What the heck is an online bank?
An online bank is very similar to your average bank (ex. Chase) however, there are no branch offices you can attend on a regular basis in your community. While this may make you feel uneasy at first it does provide benefits for the consumer. Due to being strictly run online the bank is able to maintain much lower costs than traditional banks therefore they are paying much high interest on savings accounts and certificate of deposits (CD’s). At the time of this writing, the average bank pays next to nothing for interest on their savings accounts. Here are some of the most popular online banks.
Each of these websites portray their high annual percentage yield (APY) on the front of their website showing why it is absolutely essential to open an online savings account. One of the top reasons for opening a high yield savings account is to earn interest on your rainy day fund, other otherwise known as an emergency fund. Since your emergency fund is just sitting on the side anyway, it might as well be earning you a higher rate of interest than a traditional savings account. Online banks are also FDIC insured just like regular banks, the FDIC insures you of up to $250,000 so if your bank goes out of business you are still entitled to your money. In conclusion it is clear that opening an online savings account is a wise move for people of all ages.