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How Do Online Savings Accounts Work?

Pros and Cons

Applying for an online savings account is one of the best decisions that you can probably make these days. As the technology continues to evolve, online marketing also doesn't stop on its progress. The trend on online buying and selling is very visible and no doubt that this would be the full face of economy in the near future. Opening an online savings account, however, entails both the pros and cons and it is so important that you have that concrete ideas on how your money will work when it is already there at the bank. Read some of the top reasons below on why you should choose or not the online savings account.

Pros

Easy Application. It is just a computer and an internet connection and your application can be approved in no time. Provided that you will fill up the online form completely and submit the needed documentations, you are ready to begin your transaction on the next day.

Higher Interest Rate of Up to 3%. Before the recession strikes early in 2008, you can still find banks that offer up to 6% interest rate on online savings account. But now, finding a 3% interest rate seems to be not existence already. But this doesn't mean that investing your money here is a bad decision at all. Two percent is far too different from that of 1% or lower in other type of account

s. FDIC Insured. Securing your money against online fraud and theft is absolutely necessary. The Federal Insurance Deposit Corporation will cover your deposit of up to $250,000.

No Fund Transfer Fees. This feature may sounds not possible since transferring funds from an online savings account to another account on a different bank will involve certain fees and charges. This is however limited only to the same bank accounts which includes your ATM, credit card, and checking account that you enrolled to your bank of choice.

Cons

Slow Funds Transfer. Most especially if you are trying to transfer an amount from your PayPal account to your bank account or vise versa; the transfer process can take up to 4 days. That could certainly mean a lot of downtime on your end.

Minimum Balance Requirements. Most banks impose minimum maintaining balance in an online savings account in order for it not to be foreclosed. As a depositor, it is your responsibility to monitor your account in order to avoid receiving such penalty. Aside from that, there is also an 8 to 10 days holding time on some banks upon opening of the account before you can make your first withdrawal transaction.

Fund Transfer Limit. If there's no limitation on the amount you can transfer, then there is an equivalent fee or charge on the amount that you will move from/to your online savings account. You should look for the banking institution that has low charges on such kind of transactions.

No Physical Branch. Big names in the banking industry both have their physical branch and the online banking system. But some other banks only focus on the online business and these banks usually are the ones offering the very attractive and higher interest rates. Better understand the risk before applying for an online savings account. After all, talking with an online customer service representative is way too different from raising your complain to a customer's desk in a bank.