Achieve your financial and savings goals the easy way with an online savings account.
Everybody is now becoming more technologically savvy and looking for ways they can save money. Online savings accounts allow you to conduct all your banking and saving online and potentially avoid bank fees. You can let your savings grow and manage them online without needing to leave the house.
Compare Online Savings AccountsRates last updated September 23rd, 2014
What are online savings accounts?
Online savings accounts are a special savings account you open up with a financial provider online. This type of account is based purely online and you tend to have little interaction with the bank - you manage it all yourself. Online savings accounts are a great way to help you achieve your savings goals as they tend to have higher interest rates due to less overhead costs. Although online savings accounts can be opened by anyone, they are best suited for those who are technologically savvy, people who may have difficulty accessing their local branch and those who want to save on fees.
How do online savings accounts work?
Online savings accounts tend to be fee free as you’re managing your own account without the help of the bank. By reducing your contact with the bank and the work required on their behalf, this leads to lower or no fees. You manage every aspect of your account online, from transferring money into your account, withdrawing and monitoring your savings growth. Online savings accounts encourage saving by having higher interest rates. You may also be eligible for bonus interest if you meet certain requirements. If you have a specific savings goal such as a wedding, new car or first home, online savings accounts can help you get there by not tempting you to touch your money.
It’s important to note that most online savings accounts will need to be linked to your everyday bank account. This acts as a portal where you can transfer money back and forth.
What are the types of online savings accounts available?
- Bonus interest for a period of time. Some online savings accounts may have bonus interest for a certain period of time, such as during the introductory period. Bonus interest periods typically last a few months and during this time you receive bonus interest or the higher interest rate.
- Bonus interest for meeting deposit requirements. With some accounts you are required to meet minimum deposit requirements to be eligible for bonus interest or the higher interest rate. This means you must meet the minimum deposit amount. This is usually a minimum deposit per month or a minimum opening deposit.
- Bonus interest for not making withdrawals. Some accounts reward you with bonus interest for not making any withdrawals or for making minimum withdrawals. With these accounts it’s important not to withdraw or limit withdrawals if you want bonus interest.
- Bonus interest for both meeting deposit requirements and making no/limited withdrawals each month. You may also receive bonus interest if you meet deposit requirements and make no/limited withdrawals each month. This encourages you to save as you must constantly deposit money into your account and not withdraw.
How to compare these types of accounts
- Interest. With online savings accounts, one of the most important things to compare is the interest rate. As this is a pure savings account, you need to look for a high interest rate that will assist you in growing your savings. Also compare the bonus interest schemes on offer as these can help boost your savings. Check out what conditions you need to meet to receive bonus interest and compare the rates.
- Access. Although this is an online account, it’s still important to compare access. Can you bank in any other ways than online? Does the bank they provide customer service for your online account? Also, not all banks offer online savings accounts so it’s also important to note this.
- Fees. Some online savings accounts don’t have any fees but some still do attract a fee. Compare the monthly service fees of each account. Some accounts may charge you a fee but they may come with more features or service in exchange.
- Technology. You may also be able to do your banking through an app. Many banks have created apps that allow you to easily manage your online savings account wherever you are on your smartphone. If an app would be helpful to you, make sure you compare this when selecting an online savings account.
Pros and cons of an online savings account
- Earn bonus interest. Online savings accounts can allow you to earn bonus interest. This is something that not all savings accounts offer and can really help you increase your savings just by meeting certain conditions. It’s practically free money.
- Low or no fees. As it’s all online, you can enjoy low or no saving. You have the peace of mind knowing your hard earned savings aren’t going towards paying excessive fees.
- All online. Being able to manage your account online is a big advantage for some. You don’t have to leave the house and visit your local branch. You can do all your banking when it suits you online.
- May have deposit/withdrawal conditions. To get the higher interest rate or earn bonus interest, you may have to meet deposit and withdrawal conditions. If you can’t meet these conditions your savings could suffer as a result.
- Institution may not offer face-to-face banking. Some online savings accounts are offered by online only banks, meaning if you need to do your banking face-to-face there may not be a convenient option for you.
Things to avoid about online savings accounts
Online savings accounts aren’t for everyone. If you are someone who has an irregular income or needs to tap into your savings often, online savings account may not be right for you and you may be more suited to another type of saving.
Frequently asked questions about online accounts
Are their any age restrictions for online savings accounts?
Some savings accounts do have age restrictions to open up an account. However, there are also some childrens savings accounts available for parents to open up for their children.
What happens if I can’t meet the requirements for bonus interest?
It’s okay if you don’t meet the bonus interest requirements. You will still be eligible for the normal interest rate. Some bonus interest rates are applied monthly so you can always work towards meeting requirements for next month to receive bonus interest.
Can I set up automatic transfers?
Most banks do allow you to set up automatic transfers from your everyday account so you don’t need to worry about regularly making transfers into your account, it will automatically do this on your behalf.