Online banks are able to offer high interest rate internet savings account for a number of reasons and their performance has been surprisingly good, even vs. the stock market. (see high interest rate CDs vs SP500).
Banks are able to offer a high interest rate savings account online because of the economies of scale afforded by being on the internet. Because these online banks are able to attract and service a large number of customers without the overhead costs associated with brick and mortar facilities they are able to make high interest rate savings account offers.
Rates Are Low Today But Online Banks Still Offers Better Yields
Given that rates in general right now are pretty low (and look to remain that way for the foreseeable future) having saving accounts for yourself and perhaps your children does not seem like all that sexy an idea. On the other hand it's never a bad time to learn the basic skills needed to move and manage money quickly between a local bank and a high interest rate savings account online.
Things to consider when choosing an online bank offer:
Does your local bank offer free electronic money transfers?
Is the online bank FDIC insured?
Does your online bank output data to home personal financial software like Quicken or Microsoft Money?
How easy is their website to use, understand, and navigate?
Although these questions are not the most important when selecting an online bank (interest rate and security usually are), these factors should be consider before choosing a high interest rate savings account online.
No One Is Going to Retire on Savings Account Earnings
No one is going to use a saving account (online or otherwise) for a wealth building or retirement income fund, but it still pays to know how to move money quickly and cheaply between accounts and to get at least some earnings return on deposits.
Get more information on how to open an online account. The high interest rate accounts offered online are a good place to hold any cash over and above emergency check clearing funds.
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