Do you have an online savings account? Here’s why you need one
If you’ve been paying attention at all, you know that technology has changed the way we do pretty much everything these days. Our cars and cellphones are smarter, our shopping habits have completely evolved, and even the way we live our daily lives seems to be easier, yet more complicated than ever. Have you ever felt this way?
In the ever-changing digital world, however, it’s vital to keep up with emerging trends and technologies that benefit users without even trying too hard… and finance is not the exception. One of the newest trends to be aware of is online savings accounts.
What are online savings accounts?
As the name states, online savings accounts are accounts kept in non-traditional online banks that don’t have physical locations around the city. The similarity to old-fashioned banks, however, is the well-known premise of borrowing and lending.
When you and all other account holders put money into an online savings account, online banks lend that money out to people and businesses in the form of loans, charging them interest just like any other loan. The benefit to you? While the bank uses your money, they pay you interest for the privilege of lending your money. It really is as simple as that.
Why should I get an online savings account?
To most people, having a passive income is the ultimate financial goal, as the beneficiary doesn’t have to be actively involved in the transaction to be earning money. This is basically the concept of online savings accounts, as you deposit money and don’t have to worry about further actions until you start earning back … seems like a win-win!
You’ll probably never retire on the interest you make here, but it’s good to know your money is growing two ways: through your deposits and through interest paid on those deposits. The more you put in, the more you make over time.
Moneyunder30.com lists a few additional benefits to online banking include:
- No or fewer fees
- No minimum balance requirements
- Easy transfer services from traditional checking accounts
Even though online savings accounts are a great option, something to consider before you open yours are ATM restrictions, as some online banks have higher ATM withdrawal fees and no locations for physical deposits, forcing you to mail checks if you choose to opt out of electronic transfers.
How do I know which bank to go with?
Doing plenty of research and educating yourself on the pros and cons of each online banking option should always be the first step when considering new financial activities. If you’re ready to open an online savings account you should look for the bank with the highest yield option, as this will give you the highest return on investment through interests.
A few additional things to look for when opening an online savings account are customer service availability and other requirements you might not be used to with traditional banks.
How do I open an online savings account?
Once you have decided on the best bank for your financial needs, it’s important to set a goal and stick to it. If you’re planning on putting 10% of your paycheck towards an online savings account, it might be a good idea to find out if your bank of choice offers automated electronic transactions, where you don’t have to worry about transferring money manually every month.
When you feel confident about your bank and your financial plan, get on your computer or pick up the phone! In just a few minutes online or speaking with a customer service representative, you should have an online savings account.
What if I can’t afford to save?
One of the biggest reasons why people put off opening an online savings account is because they don’t think they can afford to save any percentage of their paycheck. The good news is that with online savings accounts there are generally no minimum balances, meaning that you could save as low as $10 a month, and you’ll still see financial benefits in the long term.
LendingPoint is a personal loan provider specializing in NearPrime consumers. Typically, NearPrime consumers are people with credit scores in the 600s. If this is you, we’d love to talk to you about how we might be able to help you meet your financial goals. We offer loans from $2,000 to $25,000, all with fixed payments and simple interest.