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Why You Need An Online Savings Account Now

In 2000, ING direct launched the first successful savings account online due greatly in part to offering an interest rate four times that of the national average on savings accounts at the time. Since then, I have rarely seen in the average online savings account to be less than five times the national average.

Many people balk at savings accounts in general. They rarely see the difference that a single point of interest makes on a savings account. With a total of 15 minutes, you could receive a five times better interest rate. This is not exciting to most, but when you look at the logistics of a five times better interest rate those 15 minutes can be some of the best financial minutes of your life.

Interest rates fluctuate and that will continue through time. If you take a minute and look at what a five times better rate can do for you, over a lifetime, you will be amazed. If I were to maintain a modest savings account of $5,000 over 30 years lets see the difference! The national average for interest rates untraditional savings accounts over the last 10 years is 0.4%. If the online trend continues to be five times of that, you would have a 30 year interest rate of 2%. Assuming the interest was compounded monthly, you would amass $9,106.04 with an online savings account. If you were to stick you're your traditional savings account you would amass $5,637.37. That's a difference of $3468.67. While this is not a huge chunk of change, it will only take you 15 minutes to do this.

If the trend in online banking stays as such, we are fools to give our money to traditional savings accounts.

Online savings accounts greatly outperform off-line savings accounts there is no denying this. At this current time and the average online savings rate is 4.75% and the current off-line savings rate nationally is .75%. The current catchphrase, I hear often, is think globally, act locally. When it comes to savings accounts nothing could be further from the truth.

Let's say for instance if you maintain a balance of $5,000 for five years in a traditional savings account. Based on the current rate, over the five-year period you would collect $190.33 in interest. If you took that same amount and placed it in an average online savings account, based on the current rate, you would've earned $1305.80. For simply doing your homework, you have one more mortgage payment.



Savings accounts online not only offer a tremendous difference in rate, but they also offer a huge value and convenience. You can access your information in real time 24 hours a day, seven days a week. Many online banks are also starting to offer rebates for the use of an ATM outside of their network. If you use an ATM often, this little feature could even save you more money than the humongous difference in rate.

Let's take a look at my last traditional savings account. The last two months of that account I use an out of network ATM on six occasions. Each time I use an out of network ATM, I am charged $2.50. So this cost me $15. At the time I had maintained about $4000 in that account. I was also getting a whopping 0.4% of interest on account. I made and $26.67 in interest over those two months, yet I paid out $15 in fees. So I netted $11.67 for maintaining a traditional savings account. In reality due to the fees, I was receiving 0.2% interest. I might've been better off just saving my money and my mattress. At least I wouldn't have wasted gas going to ATMs.

Even though these accounts are online they still have the same protections as traditional savings accounts. Each individual account holder is FDIC insured up to $100,000. Just as your traditional savings account online savings accounts are completely put. You can deposit or withdrawal money at any time without any penalties. The beauty of most online banks is that the minimum amount required to set up an account is one dollar. Many traditional banks require a $300 minimum.

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