An online savings account is one that is operated entirely online; though the bank will generally have a physical location somewhere in the country, you may not be able or need to ever visit it. Opening an online savings account can be a great way to get a good interest rate, as well as to put money aside for the future. It is important to do your research first, and to consider factors such as interest rates, ease of access, and deposit insurance.
When choosing an online savings account, make sure that any deposits to the account are insured for the entire amount of the deposit. In the United States, the FDIC guarantees this, but this differs in other countries. It is best to select a bank that you have heard of before; friends or family members might have recommendations for banks that they use. Some banks may also offer special deals for business accounts or student accounts, so keep that in mind as well. For example, a student account may not require a minimum balance, whereas a business account might offer higher interest rates.
Next, consider interest rates for the online savings accounts. Most simple savings accounts do not have great interest rates, and they can vary depending on the economy. With a bit of research, however, you may be able to find an online savings account with a higher interest rate than you can get at a local bank. A credit union, for example, can sometimes offer higher interest rates than a regular bank; other types of accounts, such as money market accounts, generally have the highest interest rates too.
It is also important to consider the ease of accessing your online savings account, both to withdraw and deposit money. Can you link your primary checking account to it, for instance? You might then choose to make automatic checking to savings withdrawals every month to make saving a painless process. It should be simple to withdraw the money from your savings account as well, again either by transferring it to a checking account or by withdrawing it using a card similar to a debit card.
Finally, consider if there are any penalties that can occur on the online savings account. A common penalty is the assessment of a small fee if the funds in the account dip below a certain level. If you do not plan on using the money in your savings account often, this might not be an issue, but if you regularly withdraw from the account you might want to choose a no-fee savings account instead. Most savings accounts do not have a yearly fee, but be sure to check that in advance as well.
