Online savings accounts are much like brick-and-mortar bank accounts because they’re FDIC-insured and allow you to make up to six withdrawals per month. Online savings accounts are excellent options for emergency fund savings or a big purchase down the line.
If you’re going to allow a bank to hold your money, make sure you get the best savings account rates possible, because interest rates on savings accounts vary widely. Here are some examples of good online savings account features and rates, as of Sept. 12, 2017:
- CIT Bank offers a 1.35% APY on balances up to $100,000 — and 1.25% APY on balances over $100,000.
- The Capital One 360 Savings Account allows you to separate savings within your account and assign names and goals for each one.
- Ally Bank offers an intuitive app and an online savings account rate of 1.20% APY that compounds daily.
- Goldman Sachs Bank’s online savings offers a 1.20% APY and requires no minimum deposit to open.
Note that finding the best online savings account for you goes beyond finding the highest interest rate. Explore this financial tool and what you should consider when you’re considering an online savings account.
How to Find the Best Online Savings Account
Finding the best online savings account for you often goes beyond looking for the highest interest rate. Five factors you should take into account when searching for the best online savings account include the following:
- Reliable app that includes mobile banking
- Competitive interest rate
- Sign-up bonus
- Allows you to delineate savings accounts for various goals
- Excellent customer service
In addition, if you prefer banking in person occasionally, check for the availability of physical branches. For example, a Schwab high-yield savings account might not have the highest interest rate, but you might like that Schwab has branches you can visit, unlike an online-only bank.
Find Out: Ways Online Banks Are Saving You Money
Pros and Cons of Online Savings Accounts
The great thing about having a savings account at an online bank is that you can usually find an interest rate that exceeds 1 percent. If you use your account mostly to deposit and withdraw cash, however, online banking might not be right for you. Review the pros and cons so you can make an informed decision.
Pros of Online Savings Accounts
Online savings accounts offer a number of advantages. Here are the benefits you’ll enjoy with this kind of account:
- Typically, online savings account interest rates are near or above 1.00% APY.
- Online banks offer the same protections as FDIC-insured branches.
- Online savings accounts allow up to six free withdrawals per month.
- Some offer the ability to name your savings accounts and assign goals.
- You can fund the account and make transfers to an online account by linking an external checking or savings.
- Some accounts come with significant sign-up bonuses.
Cons of Online Savings Accounts
Before committing to this kind of account, understand what the drawbacks are. Here’s what you should be wary of when considering an online savings account:
- You generally can’t deposit or withdraw cash directly to or from your account.
- Most online savings accounts don’t have associated physical branches where you can talk to a banker or teller.
- You might find better sign-up bonuses from brick-and-mortar banks.
How to Open a Savings Account Online
Once you’ve chosen a high-interest savings account, you can typically open it online within a matter of minutes. You’ll need to provide personal information, like your date of birth and Social Security number, and link the account to an external one so you can fund it with your first deposit.
The best online savings accounts offer interest rates in excess 1.00% APY, which is significantly higher than Bank of America and Chase’s 0.01% APY rate on their regular savings accounts as of Sept. 12. Finding the right online account for you will come down to a list of factors that go beyond the best APY. Once you’ve found the best match, an online savings account will provide a convenient way to accelerate your savings goals.