Online savings accounts enable you to take advantage of generous interest rates while managing your finances from the comfort of your assisted living apartment. Below, we'll explore what online savings accounts are, learn about their benefits and drawbacks and explain how to choose the best account for your needs.
Nowadays, many traditional banks offer online services, allowing customers to manage their savings accounts through websites and apps. Therefore, it's understandable that many people feel confused about the difference between a traditional and an online savings account.
Online banks only operate over the internet, which means they don't have physical branches like traditional financial institutions. Many of these banks offer online savings accounts. While online savings accounts are easy to set up and manage, you can't visit your local brick-and-mortar branch in Creve Coeur, MO, for support like you can with a traditional option.
While the lack of physical branches could be a disadvantage if you prefer to bank in person, online banks offer certain benefits. Generally, online banks cost less to operate because they don't have physical premises to staff and maintain.
Many online banks pass on their lower overheads on to customers through higher interest rates on savings. According to Investopedia, the most generous online savings accounts offer interest rates 1% to 2% higher than you'll find at a traditional bank. Therefore, you could earn significantly more interest by keeping your money in an online account, especially if you have a relatively high balance.
Online savings accounts also tend to charge lower fees and have less stringent rules about minimum balances and withdrawal frequencies. That being said, fees and policies vary significantly between online banks, so it's worth shopping around to find the most wallet-friendly options.
However, there are also drawbacks to online savings accounts. While online banks try to make their websites and apps as intuitive as possible, they may not be a good option for people who feel less confident with technology. You may also be better off with a traditional savings account if you value in-person banking services, such as depositing money at your local branch or speaking face-to-face with an advisor.
Online savings accounts are generally secure, provided the bank holds Federal Deposit Insurance Corporation (FDIC) insurance. FDIC insurance protects your savings up to $250,000, which means you won't lose your money if your online bank fails. Before opening an account, check whether the bank has FDIC insurance by searching for it in the FDIC's BankFind Suite.
Most online banks also protect your accounts by:
Online banks usually explain how they keep savings accounts secure on their websites, and it's worth checking which methods your bank uses before entrusting it with your money. However, it's also important to choose strong passwords, enable multifactor identification and update your banking app regularly to protect your online savings account. If your bank offers fraud alerts, sign up for the service to help you deal with security threats as quickly as possible.
A growing number of online banks provide plenty of choice for money-savvy seniors, but the sheer number of options can quickly become confusing. Before deciding, compare the following factors to help you find the most cost-effective, secure online savings accounts:
Finally, consider reading customer reviews while choosing between online savings accounts. Learning about other users' real-life experiences can help you learn more about a financial institution's customer service, online platform and trustworthiness.
