Savings accounts are run by a commercial bank or a mutual savings bank. The FDIC backs savings accounts up to the limits shown. The money you put in a savings account earns interest over time, which helps you get richer. How much interest you get on your savings account depends on what kind of account you have and where you keep your money. The state of the economy also has an effect on interest rates.
In 2007, the average rate of interest on savings accounts at banks is about 2%. Many people like to save their money in places that give them a good return on their money. Most of the time, online banks can offer higher interest rates on savings accounts.
The rates of interest on online savings accounts are higher.
Because an online bank doesn't have to pay for things like rent and utilities like a physical bank does, they can offer higher interest rates on savings accounts. Most online savings accounts are also free, and there are no minimum deposits or fees for putting money in or taking it out.
Some people may be hesitant to use an online bank, but if you check to see if the bank is FDIC Insured, you can be sure it is just as trustworthy as your local bank. If the bank is FDIC-insured (usually up to $100,000 for individual savings accounts), you will be just as safe with an online bank as with a bank in your neighbourhood.
How savings accounts work online
If you've never had a bank account online before, it might be hard to understand at first. How do you put money into an online company's account? How do you get cash when you need it?
Most online savings account providers link your online account to the bank account you already have. This has a few advantages. First of all, you don't have to close your other accounts to open a high yield savings account. Second, if you have connected accounts, you can easily move money from your physical checking or savings accounts into your online account with a phone call or a few mouse clicks. Most online banks also let you set up automatic deposit options. You can have your paycheck automatically deposited into the account, or you can set up regular transfers from your other bank accounts to your online savings account.
Getting your money out of an online account works the same way. Most banks let you transfer the money from your online savings directly to your existing checking or savings account. Some online providers give you ATM cards that you can use at any ATM to get cash right away, while others might give you checks that are linked to your online account.
Providers of high-interest savings accounts
It is easy to find an online savings account with a high interest rate. There are many different providers. Some only do business online, while others have both a physical bank and an online part.
ING Direct has high-yield savings accounts, checking accounts that pay interest, and ways to invest.
HSBC Direct: If you want to use their savings accounts or other investment products, you don't need to have an account with them already. The ATM card that comes with an HSBC account makes it easy to make withdrawals and deposits at any HSBC branch.
Citibank Direct e-Savings lets you link your checking account to a money market account. It lets you pay your bills online and use other Citibank online services.
Emigrant Direct offers savings accounts with no minimum balance and easy transfers from your existing bank accounts to your new online savings account.
