Financial Tip: Online Savings Accounts

Are you still using your old school brick-and-mortar savings account?  If so, you could be losing out on hundreds of dollars of interest per year.  The average interest rate on savings accounts is currently only 0.08% APY, but online savings accounts are currently offering interest rates at over 2.00% APY.  If you have $5,000 in a savings account earning .08%, you will earn only $4 of interest in a year.  At 2%, you would earn over $100.  If you play that out over five years, you would earn $525 of interest compared to only $20 with your standard savings account at your local bank. 

The only difference with the online savings accounts is that they do not have the typical overhead that your regular bank has which allows them to offer higher interest rates.  These accounts are also FDIC insured.  It does take a couple of days to transfer money out of these accounts, but I personally use American Express’s Personal Savings account, and it never takes more than two business days to transfer money over to my checking account.  So, if you are still using the same savings account you’ve been using for years, it might be time to do some shopping around for a new savings account.