People often chase the highest yield savings account online but neglect to pay attention to other important factors in choosing a good online bank. The sliver of difference in interest rates (particularly at these anemic levels) isn’t worth the additional risk taken on by allying yourself with some of the high yield banks who are overly diversified.
Interest rates at savings banks, online or otherwise are simply ridiculously low. While I do believe it’s important to maintain an online account because the rates are considerably higher than local savings rates, selecting an online bank based on rate alone probably isn’t in your best interest.
- Other Factors I Consider:
- What other businesses does the bank and it’s parent engage? – Big banks like Citibank and Chase honestly are a little scary. FDIC insurance or not, these big banks take too big risks with their ancilliary businesses – and as we saw with Lehman Bros and about 70 other banks – business failure of the parent can interrupt availability of personal accounts – insured or not
- Does the bank link up with my personal financial software seamlessly? People using personal software like Quicken or Money like the convenience of downloading transactions and auto-reconciliation.
- Is their online site easy to navigate? An online bank you dread to visit isn’t going to serve your needs at all.
- Does the bank respond quickly to recovering / rising interest rates? Some banks track the Federal Reserve rates quickly. Some don’t
Another problem with chasing the highest yield savings account is that one month your account will be paying the most, the next month someone else will jump over your bank’s rates – and for a fraction or a tenth of a percentage point of yield, it simply isn’t worth it.
Other topics on Savings Accounts and Online Banking:
Savings Accounts Kids Use to Learn Basic Home Finances
Kids Saving Accounts – Topics to Discuss with Your Children about Saving and Earning
Open a Bank Account Online – Things You Need to Open an Account Online
High Yield Saving Account – The Blessings of an Online Savings Account
Savings Account for Kids – How to Use a Savings Account to Teach Your Child about Money
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