Americans just love buying books, music, plane tickets, and even car insurance online. Who can blame them?
With low overhead, no state or federal taxes (for now), and no trips downtown in heavy traffic to achieve the same end, shopping online for the best deal has become deeply embedded in the U.S. consumer shopping experience.
So why hasn’t the enthusiasm for online deals translated into the online banking community? Global finance consultant Comscore (Stock Quote: SCOR) reports that after decent growth in the middle of the decade, online banking usage has softened in recent years, with few clues offered about the fall-off.
Sure, as the Federal Reserve cut interest rates in an attempt to revive the flailing economy, online savings bank rates have come down. In 2008, grabbing a 3% high-yield online savings account wasn’t out of the question for online banking customers. Today that rate may be a few hundred basis points lower, around 1.0% or even 2.0% if you look very hard for good online savings account deal.
But that’s still well above the current 0.26% savings rate offered by traditional brick and mortar savings bank accounts, as measured by BankingMyWay’s National Average Savings Rates.
You can get online savings accounts at numerous financial institutions, even traditional banks like Citi (Stock Quote: C) and Wells Fargo (Stock Quote: WFC). But there are strictly online banks, too, like ING Bank (Stock Quote: ING), Everbank and HSBC Direct (Stock Quote: HBC). A quick glance reveals that both the savings and checking account rates at online banks are significantly higher than those at traditional brick-and-mortar banks.
Take Capital One (Stock Quote: COF). Its online banking arm is offering a 1.0% annual percentage yield (APY) for new savings account customers who deposit funds into the online bank, with no minimum deposit. If you deposit more than $10,000, the rate goes up to 2.0%. Plus, Capital One will kick in $50 to your new account.
Or how about GMAC Bank, the financial arm of General Motors (Stock Quote: GM). GMAC has rolled out a high interest online savings account with an APY of 2.5% -- that’s about 200-basis points above the average national savings account interest rate at traditional banks. There is no minimum balance requirement, and no monthly charges with the online GMAC deal.
However, there are some downsides with online bank accounts. In many cases, you can’t access the money from an ATM (check with your specific online bank for guidelines on ATM withdrawals). In addition, transfers from savings to checking may take a few days.
Also, make sure you choose a reputable online bank with a good track record of competitive yet stable rates and whose assets are FDIC-insured.
That said, online bank savings accounts beat brick-and-mortar rates hands down. If you appreciate a bigger bang for your savings account buck, don’t just sit there, get clicking!
—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.