How Do I Open an Online Savings Account?

May 7th 2016

Benefits of Online Savings Accounts

Opening a savings account is an important part of becoming an adult, as having money stored away for future unexpected expenses or for a big purchase can make a dramatic difference in your quality of life. Online savings accounts are becoming an increasingly popular way for individuals and families to safely save their money, especially when compared to more traditional brick and mortar banks. Online savings accounts have numerous advantages, which include better interest yields, typically better customer service and greater flexibility when it comes to deposit options. Instead of simply choosing a savings account, your highly liquid account can switch between savings, CDs, money market and other options as often as you’d like.

Although the benefits of online savings accounts are well-known, not everyone understands the best way to set up an account. Others are concerned about the security and legitimacy of performing major financial transactions over the Internet. Fortunately, web commerce and banking technologies have developed rapidly over the past several years, and it is easier and safer than ever to open an online savings account.

Safety of Online Bank Accounts

One of the biggest concerns that many have before opening an online savings account is the risk to their funds. Although there are risks associated with online banking, virtually all of them can be prevented by taking the proper precautions. According to Forbes, there are a number of easy steps you can take to protect your identity and financial accounts when using an online savings account.

The most important thing to do is use all electronic records. By removing any physical paper documentation, you dramatically reduce the risk that someone will see sensitive information in your home or in your trash and use it to steal your money. Using up-to-date antivirus and anti-malware software is another important way to prevent hackers from accessing your information. It is also wise to keep regular tabs on your online accounts, so you can catch any potential hacking or theft as early as possible.

Setting Up an Online Savings Account

Online banking firms have made it as easy as possible to create online savings accounts. In many circumstances, it is actually easier to create an online savings account than it is to create a traditional savings account in a brick and mortar branch of a bank. In addition, many traditional banks are beginning to charge an increasing number of fees, a trend that has largely not occurred in the online banking industry.

In order to open an online savings account, you’ll first want to have all of the proper documentation with you. This includes your Social Security number, a driver’s license or passport and a minimum amount of cash to transfer into your new account. This minimum is usually $100 or less for most online banks. In order to transfer funds to your online bank account, you’ll typically want to use a traditional bank account that you already have open. However, if you are unwilling or unable to use a traditional bank to transfer funds, there are a number of alternative funding options as well. These include money orders and cashier’s checks. After getting your online savings account funded, you’ll want to choose the specific accounts you want to put your money into. Although online banks typically have better interest rates than their brick and mortar cousins, their rates are still typically below 1 percent. Fortunately, many online banks offer alternative account options that can help increase the interest rate you earn on your money. For example, money markets are a completely liquid way to increase your interest rate, in many cases by more than 100 percent! If you don’t need your money in the near future, a Certificate of Deposit (or CD) is a great way to increase your yield in exchange for not having access to the money for six months or longer.

Whatever option you choose to go with, remember that there are numerous online banks to choose from. Make sure you do extensive research before choosing where to put your life’s savings.

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