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find the right online savings account for you
Online Savings Accounts in 2020
It’s a new year, and your chief priority this year — aside from finally shedding those 20 pounds — is to have more than $20 in your savings account.
Your main hurdle, though, is finding the right savings account for your needs. Should you stick with a traditional bank savings account, or should you try an online account?
The reality is, four out of 10 Americans use online banking to manage their money. So, if you’re contemplating banking online, you’re in good company.
Still, the question you may be asking yourself is, are online savings accounts safe?
Here’s a rundown on what you need to know about online savings accounts before signing up for one this year.
Let’s get started!
Are Online Savings Accounts Safe?
The answer to this question is yes.
As a general rule of thumb, you’re safe to stash your cash in an online savings account at a bank that is insured by the Federal Deposit Insurance Corporation (FDIC). In fact, at online banks with FDIC coverage, you can expect your money to be just as safe as it would be at your traditional neighborhood bank.
The FDIC coverage ensures that if your online bank ends up defaulting, you’ll be paid back everything in your account by the government. This applies to any savings account amount no higher than $250,000.
Not sure if a bank has insurance with the FDIC? Simply search for a small emblem on its website. The FDIC also has a BankFind tool for verifying a financial institution’s coverage.
What to Look for in Online Banks as Far as Safety is Concerned
The majority of online banking institutions take the exact same precautions that big banks do to safeguard your cash when you’re utilizing their online banking services.
In fact, even if you’re using a traditional bank’s online portal, you should check the institution’s security measures to make sure that the bank is worth trusting with your cash.
An online savings accounts that are FDIC-insured is a no-brainer compared to a typical brick and mortar bank. The best online savings accounts can allow you to earn an APY of 1.70% or greater
Protection for online banking users includes browser and network encryption. In addition, look for online savings account providers that use anti-malware and anti-virus protection. The bank should also use firewalls to further protect your funds.
Many banks have also implemented what’s called two-step authentication as needed. Other features designed to further protect your online savings account include frequent fraud reviews, automatic logout, and account monitoring.
Some banks additionally offer their customers access to anti-virus software.
Anti-virus software can block spyware and phishing. It can also identify links that are unsafe. A major benefit of this type of software is that it also automatically updates, so you can count on it to put a halt to the latest online threats.
Offline Transactions May Not Be Worthwhile
In light of the above, it may actually be safer for you to store your money in an online savings account versus in a regular bank savings account. That’s because today’s technological protections provide an extra level of safety that you simply don’t get with paper checks and statements.
Checks and statements are frequently the targets of thieves who like to dumpster dive for information they can then use to engage in fraudulent transactions. Meanwhile, encrypted transactions online require thieves to have more tech skills.
Additional Steps You Can Take to Keep Your Online Savings Account Safe
In addition to relying on your online banking institution to keep your online savings account safe, you should also take steps to protect your funds.
After all, your online bank can do little to help you if you carelessly release your online savings account information.
So, for starters, if you need to access an online account in public, be sure to do this in as secure a manner as possible. Anti-virus software can provide your computer with the protection you need in public spaces.
Also, don’t be quick to open emails that appear to be from your banking institution yet ask for your account or personal information. The bank shouldn’t be asking you for these details, as it already has them.
If your institution does have to get in touch with you, it will likely do this through its message center in your account’s portal. After all, this is a far more secure way of reaching out to you.
Also, if you plan to use your online bank’s app on your cell phone, make sure that you always have the most recent version. That’s because application developers always produce updates after discovering security gaps that require patches.
Another step to take to protect your online savings account? Take advantage of sign-on capabilities involving your face ID, fingerprint, or two-factor authentication. This will make impersonating you much more challenging for thieves.
Bottom Line: How We Can Help Find the Right Savings Account for You
In addition to answering the question “Are online savings accounts safe,” this article can help you find the right high yield savings account for your situation. When you are considering the right savings account, you should look at interest rates in combination with any monthly fees that could hurt your overall savings. You should also beware of introductory APYs that may lower after a certain period of time. As always, it is important to compare savings accounts and be sure to filter by size and zip to help find large-balance savers with better options. Keep in mind, as well, that this is not a checking account where you make a lot of withdrawals. With online banking, you will lose having a relationship with your local bank as there are no physical branches, but, like traditional savings accounts, they will have restrictions on minimum deposit, minimum balance, and withdrawal limits.
Best Savings Accounts
The LowerMyBills Team has put together their recommendation for our top online savings accounts, comparing savings rates, easy access, ability to transfer money, online bank account fees, as well as other benefits such as additional personal finance products and if they have a mobile app below:
Capital One is a leader in terms of its deposit accounts, but it also offers a great online savings account with no monthly fees. There are no minimum balances required and it offers an easy to use mobile app. Capital One also offers credit cards and auto loans, as well.
There is no minimum balance requirement and no monthly fees, as well as having the ability for you to get an ATM card. Synchrony makes access easy and now they even have a mobile banking app.
American Express National Bank
Offering a high annual percentage yield, this account charges no monthly deposit and doesn’t have a minimum deposit, plus your deposits up to $25,000 have FDIC insurance.
Ally is a bank that doesn’t have a brick-and-mortar location with savings accounts that continue to offer higher rates than traditional banks. Within Ally, you will also have access to all of their financial products including a checking account, money market account and investment accounts like an IR
CIT Bank offers a savings builder that rewards savers with a great rate. While having a high APY, you must also open an account with a $100 minimum deposit.
Marcus by Goldman Sachs
Marcus offers competitive rates with no minimum deposit to open, as well as no service charges or internal transaction fees.
HSBC Direct Online Savings
HSBC has an online savings account that offers a great rate and only a $1 opening deposit required.
Digital Federal Credit Union
DCU is a credit union that offers a higher rate than top online savings accounts on up to a $1,000 balance.
Discover offers an online savings account with an APY that is one of the highest yields for online savings accounts without a monthly balance requirement or any other fees such as stop payment order, excessive withdrawal or monthly maintenance fees.
What are other options outside of an Online Savings Account?
Money Market Account
Acts as a savings account, but with more access to your money. Most will give you a debit card with ATM access, but the interest rate is typically lower than the higher interest rates of an online savings account.
Certificates of Deposit
A CD is perfect for longer terms savings with higher rates, but also with limitations on when you can take money out, often needing to lock into a long term arrangement such as 5 years.
High Yield Checking Account
This account will give you the ability to access your money frequently, but most checking accounts don’t give you interest and definitely not compared to the high-interest rate of an online savings account.