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MoneyWatch: Managing Your Money
By Angelica Leicht
Edited By Matt Richardson
/ CBS News
When it comes to managing your finances, you have plenty of account options to choose from between brick-and-mortar banks and online banks. And, while some people prefer to have access to the physical banking locations that big banks can offer, the reality is that online banks can also offer plenty of perks to account holders.
Embracing the benefits of online banking not only offers ease of access to your accounts but also presents opportunities to optimize your financial growth. So, if you're not utilizing an online account for some or all of your savings, you could be leaving big benefits on the table.
Explore the top online savings account rates here now and start earning more interest.
3 great benefits of online banking
Here are three great benefits of doing your banking online:
Growing your money with an online high-yield savings account
One of the most compelling advantages of online banking is the access to high-yield savings accounts. Unlike traditional brick-and-mortar banks, online banks have lower overhead costs, allowing them to offer higher interest rates on savings accounts.
Take, for example, high-yield savings accounts. The rates on these types of accounts are high across the board right now, but online banks offer some of the highest APYs on your money.
There are numerous high-yield savings accounts from online banks offering 4.5% or more on your money currently — giving you an opportunity to earn a lot more than the average 0.42% APY offered on regular savings accounts.
To find the best option, research various online banks to identify those offering the most competitive interest rates on high-yield savings accounts. You can also utilize online comparison tools and read customer reviews to make informed decisions. And remember to make regular deposits to your online account after opening it. As you accumulate savings, compound interest grows.
Don't miss out! Explore the top rates you could be earning right now.
Locking in earnings with an online CD account
Certificates of deposit (CDs) offer a stable way to earn interest over a fixed period while keeping your funds secure. Online banks often provide competitive CD rates, and in many cases, these rates are higher than what you can get from brick-and-mortar banks.
Right now, it's possible to find numerous online CD options with APYs in the 4% to 5% range.
That said, CDs come with different terms ranging from a few months to several years — and the rates on each CD term will vary, even at online banks. But chances are that your rate will still be higher with an online financial institution, no matter what the term is, so be sure to select a term that aligns with your financial goals.
You can also create a CD ladder by investing in multiple CDs with staggered maturity dates using only online banks. This strategy allows you to access funds periodically and potentially take advantage of rising interest rates — while raking in the high interest earnings from online banks right now.
Minimize unnecessary costs with low-fee online accounts
Online banks are also known for their fee-friendly approach, often providing accounts with lower fees compared to traditional banks. As such, one of the benefits of using an online bank is getting access to accounts with low or no fees — and that includes many high-yield savings accounts.
But as with any other type of bank account, be sure to carefully read through the fee schedules as you consider accounts from various online banks. Look for accounts with no or minimal fees for services such as monthly maintenance, ATM usage and overdrafts — and ensure that you can meet any other account requirements to avoid unnecessary costs.
The bottom line
Online banks offer a number of ways to enhance your financial well-being — many of which are easy to take advantage of. By capitalizing on the numerous benefits of online accounts, including the high interest rates on high-yield savings accounts and CDs while minimizing account fees, you can reap the benefits without shelling out for extra fees. Just remember to conduct thorough research, compare offerings and choose the strategies that align with your financial goals before opening any type of account.
Angelica Leicht
Angelica Leicht is senior editor for CBS' Moneywatch: Managing Your Money, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.
