Do modern banks offer better online savings accounts rates? Banks have historically been places that held your money for you. People would go there to put money in and take money out. On occasion, people would want to buy large items that they couldn’t afford all at once, so they would ask to borrow some money and pay it back over time. These banks were usually more locally focused. They were large, intimidating buildings with people that would seemingly stare you down every time you entered. The worst part about dealing with those traditional banks has been that you had to accept whatever interest rate they were willing to pay.
The internet has changed absolutely all of this. As Justin Pritchard with TheBalance writes, you never have to visit a bank branch with online banking. You can use any device with an internet connection to handle all your banking needs. The benefits of online banking are substantial for a number of reasons, not the least of which is the higher interest rates you can get on your deposited money.
Online Savings Accounts Rates
Even for those that may not be quite ready to do all their banking with an online bank, opening a savings account with one of these banks can be a great start. Online banks as a general rule offer a considerably higher interest rate on savings accounts than a traditional bank. Funding your online savings account can be very easily done, with many banks allowing you to open an account with just one dollar! Many people worry about the safety of their money in an online bank. The FDIC (Federal Depositors Insurance Corporation) insures many online banks just as they do with a traditional bank with physical locations.
Better Interest Rates
Saved money should earn you as much as possible. Whereas once upon a time, people had little choice but to accept whatever rate their locally-owned traditional bank offered, those days are gone. It simply doesn’t pay to have your money in a low-interest savings account. An online savings account can give their customers a higher rate that is much higher than “brick-and-mortar” banks. In virtually every case, the online bank offers a better rate. In some cases, they will pay 1.90% on their savings accounts, which is unheard of in most banks.
Blending Online and Main Street
Lots of brick and mortar banks with branch locations are realizing that in order to stay competitive, they have to offer more services in the online space. Some of the country’s largest banks can allow customers to do business completely online, or utilize physical branches all over the country. Even local banks are catching on to this trend as well. Regardless of how small the bank may be, today they all have some type of online banking site. Online banking tracks spending and deposits, but some offer more online and mobile services than others.
Online Banks Have Less Overhead
Operating a physical bank takes a lot of money. Every branch has to have specialized equipment, high tech security systems, staff, and of course ongoing expenses like heating, cooling, upkeep, signage, etc. With all of this expense going into each branch, it’s no wonder that traditional banks don’t pay a higher rate of interest on savings accounts. Online banks spend far less money than traditional banks when it comes to physical locations. To attract more customers, they provide a significantly higher rate of return. The lack of overhead makes this higher yield much more possible.
Higher Deposits Get Higher Interest
While not limited solely to online banking, a common option found through online banks is a higher interest rate paid on higher deposits. For those that have a lump sum to park either for a rainy day, saving for a large down payment or other large financial expenditure, there are some very attractive opportunities. Chanelle Bessette writes for USA Today that certain banks will offer as much as 2.45% on a savings account that either has $25,000 or customers agree to deposit $100 a month to the account.
The Pros Of Online Savings Accounts Rates Outweigh the Cons
While there are still many people that enjoy interacting in person with a customer service representative, and knowing their local bankers by name when they see them out and about, online banking can simply offer a substantially larger return on your money in most cases. While this may not always be the case if traditional banks continue to blend over into the online space, for the moment, online banks have the market cornered in interest paid. But local people in local banks still present a level of stability and security for people. They envision that the physical “brick and mortar” building will stand the test of time more than an online presence. For this reason, don’t look for physical banks to go anywhere anytime soon.