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Questions About Online Banking
1. What Does A Completely Online Bank Mean?
Some banks and financial institutions will call their accounts completely online or virtual savings accounts. Basically what this means is that your money is going to be difficult to get a hold of. Your virtual account will be tied to a savings or checking account at another bank. You transfer money between the accounts at your will. But, you can only make a maximum of six withdrawals per month. With these accounts you will not have ATM access to your account. Needless to say these accounts are based on convenience for the bank not for the account holder. While they may sound useless, because they favor the bank you usually get much better rates with these accounts.
When interest rates are increased or decreased it dictates how much interest people will have in purchasing goods or services. If a rate is decreased, things become more affordable and the number of goods or services sold increases. In affect more money changes hands. Common sense would tell you this is a good thing, wouldn't it. I can afford more; therefore I can get more toys. If you think about it further, if everybody had money to buy things, we would slowly run out of goods and services. The law of supply and demand kicks in, the provider of goods or services would in turn be able to charge more. Eventually, if this got out of hand, McDonalds would scrap the Dollar menu for the Two-Dollar menu, then it would be the Three Dollar menu, and four, so on.
When interest rates rise, fewer goods and services are trade. Less people are willing to pay a lot of money for an item and less items are sold. Interest rate rises in affect curb inflation.
So what does this tell us as far as our savings accounts online? If you are enjoying good rates, thank you inflation. If you are not, come on Two-Dollar Menu! In English, if the Fed starts to drop rates consistently, start looking for longer term CDs to secure you good rates.
Online savings accounts are a great way to get the most bang for your buck while still keeping your cash liquid. In most cases you link your checking to your online account and then you transfer money between the two at any time. When you transfer money into this account usually there is a longer than normal hold period.
Because the accounts are mostly electronic and require minimum resources for the banks to maintain, you receive excessively good rates in most cases. The rates on these accounts in most cases will rival, if not beat, the local rates of CDs.
Many people worry about having their money accessible online. I have to say, about 3 years ago I was pretty much a fool for putting my money online. Today through the technology and level of security they offer is great. I feel more secure with my online banks than going to an ATM in my local town.
2. How to Signup for an Online Savings Account
A. Provide your personal information to the bank.
This is exactly what you would do to open an offline account. But, we hesitate to open online savings accounts just because of this one simple step because we have to do this electronically. The only really vital information you give to the bank is your social security number and birth date. Just about everything else can be found out about you via a quick Google or a credit check.
Here's the information they require from you:
Home and Work Phone
Birth date, Social Security
Pin Number and Security Questions
If it makes you feel better, most banks allow you to complete this step over the phone. In fact, the first online account I ever signed up for was over the phone for the same exact reason.
B. Passing a series of questions based on your credit report.
To speed the signup process and insure security, most online banks will run your credit report and ask you specific questions that in all likelihood would be implausible for anyone else to know.
For example, my last online savings account signup required me to answer 7 multiple choice questions each with four choices. I remember the following question:
A. The approximately monthly cost of my mortgage.
B. The total amount of money I owed on car(s).
C. How much I owed on college loans.
D. The amount paid on my last credit card bill.
E. How long I have had my mortgage.
After you answer these questions, the banks verify the information and will allow you to move to step three. In some cases, they will require you to call an agent from your home phone to verify some other information.
C. Link the new online savings account to a checking account
You then provide the bank with the account number and routing number to your current checking account. This will allow you to transfer money to and from your checking account in the future. After the checking information is verified, you have a 3 to 10 day wait.
The bank you are opening the savings account online with will deposit two small amounts of money into your checking account. Once you verify these deposits with them in order, your account will be activated. Note: you need to verify the exact order the amounts were deposited in.
D. The holding period
At that point, your account is active. There is usually a ten day hold on your initial deposit, just to give them even more time to verify you are legit. This means you can't touch that money for that period of time. There will always be some sort of holding time, it just reduces as times goes on. Don't worry, you are getting interest during the holds.
3. Are There Any Online Savings Account Banking Fees?
Signing up for an account, electronic fund transfers (up to 6 a month; in most cases), and online bill pay all usually come standard with online savings accounts.
I just took a survey of the top 20 online banks to answer this one.
There are only three reasons you would have to pay a fee:
1. Either you want to make a one time wire transfer (which most online savings account providers don't allow anyway)
2. You go over the maximum six account withdrawals in a month.
3. Your printer is broke and you want a printed statement mailed to you.
Here is an average of what I'm seeing on the cost of these fees:
Domestic Wire Transfers: $22.00
International Wire Transfers: $35.00
Over the maximum 6 account withdrawals per month: $5.00 per withdrawal after
Having a printed statement mailed to you: $5.00
Also, don't forget about ATM fees, if your bank doesn't offer ATM rebates.
4. What is an Online Savings Account?
An Savings Account Online is the same exact thing as your standard savings account. The only difference is that there is there is no human to human transactions taking place.
With a normal savings account if you want to withdraw money, you would visit a teller or maybe an ATM. With an Online Savings Account if you want to withdraw money, you will either just transfer it to your existing checking account and use your ATM card from their or visit the ATM. Notice Savings Accounts Online have no human to human interaction at all. This means the bank does not need to pay or train an employee to get your money. Banks also do not need to pay for a physical location, heat/light/or insure that location to get your money. Because this greatly reducing the cost for banks, they pass the savings on to you by offering a much better interest rate.
Online accounts are safe and Federally insured to boot. The online savings account security issue has been dealt with by most banks. Those that are behind are working towards it. If safety is a huge concern, please check my reviews of the banks. I look at the ins and outs of there account login and access.
Since I have been using online savings accounts that rate has always been at least ten times great than offline savings account at the bank that I have my checking account with. It's a no brainer, if you have more than $1000 in a savings account get an online savings account today.
5. How Do I Make Deposits To My Savings Account Online?
If this is your first time contemplating opening a online savings account you must realize that online savings are great for growing your money, but making deposits can be a bit annoying. Banks offer great rates with online accounts because their over head is ridiculous low with these types of accounts. In return for the great rates, you are going to have to take an extra step to get your money into the bank.
The most common way to make a deposit is to link an existing checking account (from just about any bank) to your online account. To do this you provide your online savings account bank with the account number and routing number of your existing checking account. They then make a series of small deposits to this account to verify that the accounts are linked. In the online savings account world this is the old faithful method of making deposits in fact many online savings banks site this as their customer's main method for making deposits.
Many online savings banks are now allowing you to mail your deposit or use a branch ATM to make deposit. I find mailing in deposits is rather slow. It usually takes five to seven business days until I see the money in my account. ATMs are much quicker I usually see the money in the account within 48 hours.
I really love the ATM feature, it makes me feel like my bank is open twenty-four hours. This is a big reason I really like HSBC. I have a branch five minutes from my house.
One thing I caution people on is moving your money into your online savings account for too short a period of time. If you know that you the $1000 that you put into your online savings account is needed in less than a month, it might not be worth your time or even worse lose you money. When ever you make an electronic transfer from one bank to another, each bank has a transfer period that can range. But, during that period you usually lose about two days interest. So let's say you have a savings account in a local bank that collects 2.75% interest. You transfer that money to your 4.5% online savings account. There is a two day period where you are not collecting any interest at all, while its being transferred to your online account. If you need that money right away, you just lost two days at 2.75%. A good rule of thumb is to make deposits that will stick for at least a month.
Because we all can be smarter with our money.