The financial future always contains a level of uncertainty, but the right planning offers security and peace of mind. A trusted savings account is a necessary piece of a solid financial plan. Online savings accounts contain short and longer investments, maybe for a new car or funds for your wedding. You can also use bank accounts online to save money for emergency expenses.
Fortunately, technology and competition have made it simple to keep money in trust at different institutions. Checking, savings, and investment can be in different locations so you get the right accommodations and best returns on your money.
Rates and Fees
The first thing to look for when comparing online savings accounts is a relatively high interest rate. Your savings should at least keep up with the inflation rate, if not exceed it. In addition, the best rates are generally offered by online banks. A good rate entices new customers to a new or unfamiliar bank, but also while brick-and-mortar institutions generate more expenses, bank accounts online can pass on savings to their clientele.
Various websites compare the most competitive interest rates offered by banks. Verify the bank, and therefore your money, is FDIC insured. Therefore, you avoid any lucrative teaser rates; check to make sure the interest rate has been stable for at least the past six months. Also, beware of any offers that charge monthly operating costs, and weight the cost of any additional hidden fees.
Some accounts penalize you if you make too many withdrawals within a month; after all, banks rely on your stability, just as you rely on theirs. It takes a few business days to transfer money between accounts. This provides insulation from most impulse buys and generally prevents you using designated savings as a credit account, but it may also prevent immediate withdrawal even for emergencies. Also consider linking the account with your other banks, paychecks, or brokerage accounts, because in the end, the real growth comes from the money you regularly add to the account, not from compounding interest.
Perks and Services
Lastly, look at what services they offer. More services in exchange for a lower interest rate may be a trade off worth making; if for example, you need the peace of mind that comes with direct customer assistance. If you are planning to hold a lot of money in the account, see if they offer better interest rates for their executive customers. There may be ways to partition your money into separate goal-oriented accounts. In addition, look at the penalties for quick withdrawal- if an emergency does come up, you want to know how to get the money out quickly, and at what cost.