If you are like most people, and have hundreds or thousands of dollars stored at home in your sock drawer, or even worse, a regular checking or savings account at your local bank, then you are doing it all wrong!
I can admit opening a saving account with the same bank you have your checking account with is convenient, but it is really the most effective way to save your money?
When you place your money in a savings account, the bank actually loans your money out to other people. This is why they pay you interest on the balance that is in your account at the end of each month. This is also why you are only allowed 6 withdrawals a month before your account is cancelled- they cannot loan your money out if you are always withdrawing their funding.
At the time of this writing, BofA’s standard savings interest rate is .03%. What does this mean? This means that if you keep $1000 in your account for the entire year, you will receive a grand total of 30 cents in interest. Meanwhile, banks charge its customers any where from 4 to 27% to borrow their money. No to mention, the fees you are charged for having a checking account. Can someone say HIGHWAY ROBBERY!
So What Is My Alternative?
I am so glad you asked! An Online Saving Account!
Here are 3 reason why everyone should have an online savings account
- Higher Interest Rates: Online banks pay anywhere from 1% to 1.8% in interest. Meaning that that $1000 from earlier will get you $10 instead of 30 cents at the end of the year. Who doesn’t love free money??
- Limited quick access: There are no ATM cards or branches you can walk into. Therefore withdrawing fund means completing a external transfer which can take up to 3 days. In other words, no impulse spending and savings remains savings!
- FDIC Insured: Like regular banks, online banks are also insured through FDIC providing you with protection up to $250,000 per account number. So, if your account is ever hacked your are covered. If your already utilizing your bank’s online banking systems you already have online banking. Why not get the most of it from companies that know the value of your hard earned dollars?
- Visit Magnifymoney.com for an extensive list of online banks and reviews
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