When it comes to making your savings grow, there are many options out there ranging from investing in CDs to playing the stock market. However, one of the most popular and the most common ways to save money is by opening a savings account. Putting your money in a savings account is safe, and it accumulates interest. However, are you really accumulating enough interest on your savings account to make it worth your while?
According to the FDIC (Federal Deposit Insurance Corp), the national average interest rate on savings accounts currently stands around 0.10% APY. This includes both average and jumbo accounts (balances over $100,000). And on average, a typical savings account at a bank earns anywhere from 0.01% to 1.0% in interest. That’s not much growth on your hard earned money.
Online savings accounts, on the other hand, can dish out much more in interest than a traditional one. This makes them a great option for people who want their money to grow. Here’s how having an online savings account can help your money grow.
What Is An Online Savings Account?
Simply put, an online savings account is an account offered by a bank that does all of their business, or at least a vast majority of it, over the internet. Some online banks may have at least one or two physical branch locations, while others don’t have any, and instead have customer service call centers, operational support personnel, and online bank executives.
While the thought of keeping your money in a bank with no brick-and-mortar location may sound scary or unsafe, it’s really not. The best online banks are strictly regulated by the FDIC which means your funds are just as safe with an FDIC-insured online bank as they would be at a physical bank location.
In addition, with an online bank, you are likely to get better technical support – all without having to get in your car and visit a branch in person. In fact, many online banks offer 24/7 customer support as well as online chat features that make it easy to resolves issues. As long as you do your research first and opt for the best online bank, opening online savings accounts is one of the best ways to make your money grow.
Types of Online Savings Accounts
Just as you would find at a brick-and-mortar bank, online banks offer a variety of savings accounts types including:
- Regular savings accounts,
- High-interest savings accounts,
- Money market accounts,
- Jumbo savings accounts, and
- Certificates of deposit.
However, while not all online banks offer all these types of accounts, you can almost always find regular savings accounts and CD options.
Two Ways Online Savings Accounts Can Help Your Money Grow
In many cases, online savings accounts can help your money grow better than it would with a brick-and-mortar bank. Here’s why:
Higher Interest Rates
Many online accounts offer higher interest rates. This is because online banks don’t have the same expenses and overhead associated with maintaining physical bank branch locations. Savings accounts rates at online banks can reach upwards of 1.5% to 2% annual percentage yield! That is many times higher than the national average of 0.10%. And while it may not sound like that much of a difference, over time it really adds up.
Lower and/or No Unnecessary Fees
Another way online savings accounts can help your money grow is through fees, or rather the lack thereof. Many of the fees that you are used to seeing with brick-and-mortar banks are simply not found in the online banking world. Fees such as monthly maintenance fees, account inactivity fees, statement fees, fees for not making the minimum number of direct deposits, and others can easily (and quickly) eat up any interest you’ve earned on your savings; even more so when the national interest rates fall.
With online savings accounts, your funds are free to go to work building interest instead of paying miscellaneous fees.
Having a savings account is an important step toward financial success. However, only the best savings accounts can help you meet your financial goals. And these days, the best seems to be online savings accounts. With time and little research, you can find the best online savings accounts to help make your money grow.