While there’s no doubt that putting money aside with each paycheck is an essential component to a healthy financial future, it’s important to keep in mind that not all savings accounts are going to give you the same pay back or benefits.
It’s estimated that American consumers are missing out on over $50 billion dollars of interest they could be earning every year. The average interest rate on savings accounts is 0.08 percent, according to the FDIC, with many of the largest financial institutions paying as little as 0.01 percent.
But did you know that the top online banks have interest rates 20 times higher than the national average, according to rates published by the FDIC? Because they have no physical branches, they are often able to pass on that savings to customers through consistently competitive rates.
“A traditional bank savings account is certainly a safe vessel in which to deposit money, but it won’t necessarily help that money grow,” says Diane Morais, president, Consumer & Commercial Banking Products for Ally Bank, Member FDIC, which won the title of Best Online Bank in the GOBankingRates Best Banks ranking from 2015-2018.
What’s more, online banks can offer greater convenience and flexibility, since consumers can bank from anywhere on computers and mobile devices, and there’s no waiting in line or waiting for the bank to open. The most common services and transactions (i.e. monthly account maintenance fees, standard or expedited ACH transfers, domestic and international incoming wires, cashier’s checks and personal checks) are free at many online banks. And most online banks are FDIC insured, so a customer’s deposits are equally as protected as they would be at a traditional bank.
To increase your savings, Morais recommends the following:
- Pay yourself first. When you save, you are paying yourself, so be sure your monthly budget includes a line item for savings. You can make it easier to commit to this great habit by setting up automatic transfers to your savings account.
- Do a little research. Find a bank that will pay you a more competitive interest rate on your savings. You may have to do a bit of comparison shopping, but the extra money coming your way will make the effort worthwhile. According to the FDIC, the median balance in U.S. savings accounts is around $5,000. At 0.01 percent interest, that equals 50 cents in interest for the year, however if that money was in a savings account at one of the top online banks, it would earn almost $90 of interest.
To learn more about saving with an online bank, visit www.ally.com.
It is estimated that consumers have about $3 trillion in bank accounts earning a relatively low interest rate. If a portion of that figure belongs to you, consider making your money work harder by moving it to an account with greater interest earning potential.