Are you looking for a savings account that offers principal protection, the security of federal insurance, and a higher return than a regular account? Then the High Yield Online Savings Account is for you.
It is important to know that although the APY is higher than that of chase banks, it is lower than the potential gains of riskier investments.
It is best to use a high-yield online savings account to achieve a financial goal. Find an account that will maximize your earnings while avoiding service fees. You will find several in this article. Let’s start already.
What is an online savings account?
Online savings accounts are accounts primarily opened and maintained online.
These accounts are distinct because they offer a higher annual APY payment yield than the regular savings account which is 0.06% APY as of October 18, 2021, according to the FDIC.
This means that online savings accounts have a high return.
You’ll also find that the best online savings accounts are operated by online banks and credit unions because they don’t incur the costs associated with running a physical bank.
The expenses that would have been used to operate the physical branch are passed on to the online savings account holders as a high return.
How to open an online savings account?
The process for opening an online savings account differs by the financial institution
Typically, you will complete an application form on the bank’s website. Provide all required information, including name, social security number, date of birth, and other contact information.
Choose the type of account, in this case, a savings account, and then fund the account.
Typically, you can fund using a variety of options that include wire transfer, check, or wire transfer.
By using the High Yield Online Savings Account, you can open multiple savings accounts for different savings goals.
Are online savings accounts safe?
The online savings account is safe as long as the account is insured by the FDIC (Federal Deposit Insurance Corporation) at a bank or by the NCUA (National Credit Union Administration) at a credit union.
They are insured for up to $250,000 per depositor, per bank, for each category of the account holder.
Therefore, before opening an online savings account, check that the financial institution is FDIC or NCUA insured.
How do I make deposits and withdrawals from an online savings account?
We have already established that online savings accounts have a high return.
Thereafter, customers of online savings accounts usually have several options for making deposits and withdrawals.
These include online funds transfer with another bank account, wire transfer, phone transfer, or physical check. Some online accounts also offer ATMs or debit cards.
Is interest in online savings accounts taxable?
Interest earned on your savings account is generally taxable by the IRS. If you earn $10 or more in interest per year, your bank or credit union will provide you with a 1099-INT to include on your tax returns.
Even if you do not receive a 1099-INT from your financial institution, you must still report all interest income earned.
How to choose an online savings account
The truth is that we are all driven by annual percentage returns. This is what catches our attention when buying an online savings account: the high yield. Finding an account that helps you get the most out of your money is essential.
However, there are other important criteria to check off your list. For example, one account may fit your financial goals and banking habits better than another, even if it offers a slightly lower APY.
In addition to APY, here are some other features to pay attention to:
Fees: Excessive transaction fees can reduce your earnings and even eat into your balance. Some online savings accounts charge a fee if your balance falls below a minimum balance threshold during the billing cycle.
Minimum: The minimum deposit amount to earn interest varies. Generally, lower minimum requirements make it easier to manage the account.
Customer Service: If you’re using online banking without access to a branch, make sure you can access a customer service representative whenever you need them. What is essential.
Digital experience: Use banks that have a good user experience both online and on mobile. Also, make sure they have the functionality you use the most. For example, if you frequently deposit checks, make sure a mobile deposit is available.
Withdrawal Options: Many banks have restrictions on withdrawing funds. Check each institution’s withdrawal options and excess transaction fees before opening an account.
Security: Look for an account insured by the Federal Deposit Insurance Corporation. The FDIC provides up to $250,000 of insurance per depositor, per bank, for each category of account ownership.