An online savings account is an electronic account that you access via your computer or a mobile phone. You can open an online savings account with traditional banks, such as Wells Fargo or Bank of America, or banks that exist strictly online, such as Ally Bank or Synchrony Bank.
Online-only banks typically pay higher interest rates, as they don’t have the added expenses that come with physical branches. Here’s a look at how opening a bank account online can benefit five types of people.
Who Should Open an Online Savings Account?
A savings account is beneficial for anyone who wants to safely tuck away some money for a rainy day or a savings goal. An online savings account, however, is better suited for some people than others. If you’re tech-savvy or are too busy to go to a bank branch, consider an online savings account.
Online savings accounts can only be accessed via the internet, so people who are well versed in technology are natural candidates for these accounts. Provided you have an internet connection, you can view your online account via the bank’s website or mobile app. Most banks also offer the ability to transfer funds or make remote deposits. If the bank is insured by the FDIC, online-only savings and deposit accounts are covered by FDIC insurance up to $250,000.
Find Out: Pros and Cons of Online Savings Accounts
Folks on the Go
If you travel a lot or are constantly on the go, an online account might make your banking life easier. With an online account, you can eliminate bank visits. You also get up-to-the-minute account balances and a host of banking services. If you need to talk to a banker, even an online bank like Ally Bank offers 24/7 service from a live person. The convenience of online banking might also appeal to people who live in more remote areas or people who cannot get to a bank easily.
If you’re looking for high interest rates, you’re better off using an online-only bank. As of Sept. 5, 2017, the FDIC’s national average interest rate for a savings account is 0.06% APY, but some online-only banks pay 1.20% APY or even higher. Although it can be more difficult to make a deposit at an online-only bank — Ally Bank, for example, does not accept cash and only accepts scanned or mailed checks — the payoff in higher interest might be worth it. With Ally eCheck Deposit you can deposit up to $50,000 in a single day and up to $250,000 for each 30-day period, which is higher than some regular banks allow through their mobile apps.
Many banks offer special accounts tailored to younger savers, including children, teens and college students. For example, Capital One offers a Kids Savings Account with an automated savings plan, an annual interest rate of 1.00% APY and no fees or minimums. Alliant Credit Union has a free teen checking account featuring no minimum balance or service fee, a free Visa debit card, and a 0.65% APY interest rate that allows 13- to 17-year-olds to manage their account through mobile and online banking. Kids and teens are often familiar with online activity, and opening an online savings account could be more of an incentive younger people to save than visiting a physical bank branch. And, Alliant’s Kids Savings Accounts for children age 12 and younger offer a 1.11% APY and no fees.
Traditional Banking Clients
Even traditional banking clients can benefit from an online savings account. Wells Fargo online banking, for example, offers many of the same services as online-only banks, including bill pay, 24/7 account access, and the ability to transfer money and deposit checks from a smartphone or computer. Bank of America online banking provides the same services plus a budget tracker. One downside with online accounts of traditional banks versus online-only banks is the interest rate. CIT Bank, for example, pays 2.40% APY on its online savings account, whereas Wells Fargo only offers 0.01% APY.
Regardless of your banking needs, all online savings accounts offer the convenience of 24/7 account access and the ability to transfer money. Research the various options to find the best online savings account for you.
Rates are accurate as of Sept. 5, 2017, except for Capital One and CIT Bank, which are accurate as of today.