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Ask the expert: Are online savings accounts good options?
Q: I'm comparing savings accounts, and I've been seeing some great rates on online savings accounts. What do you think of online savings accounts - are these a good option?
A: In many ways, savings accounts are ideally suited to online banking. Online checking accounts can also be convenient, but given the frequent access to your money you are likely to want with a checking account, you are more likely to need to access your account via a branch or an ATM, which may not be available in your area if your bank is based online. In contrast, savings accounts generally require less frequent access, and online savings accounts can give you the tools to remain more up-to-date on your finances than if you had to wait for paper statements from a traditional account.
Because of the cost savings that online savings accounts represent to banks, you may find that these accounts offer the most competitive interest rates. That, more than in-person access, is really the key feature of a savings account.
There are some excellent online savings accounts available from banks that do business primarily via the Internet, but more and more traditional banks are also now offering extensive online capabilities. The bottom line is, you should include both Internet banks and traditional banks in your comparison of savings accounts, and this will give you the best chance of finding the best interest rates. Also, broaden out your search to include money market accounts, since these are generally very similar in character to savings accounts.
With any form of online banking, remember to use common sense security procedures. Keep sensitive information like account numbers closely guarded, and remember that it is probably much more secure to access your account from home than from a public Internet access point like a Wi-Fi hot spot.
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