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So, we’ve talked a lot of about saving on this blog.
The question now is: Where should you put your savings? A regular ol’ checking account isn’t a good place. Why? If your savings is in the same place as the money you use for bills and other spending, there’s a good chance that you’ll spend more than you save. And regular old checking accounts don’t give you much interest. Interest is the return financial institutions pay you for keeping money in one of their accounts. Savings accounts offer better interest than checking accounts.
How to Choose the Right Savings Account
We’ve established why a checking account is the wrong place to put your money. There’s another caveat: Not all savings accounts are made the same either.
When shopping for a savings account you want to choose one that gives you the highest interest, but also has the lowest fees and the least amount of fine print. Things to consider are:
- The annual fee
- Monthly maintenance fees
- Transaction fees
- Overdraft fees
- How much you need to deposit initially to open the account
- The minimum balance required to keep the account open
Traditional savings accounts from major banks (i.e. Wells Fargo, Bank of America, etc.) are usually ones that are a little more heavy handed on the fees and fine print. They charge a monthly or annual fee and require that you keep a certain amount of money in the account to keep it open. These fees cover the cost of you using their banking services such as on-site bankers, drive throughs, and the whole nine yards.
Perks of Saving With an Online Savings Account
You’ve probably heard of online savings accounts as well. These are savings accounts without the bells and whistles of the traditional accounts above.
Online savings accounts are cheaper for financial institutions to maintain, so they pass on the savings to you with lower fees, higher interest rates, and minimal fine print. Wins all around.
For comparison, Wells Fargo offers 0.01% APY (interest) for the Way2Save checking account with a $5 monthly service fee if you don’t meet certain conditions. On the other hand, some online savings account give over 1.00% APY and have no monthly fees. Now we’re talkin’.
The Potential Drawbacks of Online Banking
The trade-offs to banking primarily online are you usually don’t get access to an in-person teller at a bank branch and most transactions are handled online or over the phone.
It can also take you longer to transfer money from your online savings account to a checking because you could be moving money from two completely separate entities. Understandably, you may be fearful of storing your money somewhere that solely operates online thinking your cash could disappear into the abyss.
This is why you always want to make sure wherever you put your money is FDIC-insured. FDIC insurance means that up to $250,000 of your money in the account is insured by the government. The online savings accounts that I’ve added to this roundup all have FDIC insurance.
Now that you know the basics of why online savings accounts are cool, let’s launch into the ones you may want to consider opening:
(Summary: If you skipped the intro explanation about online savings accounts, what you need to know is online-only savings accounts are usually cheaper and give higher interest than old school savings accounts at your local bank branch. And don’t put your money anywhere that doesn’t have FDIC insurance.) Moving on!
4 Online Savings Accounts to Consider
Barclays is a major bank that offers a high-interest savings account that you manage online. Here’s the scoop:
- Interest – 1.00% APY
- Cost – No annual fee or maintenance fee.
- Balance minimum – None; you can start an account with $0.
- How deposits work – You can set up direct deposit, remote deposit, transfer money from another bank, or mail in a check.
- How withdrawals work – You can connect an external bank to your Barclays savings account and make a transfer. The transfer can take 2 to 3 business days.
Ally is one bank to make this list that has no branches — at all. It operates solely online to pass on savings to you through various banking products.
- Interest – 1.00% APY
- Cost – No annual fee or maintenance fee.
- Balance minimum – None, you can start an account with $0.
- How deposits work – You can use remote deposit, transfer money into the account through another Ally account or non-Ally accounts, wire transfer, direct deposit, or send in checks.
- How withdrawals work – You can transfer money out through a linked account
The online savings account from Synchrony Bank gives you an ATM card which is something different. Getting an ATM card may or may not be ideal for saving. You don’t want to be constantly removing money from your account. But if you feel more comfortable having access to an ATM card for emergencies, this could be ideal. Here’s the scoop:
- Interest – 1.05% APY
- Cost – No monthly service fee or annual fees
- Balance minimum – None, you can start an account with $0
- How deposits work – You can use mobile deposit and electronic transfer to put money into the account
- How withdrawals work – You can transfer money out online and over the phone or you can use your ATM card. Withdrawing money with your ATM card may not be free. Synchrony won’t charge you an ATM fee if you use Plus, Star or NYCE ATMS. However, the operator of the ATM may have a surcharge that’s not reimbursed.
This account doesn’t offer the highest interest of the bunch, but it is offered by a well-known bank (Capital One) that has physical bank locations possibly in your neighborhood.
If you’re hesitant to cut ties completely with a bank that operates locally, this could be a good first step. It offers higher interest than other traditional savings accounts and you can connect it with a 360 Checking account.
360 Savings account holders don’t get the same Capital One branch services as regular Capital One account holders. Here’s the scoop:
- Interest – 0.75% APY.
- Cost – No annual fee or maintenance fee
- Balance minimum – None
- How deposits work – You can deposit checks from your phone through remote deposit, electronic transfer, mail, or domestic transfer. Domestic transfers can cost $30 FYI.
- How withdrawals work – You can transfer money to another account that you link to 360 Savings. If you’re transferring to another bank the transaction can take several business days.
Disclaimer: We make every attempt to share the most up-to-date information on products. However, terms may change. Read through terms and fine print before giving a company your business.
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