Online savings account

When you choose an online savings account you will be able to get more out of your savings with low or no application and account fees, and a higher interest rate. This is because with an online high interest savings account you can apply online, and manage your account entirely online too – checking your balance, making deposits, withdrawing your funds and setting savings goals. This makes it easier and less time consuming for the bank to manage your account, and they pass those savings of lower overheads onto you.

Some online accounts are offered by direct banks, which don’t have any branches at all, and operate entirely online, and you can contact them via a call centre. This reduces the bank’s costs further, and they can pass on even higher interest rates and lower fees to you.

You can also benefit from having a high interest savings account because you can’t easily access your savings using an ATM or debit card. Instead, you use a linked transaction account to make deposits to your savings, and withdraw your funds when you reach your goals. A transfer may take just one to two days, but you are no longer tempted to withdraw your savings at the sight of a shoe sale or a big night out.

There are also very few conditions to opening an online savings account to take advantage of the great rates, as there is often no minimum balance requirement, or just a $1 transfer to open the account. Online savings accounts do give you at call access to your funds, which means you have immediate access to your funds, unlike a money market account or a term deposit account where you have to wait several days for a withdrawal to be processed, and you often have to pay penalty fees too. In return for this instant access, high interest savings accounts aren’t the highest interest rate savings option, but as of July 2011, some of the top financial institutions were offering:

• A 1.04% APY at Ally Bank. The Ally Bank high yield online savings account requires no minimum balance and charges no monthly fees.
• A 1.10% APY at SallieMae. The SallieMae account also has no minimum balance requirements and no ongoing fees. Their high interest savings account interest rate is very competitive and the bank has a strong education focus, offering a 10% match on UPromise earnings.
• A 1.00% APY at ING Direct. With the Orange High Yield Savings account you won’t pay any monthly fees and you don’t require a minimum account balance to qualify for the interest rate.

Minimum deposit amount

Other high interest savings accounts will allow you to earn bonus interest if you make a certain amount of deposits each month. For example, the O Bee Credit Union offers a 2.52% APY if you set up a monthly direct deposit of $100.

While you can earn bonus interest for account deposits, if you don’t meet the deposit amount which qualifies you for an interest rate bonus you  won’t miss out on interest all together as you will still earn the base rate, just not the bonus rate. However, if you set up a direct deposit each month as the account above encourages you to do, then you don’t have to remember to make your deposit, you are paying yourself first, each and every month, and you are not only earning bonus interest but you are regularly growing your savings balance too.

No withdrawals

You can also find a high interest rate on a savings account by choosing an account which rewards you with bonus interest when you don’t make withdrawals in a month. If you have a long term savings goal, or you just know you will be making very few withdrawals from your savings account in a month, then you can earn a bonus interest rate on your balance, and use this bonus rate as an incentive and reminder not to withdraw your savings. This stops you making incidental purchases with your savings account funds throughout the month, because you want to make sure you qualify for the bonus rate, which can often be one to two percent higher than the base rate.

An example of this type of high interest account is the Ultima Bank SMART Savings Account which rewards young adults with a 2.02% APY as long as they don’t make any withdrawals before their 18^th birthday.

Linked accounts

Fast food outlets aren’t the only ones who try to value add to their sales, and if a financial institution can get you to sign up for more than one of their accounts, they may be willing to offer you a bonus interest rate. For example, the Bank2 Great Rate savings account must be linked to a Great Rate Checking account to earn the 2.01% APY while if you have a Dollar Bank Federal Savings Bank FreMONEYSavings account you must also have a Checking or e-Checking account to earn the 2.00% interest rate.

Having a linked transaction account with the same provider as your high interest savings account has other benefits for you too. For example, if you are making deposits to and from your high interest savings account using a transaction account from the same financial institution, then you won’t have to pay any transaction fees, because transfers between accounts with the same institution are free. It is also easier for you to manage all of your accounts in one place, by logging into just one online banking system.

Minimum balance

Some high interest accounts will also try and encourage you to maintain your savings by rewarding you with a higher interest rate for maintaining a minimum balance in your account. This may require you to maintain a balance in your account throughout the month to earn a higher interest rate, or maintain a minimum balance to avoid account keeping fees – both of which will boost your interest income and return on your savings investment.

Interest Rate Promotion

While you are comparing high interest savings accounts, look for an account which is running an interest rate promotion, offering a bonus interest rate for signing up to the account. This bonus interest rate will apply to a promotional account for between one month and one year, after which the interest rate reverts to the standard rate. However, during the promotional period you can take advantage of the higher rate, and when the promotional period is over, you can switch to the next account with a high promotional interest rate, as high interest savings accounts don’t charge application or exit fees.

Certificate of Deposit

A certificate of deposit offers a higher interest rate than a standard high interest savings account and unlike other investments includes federal deposit insurance up to $250,000 to protect your investment. A certificate of deposit is able to offer you a higher interest rate on your savings because you are investing a fixed amount of money for a fixed period of time, usually your choice of six months, on year or five years.

At the end of your chosen term you receive your initial investment back, plus the interest earned over that period. However, if you access your CD funds before the maturity date you will usually have to pay an early withdrawal penalty, or forgo some of the interest you have earned.

There are also a number of other variables you can customise when choosing a certificate of deposit, and to make sure you are making the right investment, follow these tips:

• Look at your financial goals. Before you invest in a CD think about what you hope to get out of your investment, to make sure that it is the right choice. An important factor to look at here is the inflation risk, because your savings need to grow at a rate which exceeds inflation, and long term cash deposits risk being over taken by inflation.
• Know the maturity date. Make sure you know when you will have access to your funds again as this will help you determine how much you should invest, according to how long you can afford to be without that money.
• Know the details of call features. A callable CD gives the financial institution the right to terminate – or call – the CD after a set period of time, but you don’t have the same right to access your funds in that period. For example, if interest rates fall, your bank may call your CD because they can’t afford to pay the higher rate for the whole term. If this happens you will receive the full amount of your original investment back, plus any accrued interest. Remember that the call date is not the maturity date, and it is not the date you will have access to your funds.
• Know the interest rate you will be paid and how interest will be paid. If you are locking your funds away in a CD you want to be certain of your earnings over that time, and you should receive a disclosure document which states the interest you will earn, and whether the rate is fixed or variable. You can also have your interest income paid monthly; six monthly or yearly over your term, but you will need to confirm this with the bank as this can affect the interest rate you earn.
• Know the early withdrawal penalties. Emergencies can happen to the best of us, and if you find you need access to your CD funds, you don’t want to be hit with high early access fees. Therefore, find out from the beginning what these penalties will be, and shop around for the best conditions.

This is a guest post from Savings Account Finder which helps people compare savings accounts and term deposit products in Australia. They blog about useful personal finance matters and general tips to help you achieve financial independence.   

In today’s economy, personal savings are extremely important. It is crucial to set aside a bit of money for long-term plans: retirement, college, and major purchases among them. Additionally, it’s always a good idea to keep a portion of your assets liquid for unexpected expenses or emergencies. For many people a traditional savings account serves as a place to let their funds build, but the downside to traditional savings accounts is they don’t offer the higher interest rates that many online savings banks do. Clearly you don’t need an online finance degree to see that having an online savings account will be of greater benefit to your bottom-line than a traditional, brick-and-mortar bank. However, there are other significant advantages to moving your savings than simple interest rate comparisons.

One additional advantage of an online savings bank is convenience. When you open an online savings account you get the same benefits as you do with a regular bank: you can set up direct deposit, receive a debit card, and transfer funds. You may even be able to write checks depending on the sort of account you have. Similarly, online savings accounts usually don’t require minimum deposits or balances, giving you a great deal of control over how you manage your account.

Better yet, online savings banks allow you to accomplish everything you need to online making visits to your local branch a thing of the past. Online savings accounts also carry different business hours than regular banks, meaning you can conduct transactions at almost any time. Online accounts are also easily linked to other accounts eliminating any pain that might be caused by transfers between accounts. For example, many investment banks offer free online savings accounts allowing you to manage your savings account, 401k, and brokerage account all from the same bank. That people only have to visit one Web site to manage their finances is one of the major selling points of online banking.

Of course, one of the greatest features of an online savings account is the interest rate you get. Generally speaking, even the most basic online savings accounts offer interest rates that are significantly higher than those of regular banks. This is primarily due to the lower overhead online banks enjoy. They don’t manage branches, they employ fewer people, and they manage their funds electronically. This translates to higher interest yields for customers.

To increase your interest even more, you might consider creating an online money market account or certificate of deposit account. These are essentially savings accounts with different rules. A money market account usually requires a higher minimum balance, and in exchange you are rewarded with a higher interest rate. However before you set up a money market account, there are some things you should know. Money market accounts usually limit the number of withdrawals you can make per month. This number varies between banks, but a standard maximum is six withdrawals per month. Yet given that your goal is to save money, this should be no issue.

On the other hand, with a certificate of deposit (CD) account, you get the best interest yields possible. When you open a CD, you depositmoney for a fixed amount of time. During this time frame, which can be several months or several years, you can’t withdraw funds without paying a penalty. However, once the CD matures you will get the best rates the market can offer.

Another thing that often attracts people to online accounts is the security they provide. Like traditional banking institutions, online accounts are FDIC insured. This means that every deposit you make will be protected. This also applies to savings accounts, money market accounts, and certificate of deposit accounts. Also with an online account, your savings are not tied to the market. The market may determine your interest rate, but all of your deposits are secure. This way, you don’t have to worry about losing any money when opening an online savings account.

Opening an online savings account is both smart and easy. The whole process can be completed in a few minutes. Before opening an account, it is a good idea to look around at various Web sites and find an institution that suits your needs. After you have selected a bank and determined how much money you feel comfortable saving, you can decide what type of savings account is best for you. Clearly, moving your savings to an online account will make more money in the long run as well as provide you with many benefits. The advantages you get with an online bank will make the transition worth your time.

I wanted to pass along an announcement about an exceptional offer from WTDirect. This is the biggest cash bonus offer ever from WTDirect!

I received an email announcing a $500 cash bonus offer for customers who open a new WTDirect Online Savings Account.  For every $10,000 deposited, new WTDirect clients will earn a $100 bonus, up to a maximum of $500.

Wow!  This is an offer you don’t want to ignore if you have at least $10,000 you’re ready to move to a high yield online savings account.   Obviously, this is especially exciting considering the current savings rates.  Consider the instant return on your money.

Overview of WTDirect Online Savings Account

• No monthly fees.
• No minimum balance.
• Customer service 7 days per week with call you back feature and email.
• Balances of $10,000 or more earns highest rate.
• Interest on amounts deposited into account will begin to accrue on the date that the funds are received into the account.
• Interest will be compounded daily and will be credited to account monthly.
• Mobile banking available.
• FDIC insured.

Want more information?  You can also read my WTDirect Online Savings Account Review.  Or click below to go to WTDirect.

WTDirect: Get a $500 bonus and Earn 1.16% APY Now. A Savings Rate Consistently In The Top 5% of U.S Banks. Start Saving Today!

The ranking recognizes the best bank accounts that “combine higher yields and convenience.”  The email announcement said Kiplinger chose Ally Bank Online Savings Account because it requires “no minimum to open an account, no monthly fees and no minimum balance.”

This is great news for both of us!  Why?  I currently have my freedom savings account with Ally, so I’m pleased they are well respected and I can continue to feel comfortable in recommending them to you.

If you’re interested in learning more about the Ally Bank Online Savings Account, you can read my review.

Personal Finance Links

I hope you’ll take a few minutes out of your day to explore these posts I found interesting and helpful.

• Personal Finance Journey: How to get overdraft fees refunded provides good coverage on the topic and steps to get them refunded.
• PT Money: Use Google Docs to save big and make life easy provides some good tips for using Google Docs for your word processing program. MS office can be expensive.  Do you really need it?  As this article suggests, most of the work we do in MS office can easily be done with Google Docs.
• Redeeming Riches: Money lessons from a fool provides Biblical guidance on how to avoid repeating of mistakes.  One of the best ways we can do that is to listen to counsel from elders.
• Christian Personal Finance: How to raise a child on less is some excellent advice on managing the costs associated with having a child.  Some of the estimates out there on how much it costs to raise a child can be intimidating.  But using this advice and following wise money management principles can prove otherwise.
• Sound Mind Investing: Big Brother is watching…and compiling…and selling is an interesting post about how retailers are gathering information from you in unexpected ways.  Did you know a retail equation maintains information on merchandise returns made to an undisclosed number of national retailers?  Whoa!

One Money Design around the web

This week I discussed non-financial considerations in selling your house at Bible Money Matters.  It’s the second post in a two post series helping you answer the question:  should you should sell your house?

Today, I have a post at Christian Personal Finance that you don’t want to miss.  It explores dealing with common debt situations such as auto and investment debt.

Personal Finance Blog Carnivals

What is a personal finance blog carnival?  If you’re interested in learning more here is a great definition from BlogCarnival.com:

Blog Carnivals typically collect together links pointing to blog articles on a particular topic. A Blog Carnival is like a magazine. It has a title, a topic, editors, contributors, and an audience. Editions of the carnival typically come out on a regular basis. Each edition is a special blog article that consists of links to all the contributions that have been submitted, often with the editors opinions or remarks.

The benefits for the reader include reading a wide variety of content about personal finance.  A further benefit is the ability to interact with the writer or other readers in the comments.

And here are the carnivals One Money Design was recently featured in:

• Carnival of Personal Finance #243: Valentines Day Edition
• Carnival of Personal Finance #242: Fun Tax Facts
• Money Hacks #103:  Snowed In Edition