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An online savings account offers convenient account access and the potential for higher interest rates and lower fees than traditional banking. But how do online savings accounts work?
The answer is simple: Really similar to regular savings accounts. An online savings account lets you add money whenever you want without locking up your funds, and many digital savings accounts offer impressive rates compared to what you’d find with brick-and-mortar banks. In fact, online banks offer many of the best high-yield savings accounts. The main differences in how an online savings account works will come down to your options for depositing and withdrawing funds and customer support.
Learn more about online savings accounts and why you should consider them.
Featured High Yield Savings Accounts
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Earn up to 4.00% APY1 <p>New and existing Checking and Savings members who have not previously enrolled in Direct Deposit with SoFi are eligible to earn a cash bonus of either $50 (with at least $1,000 total Direct Deposits received during the Direct Deposit Bonus Period) <b>OR</b> $300 (with at least $5,000 total Direct Deposits received during the Direct Deposit Bonus Period). Cash bonus will be based on the total amount of Direct Deposit. Direct Deposit Promotion begins on 12/7/2023 and will be available through 1/31/2026. Full terms at <a href="http://sofi.com/banking">sofi.com/banking</a>. SoFi Checking and Savings is offered through SoFi Bank, N.A., Member FDIC.</p> <p>SoFi members with Direct Deposit can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the 4.00% APY for savings (including Vaults). Members without Direct Deposit will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of Dec. 3, 2024. There is no minimum balance requirement. Additional information can be found at <a href="http://www.sofi.com/legal/banking-rate-sheet">http://www.sofi.com/legal/banking-rate-sheet</a></p> and collect up to a $300 cash bonus with direct deposit or $5,000 or more in qualifying deposits.2 <p>SoFi members with Direct Deposit or $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either Direct Deposit or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi members with direct deposit are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of Dec. 3, 2024. There is no minimum balance requirement. Additional information can be found at <a href="http://www.sofi.com/legal/banking-rate-sheet">http://www.sofi.com/legal/banking-rate-sheet</a></p> FDIC Insured.3 <p><b>SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $2M through participation in the program. See full terms at <a href="http://sofi.com/banking/fdic/terms">SoFi.com/banking/fdic/terms</a> See list of participating banks at <a href="http://sofi.com/banking/fdic/receivingbanks">SoFi.com/banking/fdic/receivingbanks</a></b></p>
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Western Alliance Bank offers a powerful 4.40% APY to help grow your money. FDIC insured, no fees,5 <p>No account activity or maintenance fees.</p> $500 minimum deposit, $0.01 minimum balance to earn APY.
High-yield savings accounts vs. online savings accounts
You’ll often see the terms “high-yield savings accounts” and “online savings accounts” used interchangeably, and this is because many online accounts are also high-yield. To be considered “high-yield,” an account must earn a higher rate than the national average for savings accounts. This is 0.42% (as of 12/16/24), according to the FDIC. If you’re looking at a list of high-yield savings accounts, you can bet that many of them – if not all — will be online. Some will earn 4.00% APY or more.What is an online savings account?
An online savings account is an account you can open with an institution or company that operates entirely online. You manage your account via a mobile app and/or online portal. This means you won’t have access to brick-and-mortar bank branches with an online savings account, and you generally won’t be able to get any form of in-person support.
Traditional bank accounts — including savings accounts — can cost more for brick-and-mortar banks to operate, and institutions often try to recover these costs by charging consumers more fees (and offering them lower rates). Online banks generally have lower overhead than traditional banks with branch networks because they don’t have to pay for branches and staff to support them. This is why they're known for passing on more savings to customers in the form of higher interest rates and lower or fewer fees.
Online savings accounts with non-banks
You can open many online savings accounts with companies that offer banking services, often called neobanks or financial technology companies (fintechs). These are entirely legitimate accounts that still include FDIC insurance because they’re ultimately issued by member institutions.How do online savings accounts work?
Although online bank accounts can work differently from one institution or company to the next, here’s how a typical online savings account works.
Deposits
Most online banks offer some or all of the following options for depositing money into your account:
- Transfer funds from a linked account, also known as an ACH (Automated Clearing House) Transfer
- Deposit checks, either by mail or mobile check deposit
- Receive direct deposit from your employer
- Receive wire transfer
Cash deposits
Only select online banks permit cash deposits into savings accounts, which is one of the main restrictions that set them apart from traditional accounts. If you have cash you need to deposit into an online savings account, we recommend using an ATM to add that cash to your checking account and transferring the funds from there.Withdrawals
You can generally take money out of an online savings account in the following ways:
- Transfer money to a linked external account
- Request a mailed check
- Use outgoing wire transfer
- Use ATMs, if your savings account is linked to a debit card
Read more: Best Online Savings Accounts with ATM Access
Customer service
Many online banks offer robust customer service options online and over the phone.
You can generally get help with an online savings account by:
- Calling customer service
- Sending a secure message through your banking portal
- Live chatting with a representative
Account management + opening
As we mentioned, you won’t be able to manage an online savings account by visiting a branch. Instead, you’ll use an online banking platform and/or mobile banking app exclusively. This isn’t that different from how normal savings accounts work anymore since most banks offer digital tools, and you can open most savings accounts online (even for banks that operate branches).
Pros and cons of online savings accounts
Pros
Online savings accounts offer many benefits compared to traditional savings accounts with brick-and-mortar banks. These include:
- Lower fees and minimums: Many online savings accounts have no monthly maintenance fees or minimum deposit requirements.
- Higher annual percentage yields (APYs): Many online savings accounts pay higher interest rates than traditional savings accounts due to having less overhead.
- 24/7 access: You don’t have to wait for traditional bank hours to manage your money. You can manage your account through the online portal or mobile app 24/7.
Cons
Online savings accounts do have their cons when compared to traditional brick-and-mortar banks. This includes:
- Limited cash access and deposit options: Many online savings accounts don’t include a debit card to deposit or withdraw cash at an ATM.
- Fewer account options: Outside of savings accounts, online banks often have fewer accounts to choose from than traditional banks. This can mean that you can only open an online savings account, without access to checking accounts and other banking services if you need them later on.
How to choose an online savings account
Here are the main factors we suggest looking at when you’re choosing a savings account online:
- Compare APYs: Compare the APYs available on each account and the requirements to earn it. Make sure you can meet requirements to earn the best rate, such as a minimum balance requirement.
- Check out fees: Many online savings accounts don’t charge monthly fees, but don’t assume. Read the fine print and remember to look at other fees, such as excess transaction fees for going over monthly transaction limits.
- Research digital tools: Take a few minutes to poke around mobile app reviews and browse online banking platforms to see how easy it would be to manage an online account. Some digital tools are much more user-friendly than others, though most online banks have them figured out.
- Look into customer service: Look for an online bank that offers the customer service you’re comfortable with, as not all provide phone support or may have limited hours.
- Find out about cash deposits: If you see yourself depositing cash often, understand how that works with each bank to ensure it’s something you can handle.
Best online savings accounts
The best savings accounts offer high APYs, low fees, and perks to help you save more (which might look like automated savings features, no minimums, both, or something else). All the savings accounts we’ve identified as the best stand out from other options for providing more value.
Here are a few we’ll always stand behind.
Featured High Yield Savings Accounts
Earn up to 4.00% APY1 <p>New and existing Checking and Savings members who have not previously enrolled in Direct Deposit with SoFi are eligible to earn a cash bonus of either $50 (with at least $1,000 total Direct Deposits received during the Direct Deposit Bonus Period) <b>OR</b> $300 (with at least $5,000 total Direct Deposits received during the Direct Deposit Bonus Period). Cash bonus will be based on the total amount of Direct Deposit. Direct Deposit Promotion begins on 12/7/2023 and will be available through 1/31/2026. Full terms at <a href="http://sofi.com/banking">sofi.com/banking</a>. SoFi Checking and Savings is offered through SoFi Bank, N.A., Member FDIC.</p> <p>SoFi members with Direct Deposit can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the 4.00% APY for savings (including Vaults). Members without Direct Deposit will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of Dec. 3, 2024. There is no minimum balance requirement. Additional information can be found at <a href="http://www.sofi.com/legal/banking-rate-sheet">http://www.sofi.com/legal/banking-rate-sheet</a></p> and collect up to a $300 cash bonus with direct deposit or $5,000 or more in qualifying deposits.2 <p>SoFi members with Direct Deposit or $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either Direct Deposit or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi members with direct deposit are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of Dec. 3, 2024. There is no minimum balance requirement. Additional information can be found at <a href="http://www.sofi.com/legal/banking-rate-sheet">http://www.sofi.com/legal/banking-rate-sheet</a></p> FDIC Insured.3 <p><b>SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $2M through participation in the program. See full terms at <a href="http://sofi.com/banking/fdic/terms">SoFi.com/banking/fdic/terms</a> See list of participating banks at <a href="http://sofi.com/banking/fdic/receivingbanks">SoFi.com/banking/fdic/receivingbanks</a></b></p>
Western Alliance Bank offers a powerful 4.40% APY to help grow your money. FDIC insured, no fees,5 <p>No account activity or maintenance fees.</p> $500 minimum deposit, $0.01 minimum balance to earn APY.
FAQs
What kind of interest rates can I expect on online savings accounts?
Higher interest rates are one of the major benefits of online savings accounts, though they vary from bank to bank. A savings account with Capital One 360, for instance, will give you an interest rate of 4.10% (as of 10/3/24), while the Aspiration Spend & Save account offers up to 3.00% (as of 10/3/24) APY with Aspiration Plus. Online banks are generally a good place to look for a high-yield savings account with a competitively high APY.
How can online banks offer such good interest rates?
Because online-only banks don’t need to pay the employee wages, maintenance, and real estate costs associated with brick-and-mortar branches, they can charge fewer fees, require no minimum balance, require a low or no minimum opening deposit, and usually offer better interest rates.
What is the typical minimum balance for an online savings account?
The minimum balance requirement for an online savings account is usually structured one of three ways:
- No minimum balance, which is typical for many online banks
- A minimum balance to keep the account open, which could be as little as $1 or as much as several thousand dollars
- A minimum balance to earn the advertised high interest rate, with anything less earning a lower APY
Is online banking safe? Is my money insured?
To discover the type of protection you have when banking online, make sure your new bank has the words "member FDIC" somewhere on its website or marketing materials. The FDIC, or Federal Deposit Insurance Corporation, is an independent agency of the United States government. If you deposit money at an FDIC-insured bank and the bank later fails, your money is protected (typically a maximum of $250,000 is covered) by that FDIC insurance.
However, banks are not mandated to be FDIC-insured, so it’s always important to make sure the bank you’re considering is. To see if a bank is FDIC-insured, you can go to the FDIC BankFind page. If you are banking with a credit union, make sure they are covered by the National Credit Union Administration (NCUA).
Even if the online account is insured by the FDIC, you should make sure the bank you choose uses robust technology to protect your money because the FDIC does not provide reimbursements for fraud perpetrated against accounts.
Is your money stuck in an online savings account?
No. Just like a traditional savings account, your money is accessible to you when you need it. With just a few clicks, you can move money in and out of your savings and into another account.
Transfers to an account within the same bank are usually instant, while transferring to an account with a different bank might take a few business days before the funds are made available.
Bottom line
If you want to earn the highest rates possible on your savings and don’t mind managing your account digitally, choose an online savings account. These accounts offer convenience and value over traditional accounts, though you’ll sacrifice cash access and in-person support.
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Western Alliance Bank High-Yield Savings Premier Benefits
- Earn 4.40% APY4 <p>The annual percentage yield (APY) is accurate as of 12/16/2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.</p> from a top-rated U.S. bank with $70B+ in assets6 <p>Ranked among the top U.S. banks in 2022 and 2023 by American Banker and Bank Director.</p>
- Enjoy 24/7 online access to your account and funds
- Interest is compounded daily and posted to your account monthly
- No fees,5 <p>No account activity or maintenance fees.</p> $500 minimum deposit, $0.01 minimum balance to earn APY
- Enhanced security and FDIC insured