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Online savings accounts greatly outperform off-line savings accounts
there is no denying this. At this current time and the average online
savings rate is 4.75% and the current off-line savings rate nationally
is .75%. The current catchphrase, I hear often, is think globally,
act locally. When it comes to savings accounts nothing could be
further from the truth.
Let's say for instance if you maintain a balance of $5,000 for
five years in a traditional savings account. Based on the current
rate, over the five-year period you would collect $190.33 in interest.
If you took that same amount and placed it in an average online
savings account, based on the current rate, you would've earned
$1305.80. For simply doing your homework, you have one more mortgage
payment.
Savings accounts online not only offer a tremendous difference
in rate, but they also offer a huge value and convenience. You can
access your information in real time 24 hours a day, seven days
a week. Many online banks are also starting to offer rebates for
the use of an ATM outside of their network. If you use an ATM often,
this little feature could even save you more money than the humongous
difference in rate.
Let's take a look at my last traditional savings account. The last
two months of that account I use an out of network ATM on six occasions.
Each time I use an out of network ATM, I am charged $2.50. So this
cost me $15. At the time I had maintained about $4000 in that account.
I was also getting a whopping 0.4% of interest on account. I made
and $26.67 in interest over those two months, yet I paid out $15
in fees. So I netted $11.67 for maintaining a traditional savings
account. In reality due to the fees, I was receiving 0.2% interest.
I might've been better off just saving my money and my mattress.
At least I wouldn't have wasted gas going to ATMs.
Even though these accounts are online they still have the same
protections as traditional savings accounts. Each individual account
holder is FDIC insured up to $100,000. Just as your traditional
savings account online savings accounts are completely put. You
can deposit or withdrawal money at any time without any penalties.
The beauty of most online banks is that the minimum amount required
to set up an account is one dollar. Many traditional banks require
a $300 minimum.
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