Looking for a high yield savings account with no minimum balance requirement and the ability to withdraw anytime? It’s something you typically can’t find at your local bank or credit union, where rates for simple savings account rarely eclipse 2% and, if they do, they require minimum deposits of $1,000 or more.
Online savings accounts, however, provide an easy way to stash cash in a federally-insured account and typically offer much better interest rates than brick and mortar savings banks. Depending on national interest rates, annual yields on these accounts can reach 4%, 5%, and sometimes even 6%.
What is an online savings account?
Like any savings account, an online account is a bank account designed for short-term savings or for savings during a time when you might need access to the funds. They can also be useful for protecting money from inflation during times you cannot tolerate the risks involved with more volatile investment strategies.
Also like regular savings accounts, online accounts are insured by the Federal Depositor’s Insurance Corporation (FDIC) for up to $100,000, meaning your money is safe in the event the bank goes under, the stock markets crash, or aliens raze the Eastern Seaboard.
How do online savings accounts work?
Rather than investing in physical banks to support customer accounts, online accounts accept deposits and withdrawals solely online, thus tremendously reducing the bankers’ cost of doing business. This, in turn, allows the online account to offer a much better interest rate.
Online transactions are processed quickly and securely via an electronic funds transfer (EFT) with your existing checking account, whether or not you already bank online. You can fund an online savings account with an electronic check simply with just the routing number and account number on a voided check. EFTs are typically completed in 3-5 business days.
Just as there are no physical banks at which you can make a deposit, you will not receive monthly statements in the mail; you can only check them online.
How do I choose an online savings account?
The best online savings accounts have few restrictions on minimum initial deposits or balances. Some also offer features that are similar to checking accounts like online bill paying and an ATM or debit card to access your cash. Read our review of the nation’s top high yield savings accounts to find an account that’s right for you.