It is important for everyone to have some sort of savings. Depending on your age and how much money you have to put into savings, there are many different options available. For some people, a traditional in bank savings account will work while some people would prefer to put a large amount of money into a CD. One of your options is an online savings account. In today’s market more online services are being offered than in the past. Almost all banks offer a wide variety of online products. Technology makes banking more convenient than ever, but it does also have its drawbacks. Here are some pros and cons to consider when looking into an online savings account:
Advantages of an Online Savings Account
- Online savings accounts give you easy accessibility to your funds. Since the account is completely online you have access to your money 24 hours a day. You do not have to worry about bank hours and you have the convenience of not having to travel to the bank to access your account.
- Many online banks give you the option to link your savings account to your checking accounts, which makes it easy for you to transfer funds between accounts.
- Funds that are transferred from accounts or direct deposited clear faster and become available quicker than checks presented at the bank.
- You have less paper mail because statements can be accessed online.
- Many online banks will let you set up text alerts to let you know what your balance is and if it drops below a certain amount.
- Most account related paperwork can be filled out electronically.
- Interest rates for online savings accounts are normally significantly higher than traditional in branch savings accounts. This is because there is no overhead for the bank. Ally’s online savings account offers a 1.00% interest rate. Many traditional banks are currently offering an interest rate on savings accounts between .01-.05% interest rates.
- Online banking gives you the security of not having to carry cash or checks with you, which can be a safety concern for some people.
Disadvantages of an Online Savings Account
- CD’s offer a higher interest rates than savings accounts but keep your money tied up for a period of time. If you need to withdrawal your funds before the CD’s maturity date banks will charge you an early withdrawal fee.
- There are federal limits on the amount of withdrawals and transfers that you can do within a statement cycle.
- Some online banks charge a monthly account maintenance fee.
- Any documents requiring your signature must be done through the mail.
- If you have a problem with your account that cannot be resolved online you may have to pay a fee to go into the bank and have a face-to-face with a banker or inquire over the phone about your account.
- Deposits into an online savings account have to be either direct deposit, transferred from another account, or mailed. This can be inconvenient for people who want to deposit checks or cash into their account.
- You can lose access to your account if the bank is having any technical issues with their online services.
So, is an online savings account right for you? There are many things to consider when choosing a type of savings account. One of the most important things to consider with online banking is whether or not you are tech savvy enough to handle doing your banking online. If you are someone who is going to need the support of talking to a banker, an online savings account may not be the right fit for you. On the other hand, if you are comfortable with technology, online banking is very convenient and gives you more flexibility and easy access to your funds. View today’s list of online savings accounts sorted by highest interest rate to find one that fits your needs.