Okay, I admit it. My bank account is a lean mean machine. There isn’t a lot of fat going on there, unlike what’s happening in the thighs of my jeans. But if you’re like me, you want to make the most of your assets. Ahem. Right?
That’s why I’m going to expound the virtues of online savings accounts. I know. It sounds boring. But really. It isn’t.
I stumbled across the joy of online savings accounts when I realized my hometown bank was paying me a measly 0.05 percent interest. Yeah, you read that right-- 0.05 percent—not even a half of a percent—one tenth of a half of one percent. Highway robbery.
Do you know how much that interest will get me at the end of the year, if I have $100 stashed away? A nickel. Five measly cents.
I’d herd a rumor in the news that banks are competing for customers, and one of the ways they are luring them in is with high interest rates on savings accounts. Phooey, I said. My nickel didn’t look like much bait.
So online I went. And I discovered that it was true. If I opened an online account, I could earn 5 percent interest. Hell, that would turn my measly nickel into a solid 5 dollar bill by the end of the year. That’s a free venti chai latte at Starbucks. Who could say no?
Here is what I found out while shopping.
First, a lot of online savings accounts come with hooks. For instance, you only get the great rate if you have $1,000 or $50,000 in an account. If I had that much money, would I be worried about bringing home that extra $4.95 a year? No.
Also, some of those accounts are actually money market accounts, which may or may not have FDIC insurance. Most people don’t know what that is, but basically, it means you get your money back from the Feds if the bank people turn out to be shysters. Sign me up for that, please. Never open an online account that isn't FDIC insured. Period.
And third, some online savings accounts only pay you the great rate if you also open a checking account or some other account with them. Forget that. I want cold hard cash, and I want it with the click of my automatic deposit button, no strings attached. Who wants to get their checks reprinted anyway?
Now here is how it works.
You open the account and link it to your checking account. You can transfer money into savings whenever you have a few spare bucks, or set up an automatic debit so the money magically is transferred for you every so often. There is a built in spend-guard,too. It usually takes 3 to 5 days for the money to appear in your checking account if you transfer it out of savings, so you can’t just binge buy without some forethought. For me, this has turned out to be pretty awesome, because I tend to leave the dough alone, and leave whatever shiny whatzit I wanted to buy where it belongs--at the store.
So here are the gems. No weird strings. No silly onerous requirements and the interest rates aren’t teaser rates that will dwindle to virtually nothing after a month or two.
EmigrantDirect.com: Only $1 to open an account and so far, they are paying the best interest rates. They don’t charge any silly fees, either. The bank is a subsidiary of Emigrant Bank out of New York, which has been around for a good long time, so they won’t just disappear, either. I signed up for this one, and so far, it's been great. They even sent me a silly hat as a thank-you.
HSBCDirect.com: Only $1 opens you an account, and it appears they pay almost as much interest as EmigrantDirect. This, also, is an online branch of a real brick and mortar bank, and there aren’t any fees on the accounts.
INGdirect's Orange savings account is a good bet. Only $1 to open, and it’s FDIC insured. The interest rate is, however, less than EmigrantDirect and HSBCDirect.
Amboydirect has a decent program, too. It’s very similar to the others: Insured, with a $1 minimum deposit.
Some of the accounts that I don’t personally think are all that hot, but might work for you are:
CapitalOne’s direct money market fund. It comes with an ATM card, for easy cash access. (Sure, you can withdraw your money from any ATM, but doesn’t that defeat the purpose of saving? ) They also require $100 to start and won’t pay you any interest if your balance falls below that. Oh, and that’ll be $1 every time you use that ATM.
GmacBank’s online money market has a 5 percent rate, a $50 opening deposit, but they charge you $7.50 a month if your balance is below $500 a month. If you can't keep the balance that high, skip it. You are supposed to be making money here, not losing it.
CitiBank's e-savings: No minimum to open the account, and it pays a decent rate, but you have to have a Citibank checking account.
The good news is there is an account that fits everyone, and it's not that hard to shop around. Although, you have to be honest with yourself about how you handle your money. Can’t keep a minimum balance? Don’t sign up for an account that will charge you if you don’t. Can’t keep your hands off your savings? Don’t get an account with ATM access.
It’s that easy.
And my last bit of sage advice: If you need help shopping around for an account, visit Bankrate.com. It’s an awesome site, and they list the top 100 best-paying accounts.
Now go forth, and sock away your dollars and earn more than a few cents. •
