings account to open up:
As mentioned above, online savings accounts usually have higher APYs than what can be offered by traditional banks, ranging from 1.5% to as high as 2%.
Because these products compound interest, you will be able to grow your savings much quicker. In contrast, traditional savings accounts usually offer rates below 1%, with the average being about 0.1%.
Some online savings accounts advertise no monthly maintenance fees, however those fees are usually just waived if you can manage a minimum balance.
Traditional savings accounts do this too, so there’s no escape. The only thing you can do is compare both accounts to see which ones have waive their fees the best.
Most traditional banks now let you apply for an account on their website as well as at physical branches. Online banks will guide you through a similar, straightforward process on their website.
Whether you apply online or in person, the personal info required is usually the same. You’ll need a government-issued ID, your SSN, and a mailing address.
Average time of account approval will depend on the bank, though it’s typically quick. Approval can take anywhere from 10 minutes to 1 day, with online banks usually making a quicker approval.
Most savings accounts, online and traditional, require that you deposit money into the account to officially open it.
The amount in question will depend on the bank you decide to work with (some require as little as $1).
To make sure you get the best deal for you, make sure you do your research into each of your bank choice’s minimum deposit.
Both online banks and traditional banks are required to limit the number of transfers and/or withdrawals that customers make from a savings account (for transfers, usually no more than 6 per month).
Online banks may also take slightly longer to process transfers and withdrawals. Learn each bank’s transfer/withdrawal policies and what fees you might incur by exceeding the limit.
Generally, deposits are going to be slightly easier with a traditional savings account. All you have to do is stop by your nearest branch and deposit your check or cash in a couple of minutes.
Online banks require a few more steps. You can either deposit your funds into a traditional bank that you currently bank with and transfer the funds over or use an ATM that is in your bank’s network.
This area is another spot where traditional banks may have an advantage over online banks.
Using a traditional bank, you have the option of interacting face-to-face with your teller to talk about your needs.
Online banks do not provide this option, but they do still offer excellent customer service using the phone or chatrooms.
Traditional banks may also have the advantage when it comes to selection of financial products, like mortgages, auto loans, insurance policies, and more.
Many online banks specialize in just a few types of accounts at most.
If you’re hoping to bundle several products from the same institution for easier banking, consider a traditional bank instead.
How To Open An Online Savings Account
Once you’ve decided to go with the online banking route, here are the general steps on how to get your account set up:
- Choose your bank. Research the terms and yields of different online savings accounts to find one that fits your needs.
- Gather your documents. This includes a government-issued ID, your Social Security number, and proof of residence/mailing address.
- Submit an application. Fill out an application online with your personal information.
- Fund your account. Transfer funds into your online savings account and include at least the minimum balance amount.
Recommended Online Savings Accounts
• Earn up to 0.61% APY with interest compounded daily and no monthly fees with the Axos Bank High Yield Savings account
• No minimum balance requirements
• Free ATM card upon request
• $250 minimum opening deposit
• Free Incoming Wires
With the American Express® High Yield Savings Account:
• Earn 0.40% APY on your deposits. Your High Yield Savings account earns interest daily and is posted to your account monthly.
• Links easily with your current bank accounts. No need to switch banks.
• FDIC Insured. Your account is insured to at least $250,000 per depositor.
• No monthly fees, no minimum balance.
• 24/7 Account Access
With the CIT Bank Savings Builders account:
• Earn a top tier, competitive APY on your money—one of the top savings rates in the nation. Earn 0.40% APY on your funds - grow your savings faster.
• Build a habit of savings. Pay yourself first. Start with $100 per month and build your habit of savings-—all while getting a top rate.
• FDIC Insured
Open a Discover Online Savings Account for all these features:
• Bonus offer applies for your first Discover Online Savings Account
• Earn $200/$150 Bonus with promo code HMB21 by 12/15/2021
• Fund your first savings account with at least of $25K within 30 days of account open date to earn the $200 Bonus
• Fund your first savings account with at least of $15K within 30 days of account open date to earn the $150 Bonus
• Earn high interest rate of 0.40% APY
• No minimum opening deposit, no minimum balance requirement, and now no fees
• Interest on Discover Online Savings Accounts is compounded daily and credited monthly
• Manage your account online or with the Discover mobile app
• FDIC insurance up to $250,000
See advertiser website for full details
Online savings accounts can be a great tool for you with several great perks such as high APYs, mobile convenience, and generally lower fees. To make the best decision for you, compare the different terms and conditions of each bank that you’re considering.
When making your choice in bank, check each of their APYs to make sure you have the best chance to grow your money! For more posts like this, check out our list of bank guides!