The average savings and checking account interest rates at a brick-and-mortar bank are pretty dismal. The national average is 0.06% for checking and 0.09% for savings. This means that you will make 6 cents and 9 cents respectively on $100 in a year. At that rate, it is barely worth saving money. Plus, most banks load you down with fees.
You can actually lose money at a bank! But what if there was somewhere you could put your money where you could earn more – as much as 2.25% – on every dollar and not have fees, including ATM fees? Check out online banks for both higher interest rates and convenience.
Sure, most brick and mortar financial institutions offer online banking, but you still pay fees to help pay their mortgage, staff and even the dog biscuits they hand out at the drive-up window. A true online bank often doesn’t have fees, so you save money that way and they offer higher interest rates, so you make money. You can do almost anything you can do at a brick and mortar bank. And many online banks allow you to deposit as little as $1 and still earn interest.
Online Bank Perks
- No fees – no puppy biscuits either, but you can buy those with all the money you make from higher interest rates
- Higher interest rates for both savings and checking accounts – you may have a minimum balance to maintain – as little as $1
- Grow money faster in a savings account – more than $2 a month on $100
- Excellent technology and phone apps – bank when you want, not when the bank is open
- Incentives to switch – including cash deposited into your account
- No need to close accounts when moving – all you need is internet
- Some offer domestic and international ATM fee reimbursement
- Transfer funds between accounts and even banks
- Generally considered more secure than traditional banks
Online Bank Drawbacks
You might want to avoid online banks if you hate technology. But since you are researching this online, it probably doesn’t apply to you. You won’t have access to notary services, safe deposit boxes, or checks, but if those aren’t important to you, an online bank would probably be great.
What Should I Switch?
If you aren’t sold on the benefits of online banking, start with a savings account. Once you see the benefits, you’ll find it easy to go online all the way. If you still need checks for those few retailers who don’t take plastic, you can keep a traditional account open while you reap the benefits of an online account.
How Do I Find an Online Bank?
Start with research! There are very informative websites out there that detail all the incentives and other perks. They allow you to compare a variety of options from interest rates to fees. Read the reviews so that you get an idea if the online bank is easy to work with. The incentives are terrific right now, so don’t delay.