The best way for you to start saving better is to go ahead and start today. One of the easiest things you can do with that money you already have saved is make sure it’s earning you the most that it can. Is that Bank Of America Savings account only getting you .01% ? Why not put it somewhere just as safe but gets you almost 10 times that amount? I’m talking about online savings accounts, or internet based savings accounts.
What are online savings accounts?
Basically these are just like regular bank savings accounts. The main difference is that these “online savings accounts” need a computer for you to access them, and they give you a higher interest rate. That’s all there is to It really. Well there may be a bit more to it than that, but I’ll get into that in a minute. Some people get scared off by the thought of having to use the computer for their banking. This is especially true for an older individual. I had the most difficult time trying to convince my grandmother that she needed one. It didn’t make sense to her how it all worked. Let me try and explain it…
First you head on over to your favorite online savings account bank. I personally have used Capital One 360, Emigrant Direct, and HSBC Direct. I don’t use HSBC Direct anymore because their interest rates went way down so I moved my money into Capital One 360 (referral link) which is getting .75% as of this writing.
After you go over to Capital One 360 and open your online savings account you’re all set to start saving. Then all you need to do is link your new Capital One 360 online savings account to your existing Bank Of America checking account. Once these accounts are linked together you can freely move money back and forth between the two accounts at your leisure. Now instead of getting that .1% at Bank of America you are making .75% instead. Seems like a no brainer doesn’t it?
Some people may be discouraged because they don’t understand how the process works. Maybe you think it’s one of those “too good to be true” type scenarios so you avoid it. It’s good to always have your radar up for scams, but this isn’t one of them. Online savings accounts have been around for many years, and they aren’t going anywhere. Plus, these online savings accounts are FDIC insured just like any other bank savings account.
So why are internet based savings account giving out higher rates?
short answer – Overhead.
With an online savings account the bank doesn’t have to employ a teller at the bank to help you with your transaction. Why? Because the online savings account is online only. It is completely internet based. You won’t be able to go to the bank and withdraw cash. If you want to withdraw money what you have to do is you first need to send money over back to your checking account at Bank of America. Once it’s there you can withdraw it from the bank like usual.
You see, Capital One doesn’t have to have bank tellers. They don’t need to have ATMs. They don’t even need to have a physical bank for you to visit because you do everything on the internet. This is how they are able to give out a higher interest rate. The bank is holding on to your money with less cost to them so they are passing those savings back to you in higher interest rates.