Why Are Online Savings Accounts a Good Investment?
Online savings accounts are able to save costs and generally offer higher interest rates (APY) than brick-and-mortar banks. The average rate for savings accounts has fallen below 0.25%, according to Bankrate.com.
When picking an online savings account, it is important to make certain the funds invested will be FDIC insured with a $250,000 limit. Make certain there are no fees for account maintenance, the business is established and that it provides good customer service.
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Function
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Online savings accounts allow you to invest money with online institutions that generally provide higher interest rates than traditional banks. They are able to do this due to lower costs, since there is less overhead. Limiting the number of monthly fund transfers is common among online savings accounts.
Features
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Outside of providing higher interest rates than traditional institutions, online banking provides considerable convenience. Funds can easily be spread among different online savings accounts that have features you prefer.
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Considerations
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There are a variety of institution options to consider when choosing where to invest in an online savings account. ING Direct is recommended at the Saving to Invest website for its strong brand, good interface, customer service and rates. Ally Bank is considered to be a new competitor.
Benefits
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Online savings accounts provide higher yields (APY) and convenience. In volatile economic times, it is wise to invest funds in stable and higher-yield accounts that provide some passive income.
Misconceptions
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Some people are concerned about the safety of having their funds in an online account. As long as the institution is properly established and accounts are FDIC insured, funds are as safe as they would be in traditional brick-and-mortar banks.
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References
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