In this day and age, almost everything can be done online: you can order groceries to be delivered directly to your home. You can have a 24/7 therapist you can talk to at any time. You can even “hire a husband” to come and take care of your to-do list around the house. With all this, it’s no wonder that the world of banking has gone completely online and has such sophisticated capabilities that you’ll never even have to step foot in your local bank branch.
Companies directly deposit your paychecks into your bank account, and through websites and smartphone apps, you’re able to transfer money, pay your bills, and handle all your banking needs at the touch of a button. Even if you don’t have a bank account, you can open up one online or add additional savings and retirement accounts in an instant. With all these new functionalities, the low or eliminated costs of these financial institutions maintaining physical buildings is passed on to customers through a higher APY and here’s how.
A great alternative to traditional banks, an online- only bank account focuses on helping you build savings. These cyber facilities remove the overhead costs of brick-and-mortar banks; many people may not know it but the operating costs for these buildings are usually covered by charging high banking fees and offering low interest rates. Online-only banking facilities have an extremely low overhead, only needing to cover an extremely limited work force to maintain the software and over-the-phone customer service. This allows them to focus more on the needs of their clientele and offer through-the-roof rates which can’t be found anywhere else.
Actually, that’s a lie. Online banking offers MORE facilities than your traditional bank. Can you walk in to your bank at two in the morning and pay your credit card bill? What about if you have questions about a unauthorized charge? With many online banking applications and websites, they have customer service directly on their site in the form of a chat or a call-me-back option - this is when you request that a representative call you so that you don’t have to navigate the automated menu or listen to horrible elevator music as you wait.
With the 24/7 access to your account that online banks offer through their online portals, you will be able to execute transactions in seconds. This includes electronically transferring funds to and from accounts, yours or someone else’s, paying off credit cards and other bills, and keeping an eye on your growing savings account in real time. Just like traditional banks, online-only savings accounts are insured by the FDIC and will protect up to $250,000 worth of any deposits made.
That being said, it has been noted that these robust features have been more popular with users who are technologically savvy and actively looking for ways to build their savings in a shorter amount of time.
There are a number of additional benefits and features offered by online savings accounts which are just not provided by traditional savings accounts. For example, ValuePenguin reported that the average interest rate for savings accounts in brick-and-mortar banks averaged at less than 0.06 percent. Some of the national banks even went as low as 0.01 percent. At the same time, online-only savings accounts often extended interest rates which surpassed a whopping 1.2 percent.
According to MagnifyMoney, their July 2018 report showed that PurePoint Financial offered 1.90% APY, HSBC is offering 1.80% APY, and that Ally and AMEX offered 1.75% APY.
Imagine this scenario: if you put $10,000 in a traditional savings account at 0.01%, you’ll get $1 after one year - that’s right, one whole dollar. On the other hand, if you place that $10,000 at PurePoint Financial, you’ll receive $190 in accrued interest.
Avoid the high fees and low interest rates that your local bank is offering. Stop paying extra in monthly maintenance fees and ATM fees. Research your options and choose an online savings account that will suit you and your financial goals today.