Disclaimer: I am not making money or using any referral links in this post. I am simply passing on knowledge that I wish I knew about sooner.
Do you have an online savings account? No, I do not mean a traditional savings account at the local bank branch that gives you $0.02 a month in interest. I mean a high-yield savings account that you can easily transfer money to or withdraw from nearly any ATM. The difference is monumental…
I had a traditional savings account at Citizens Bank where I had would accumulate interest at a rate of 0.01%. I understood that I would have a low-interest rate on savings due to the fact I always had access to it, unlike the other options of tying up the money in an IRA or a CD. I felt like this was the best option until I researched it more.
There are plenty of competitors, but I decided to open a Discover Online Savings account which offers an interest rate of 2.00% which is compounded daily and interest is rewarded monthly. This rate is already 200 times better than my previous rate at Citizens Bank. Discover is advertising that a starting balance of $15,000 can earn ~$300 in interest in a year. This is free money, especially if your previous savings account was paying you pennies a month to utilize your balance. I cannot believe I went this long living without exploring this option.
Bank Rate has a great comparison to get you started on rates. Educate yourself with the image below.
Thinking about making the switch between savings accounts? I don’t blame you. Here are some things to keep in mind:
- Find an institution that is FDIC insured.
- To open an online savings account some institutions will require a minimum starting balance or an initial deposit.
- Typically closing savings accounts is hassle-free if you go to your bank in-person. However, if you choose to keep your traditional savings account open, research and see if your account type requires a minimum balance otherwise you may be prone to bank fees. Closing bank accounts do not impact your credit scores.
- Depending on the online banker, moving money between a standard account to the online account can take a few days for the transfer to complete. However, you will be able to withdraw from your online savings account from ATMs.