What do you look for in a savings account?
Determining the best place to park your money may require some time and comparative research. Not only because interest rates are at their low point, but because of the numerous choices we have available to us. Financial institutions have more products than ever and are eager to get your business. Not only are they competing with the building and advertising billboards across the street, but they are also trying to adapt and play in a new marketplace where online banks are thriving.
So what makes a great savings account? It’s pretty obvious what most people are after: it’s the yield of course. And online accounts are in a category of bank products that provide relatively higher returns because it costs a bank less to maintain them. The institution can therefore pass those savings off to their customers. So if you’re after the returns, then it’s worth investigating an online savings account.
Check out this list of great online savings options:
In my case, what first attracted me to an online bank is the fact that the money I keep here is separate from that which I have in my traditional financial institution. I can transfer over a percentage of my monthly income to the online account and watch it accumulate. It is less tempting to dip into it needlessly when it doesn’t appear on my regular monthly statements. I like to use a good high yield savings account for a specific purpose: a trip, a big purchase like a new appliance, or to save enough to pay off our vehicle. I then separate my retirement and long term savings into other accounts.
A Good Savings Account Has These Features
Given these parameters, we should expect that an online savings account needs to fill a need with a few specifications:
- Accessibility: With seasonal employment and kids headed for college one day, I’d like to ensure that I have easy access to my savings within a short time frame. Our money in short term savings needs to be liquid; we don’t need to be waiting to sell funds.
- No Minimum Deposit: I like a savings account that allows me to put away whatever amount works for me that month. It might mean that I have less than $1,000 with which to open the account.
- Low or No Fees & Costs: Why pay monthly fees when there are many options out there that don’t charge this type of fee?
- Reputation: I can only entrust my savings to a well known, reliable bank with a solid reputation.
- Good Yield or Decent Returns: Obviously, I want the highest interest rate possible, but the other points and features need to be considered as well. In this low interest rate environment, the difference between 1.4% and 1.6% is not going to influence me, especially if my savings fund isn’t that large to begin with. One more thing to watch out for: any possible “bait and switch situation”. What I mean is this: some banks may lure you into a savings or bank account based on one rate but then turn around and lower that rate not long after. Some accounts have very dynamic rates, which shift and change direction (usually lower), like the wind.
- User Friendly Website: Because all of our transactions are going to be online (in the case of internet banking), I would much appreciate a site that is easy to use and understand.
I am usually turned off by any account that has confusing details, such as changing interest rates depending on the amount in your account. I am referring to terms such as this: “If you deposit $500 for 36 days, the interest rate will be 3.5%, after the 37th day, if you don’t deposit another $500, the interest rate will change to 0.04%.” I much prefer terms that are clear and static. For instance, the case where one interest rate is given to balances over a particular amount (ie. $10,000) and another rate for account balances that are under that stated amount is actually more reasonable, so I can buy into this.
My Personal Picks
Considering the popular online savings accounts that are listed, if I were to pick one for my current needs as discussed here, I would definitely be opening an Ally Bank Account or an FNBO Savings Account. They have no monthly fees and no minimum balance requirement with an interest rate that is competitive. I can live with the slightly lower percentage rate if it’s afforded by a highly reputable brand.
Now, if I had a heftier sum to channel into savings (say $50,000) and wanted to park it short term, I would pick the EverBank Yield Money Market account and reap the benefits of their higher interest rate on $50,000 for the first three months. This is one of those accounts with lots of details and varying terms based on the length of time of the investment and the amount of the investment, so be educated on those matters before signing up.
Created: June 4, 2009; Updated: May 25, 2011
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