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Best Online Savings Accounts

Higher interest. Lower fees. What’s not to like about an online savings account?

Online-only banks, just like the name implies, do not have any brick-and-mortar locations and only exist online.

They’ve also truly created great competition for regular banks.

In fact, with the upsurge in new technologies, traditional brick-and-mortar banks may eventually go by the wayside. If you consider the popularity of peer to peer lending programs such as Lending Club, Prosper or Upstart, which attract investors looking for 21st century lending models, it makes sense that traditional banks have started to become obsolete.

Bitcoin and cryptocurrencies could replace traditional banks altogether. Once bitcoin is able to process and settle hundreds of transactions per second, it could offer a more efficient, secure and cost-effective banking structure.

Given all these reasons, it might be worth your while to look into an online savings account, pronto.

Quick look – Best online savings accounts

Ally Bank Online Savings Account
Discover Online Savings Account
Dollar Savings Direct High Interest Savings Account
Synchrony Bank High Yield Savings Account
Marcus by Goldman Sachs High Yield Savings Account

What's an online savings account?

Again, an online savings account is a savings account that only exists online. Typically high-yield, online savings accounts make a savings account APY more appealing. The difference can be vast (think 0.5% APY for a traditional brick-and-mortar savings account vs. 1.5% APY for an online savings account).

In a nutshell, online banks can charge fewer fees, require no minimum balance and offer excellent rates because they don’t have the overhead related to wages, maintenance and real estate costs like the traditional brick-and-mortar bank variety.

Why do I need a savings account?

Building up a savings account is a great way to develop a healthy mentality about money. There’s something very satisfying about watching small deposits in a savings account grow over time, and some banks even encourage goal-setting through mobile apps and online banking.

Here are a few down-the-road options for your savings:

  • Save for your child’s college education.
  • Save for a down payment on a house.
  • Save for an item you’ve always wanted.
  • Emergency fund savings (between three to six months of savings is recommended).

Pros/cons of an online savings account

The online savings account pros and cons may seem sort of obvious, but it’s always best to read the fine print in any situation. (For example, traditionally, the fees are lower or nonexistent for online savings accounts, but it’s definitely a good idea to be 100% sure.)

Pros:

  • They offer higher rates
  • They charge lower fees
  • New technology allows for some great banking options on your device
  • ATM networks are extensive

Cons:

  • You have to pay a fee for ATM access in some cases with affiliated brick-and-mortar banks
  • Depositing funds may actually be more cumbersome than depositing at a traditional bank.
  • Customer service is not readily available.
  • Sometimes account APY is an introductory rate (again, read the fine print).
  • It’s possible for online banks to fail or not be FDIC-insured. Do your homework.

How to find an online savings account

Once you’ve outlined your goals, you’ll want to decide which account makes the most sense for you. You’ll need to consider APY, your customer service needs, fees and service charges and whether the online bank has FDIC insurance.

For more information about APY, check out What is APY?

How online savings accounts work

Once you’ve officially decided on a bank, you’ll be required to fill out an application. The application will ask you to give your address, personal and work phone numbers, date of birth and Social Security number or Tax Identification Number. You’ll also need to create a security question and password.

You’ll be able to link your online savings account with your online or traditional checking account. In fact, to start the account, an opening deposit must come from your checking account. If you’re applying the old-fashioned way (on paper) you can include a check with your paper application.

Then, from there, you can deposit money into your account. The part that you don’t see is that the bank will then lend your money out in personal and business loans to other individuals. (The bank ultimately pays you interest when it lends out your money.)

Best online savings accounts

Ally Bank Online Savings Account

Pros:

  • High APY at 1.45%
  • No monthly maintenance fees
  • Deposit checks remotely with Ally eCheck Deposit feature
  • Six transactions limit per statement cycle
  • Accessibility with ATM card, ATM reimbursements and good mobile app
  • FDIC insurance up to $250,000

Cons:

  • Some fees (but are transparent and easy to understand)

Discover Online Savings Account

Pros:

  • 1.50% APY
  • Minimum opening deposit is $0
  • No monthly fee and no minimum balance required to waive monthly fee
  • Annual interest you can earn on a $15,000 balance is $225.17
  • FDIC insurance up to $250,000
  • Excellent mobile banking app
  • Auto-savers transfers allow you to create automatic transfers from personal checking into this account
  • $200 cash bonus for applying (use code COW318) through 4/16/18

Cons:

  • Just six transfers to other accounts per statement cycle are allowed.
  • If you exceed six transfers, you’ll be charged a fee.
  • Cash bonus is not valid for existing Discover savings customers.

Dollar Savings Direct High Interest Savings Account

Pros:

  • 1.80% APY
  • No hidden costs, fees or penalties
  • No service charges
  • FDIC insurance up to $250,000 in every account you own

Cons:

  • $1,000 minimum balance for the highest APY offer
  • Website is difficult to navigate

Synchrony Bank High Yield Savings Account

Pros:

  • Up to 1.55% APY
  • ATM card and ATM reimbursements
  • Synchrony Bank Perks include access to webinar series, three free wire transfers per statement cycle, unlimited ATM reimbursements, travel and leisure discounts and more
  • No monthly service fees
  • FDIC insurance up to $250,000

Cons:

  • Not great customer support
  • No mobile app

Marcus by Goldman Sachs High Yield Savings Account

Pros:

  • 1.5% APY
  • No minimum deposit to open an account
  • Dedicated saving specialists based in the U.S. deliver live, personalized support
  • No transaction fees
  • Excellent security
  • FDIC insurance up to $250,000

Cons:

  • No mobile app is offered
  • No ATM card is offered

Learn more about Bank Fees on Benzinga.

Final thoughts

Ultimately, the question “Is an online savings account best for me?” is a personal decision.

One item to consider: While high APY can be tough to ignore, there may be some other serious factors when considering which online savings account will work best for you. Depending on the customer, it could also be important to consider online/mobile experiences, mobile and online alerts and other perks or rewards you can receive.