A soaring personal savings rate among American consumers confirms that the era of conspicuous consumption is out and frugality is in. So, where's the best place to stash your newfound cash as you strive to spend less and save more? If you're looking for a safe and highly-liquid investment that offers the best interest rates available at little or no cost, a high-yield online savings account can't be beat.
Unlike accounts offered by traditional brick and mortar banks, online savings accounts offer significantly higher interest rates and often have no fees or minimum balance requirements. In addition, reputable companies provide excellent online security and FDIC insurance protection up to $250,000, so there's absolutely no reason to feel uncomfortable about placing your hard-earned dough in the hands of an online bank. It's certainly better than settling for the whopping fraction of a percent you could earn at your local bank.
However, with new companies jumping online each month in order to snag their share of the saving revolution, it's become quite a daunting task to navigate all the options in the marketplace and make the best decision for your personal financial needs.
So, to get your search started on the right path, keep the following three questions in mind when comparing and contrasting the latest offers for high-yield online savings accounts.
1.) Is the Interest Rate consistently among the best?
The interest rate should obviously be one of the biggest factors you consider when evaluating an online bank. However, with that in mind, remember that the interest rates are variable and will fluctuate dramatically with the market. Therefore, it's actually more important to look at which banks have a reputation of consistently offering top-tier rates among their competitors. Of course, you could always play the rate-chasing game and open an account with practically every online bank available, but for many people it's just not worth the time or hassle of moving their money around every few months. So, if you're more interested in placing your money somewhere that's been around for awhile and consistently offers competitive rates, HSBC Direct may be a good choice for you.
2.) Is there a minimum balance requirement?
Most online banks don't have a minimum balance requirement, but some may have it hidden in the depths of their fine print. You certainly don't want to be subject to any monthly fees or a reduced interest rate for falling below a minimum, so steer clear of those with balance requirements unless you plan to plop a large chunk of cash in the account for good. WT Direct is perfect example of an online bank that only offers its highest interest rates to customers with a balance above $10,000. Most of the others offering high rates, including Ally, HSBC Direct, Bank of Internet (Requires at least a $100 deposit to open a new account), and E*Trade, have no minimum balance requirements.
3.) Is the website simple and easy to navigate?
This may not be as important to everyone, but using a poorly designed website that freezes up every time you try to perform a transaction can become excruciatingly painful and annoying. So, before you make a final decision, hop on a few of the sites that most interest you and see how easy it is to get around. It's all personal preference, but Ally and ING Direct seem to be among the most simple and user-friendly sites today. While there are certainly other variables you may wish to take into account before opening an online savings account, you can't go wrong if you answer these 3 simple questions and choose the option that best fits your needs. Who knows, maybe you'll catch the rate-chasing bug and want to open more than one! Happy hunting, and more importantly - happy saving.
