Get an Online Savings Account

September 14, 2009 at 11:11 PM Leave a comment

What’s the easiest way to get your money earning money without risking any of it or putting it out of your reach?

It’s not a 3-letter word or an investment in natural resources—it’s just a savings account. But it’s all online.

Online savings accounts work just like regular savings account, but the banks that run them—even when they’re affiliated with the bank on your block—don’t have (or have only a handful of) physical buildings to bring cash to.

Downside: This’ll make it a little tougher to get your money in (but not once you have it set up).

Upside: This lets them keep their costs really low. And low bank costs mean money in your pocket.

While I’m writing this, top-tier online banks have interest rates between 1.30% and 1.70% . My Chase Statement Savings Account (I opened it to try to snag an incentive—don’t hate!) makes 0.05%. That means—prepare for some shady pseudo-math—that if I kept $1,000 in each for a year, an online savings account would make $13, while my Statement Savings Account would make 50 cents. Awesome, Chase. Awesome. (But don’t hate only Chase, either—this is every savings account at real building-type banks).

So you’re making easy money, and there has to be a catch. No, seriously, there isn’t. These accounts (any worth putting money in—check before you transfer) are FDIC-insured up to $250,000 (your money’s not going anywhere), they can connect to your current checking account for easy transfers, and they don’t come with a lot of the strings attached to other accounts. (“Monthly service fee is waived if minimum daily balance is $300 or more”? Uhh—maybe next time, Chase.)

So what’s a good bank to stash your cash in? I’m a staunch defender of ING Direct —they have a great site design, it’s easy to set up and maintain an account, and you can see your balance on multiple accounts at once (including an online checking account and a partnered investment site, if you’re interested). But I’m told that HSBC Direct, Emigrant Direct, and Ally Bank are great choices, too.

And another note about interest: while your money’s locked tight in these banks, your interest rate is not. I opened my ING Direct account back when interest rates were closer to 4%, but like the rest of the economy, they’ve tanked. And all banks—even ones without neighborhood branches—are pushed around by the same economic waves. If an interest rate looks way too good, it’s not going to stay that way, and your money’s going to be no better off there than at a more stable contender.

Want to shop for highest interest rates? Check out and But don’t pick a bank based on interest rate alone—examine their site, see what others have to say, and make an informed decision.

Tell me about your favorite online bank (or trash-talk one of my picks) in the comments!


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Sam Warren

I write about money matters that apply to my life—and hopefully yours!

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