Real short and sweet, huh? Well, that’s the point, because it’s fairly simple. You already know you should be trying to save, so we’ll skip the lecture on that, and just go straight into the where.
You see, the problem with savings accounts at regular, “brick-and-mortar” banks is that their interest rates tend to suck. As I write this, Bankrate puts the national average at an abysmal 0.46%. That means for every $100 you put in a regular savings account, you get 46 cents per year.
Rates at any bank aren’t particularly high right now, thank to recent economic happenings, but you can certainly do better than 0.46% by going online – 2.75% or higher. You can check out current rates by visiting the sites that offer high-yield savings accounts:
There are others – leave a comment if you want to add your favorite! All of these accounts have something in common, though: no minimum and no fees. That’s something you might have trouble getting from a brick-and-mortar bank, as well.
My personal favorite? Capital One 360. I have four online savings accounts (the other three being at E*TRADE, Citibank, and Emigrant), and Capital One 360 has given me the best experience. They don’t always have the highest rate, but their interface and customer service are top-notch. And you can’t beat their referral program!
Truly Frequently Asked Questions About Online Savings Accounts:
Are they safe?
Yeah. These are real banks and real accounts, and the accounts are FDIC insured, just like your accounts at brick-and-mortar banks.
Why is the rate so much higher than regular savings accounts?
Brick-and-mortar type banks have to employ tellers, security people, rent the property, build the building… there’s a lot more overheard to running actual locations. Online banks can set up just one or two office buildings for the whole country. Their lower costs add up to bigger rewards for you.
How do I get money in and out of them?
These accounts electronically link up to your current checking account. The process is easy, and you’ll be walked through it when you open the account. Once they’re linked up, you can do transfers between the savings account and your checking account. Warning: Federal law prevents you from making more than 6 transfers per month out of any savings account. This includes non-online accounts! You can make as many transfers in as you like, however.