Are You Getting The Best Bank For Your Buck?
Saving money and investing is the key to financial independence and building wealth. Though saving and investing go hand in hand, accumulating money through saving is the main mechanism that makes investing work. A savings account is the most basic type of account that holds your money and pays interest on your savings but are you getting best bank for your buck at your current bank?
If you are banking with your local brick-and-mortar bank you’re most likely not. Many of the nation's big commercial banks are offering savings interest rates as low as 0.01%.
Not sure what 0.01% looks like like? Here's an example, If you let $10,000 sit in your standard savings account with 0.01% yield for one year, you would receive $1 of interest. It’s hard to feel great about that.
If you do most of your banking online, it might be a good time to ditch BOA and stash your cash in an online High Yield Savings Account. Online banks offer many perks, the number one benefit to an online savings account is the higher interest rates. They don't have to pay the overhead cost of building and maintaining a branch so they can afford to pay a little more than a traditional bank. Many online banks are currently offering a 1.00% APY on its savings account. This means that your $10,000 deposit will generate $100 of interest in over a year instead of the $1 at your local branch.
Similar to traditional banks, online banks are backed by the FDIC, meaning you won't lose money, you'll be covered for losses up to $250,000 just like any other bank customer. Other benefits of using an online bank include, but are not limited to, no monthly fees, no minimum balance, low opening balance requirement, daily compounding interest, 24/7 customer support, live online chat, mobile app and remote check deposits.
The main advantage that brick-and-mortar banks retain is the convenience of ATM’s and the ability to accept cash deposits. Not having ATM or debit option makes it difficult when you need to access your money. However, most online banks have agreements with ATM services which allow you to make ATM withdrawals without incurring a fee. Capital One 360 and Ally Bank allow you to use any allpoint ATM for free and will reimburse for ATM surcharges.
Before making the decision to switch to an online bank doing the proper research and asking the right questions is always important. It’s your money and you decide what works best for you. If you’re not ready to commit fully to online banking but would like to try, keep your traditional account but add some money in a web based account to test drive.