dcsimg
 
Advertiser Disclosure: Many of the savings offers appearing on this site are from advertisers from which this website receives compensation for being listed here. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). These offers do not represent all deposit accounts available.

10 online accounts that pay best

June 20, 2011

| MoneyRates.com Senior Financial Analyst, CFA

Some people still take comfort in being able to walk into a branch office of a bank to meet with a banker face-to-face. If you are one of those people, have you ever asked yourself how much you are paying for that privilege?

According to a recent survey of traditional savings account rates and online bank rates, selecting an online savings account is far more important to getting a good rate than having a high balance to deposit. In fact, depositing a higher balance at a traditional brick-and-mortar account may actually cause your savings account rate to drop.

Comparing savings account rates

MoneyRates.com's popular America's Best Rates rankings showcase top bank rates, including accounts offered by traditional banks as well as accounts offered online only. With online savings accounts becoming more and more mainstream, America's Best Rates will soon feature quarterly rankings dedicated just to online-only offerings.

As a preview, MoneyRates.com has assembled online savings account rates collected in the second week of June 2011. Whether you have a $1 balance or a $10,000 balance, it's clear that you're leaving money on the table if you aren't considering online savings accounts.

At traditional brick-and-mortar banks, savings account rates offered offline for a $10,000 balance averaged just 0.15 percent annual percentage yield (APY). Meanwhile, online savings account rates for a $10,000 balance averaged 0.87 percent APY--more than five times the average brick-and-mortar rate in the survey sample.

The following are the top online savings account rates with a $10,000 account balance:

1.

SFGI Direct

1.21% APY

2.

Discover Bank

1.15% APY

3. (tie)

Capital One Bank

1.10% APY

3. (tie)

Chesapeake Bank

1.10% APY

3. (tie)

Colorado Federal Savings Bank

1.10% APY

3. (tie)

Sallie Mae Bank

1.10% APY

3. (tie)

SmartyPig

1.10% APY

8. (tie)

First Trade Union Bank

1.05% APY

8. (tie)

OneWest Bank

1.05% APY

10.

Ally Bank

1.04% APY

What if you have far less than $10,000 to put into a savings account? It turns out that traditional offline savings accounts offer an average of only 0.16 percent on this kind of money. Online savings accounts, however, average a much higher 0.76 percent, and even higher rates can be found with a little digging.

Here are the top online savings account rates with a $1 account balance:

1. (tie)

Sallie Mae Bank

1.10% APY

1. (tie)

SmartyPig

1.10% APY

3.

Ally Bank

1.04% APY

4. (tie)

iGOBanking

1.01% APY

4. (tie)

WTDirect

1.01% APY

6. (tie)

American Express

1.00% APY

6. (tie)

ING Direct

1.00% APY

6. (tie)

Urban Partnership Bank

1.00% APY

9.

FNBO Direct

0.85% APY

10. (tie)

Emigrant Direct

0.80% APY

10. (tie)

HSBC Advance

0.80% APY

Savings account type matters more than size

In the past, consolidating your balances to become a bigger customer at a single institution might have reliably gotten you a higher savings account rate. That's not the case today.

At traditional banks, larger account balances can actually earn slightly lower rates than smaller account balances, on average, reflecting the fact that many banks are not particularly interested in attracting large cash deposits in the current financial environment. While $1,000 or even $1 in an offline savings account in the MoneyRates.com survey pays an average of 0.16 percent APY, $10,000 in those same accounts pays an average of 0.15 percent APY.

You can still get a little reward for account size in the online banking world. Online savings accounts averaged 0.76 percent APY for a $1 account balance, 0.86 percent APY for a $1,000 balance and 0.87 percent APY for a $10,000 balance.

Still, the rate differences between large and small account balances pale in comparison with the differences between online and traditional bank rates. The message banks are sending is clear: these days, it's not how much you have in your savings account, but how you choose to bank that matters.

The significance of higher interest rates

Anything that can help you find a little bit better interest rate is especially significant right now, with rates generally at extreme lows. However, even beyond today's low-interest-rate environment, there's reason to believe that the interest rate edge offered by online banks might be a sustainable advantage, which would allow you to make more money in times of low interest rates and high interest rates.

After all, the higher rates available from online banks are not a coincidence. Often, they don't have the legacy loan problems that many large traditional banks do, and don't have as much overhead.

As traditional banks increasingly begin to offer online account options also, will these savings accounts offer similarly attractive rates? Simply adding an online capability won't solve the overhead burdens of traditional banks, but those banks might have an incentive to guide customers into lower-cost accounts, and accordingly they might offer higher rates for online accounts.

Whatever the reason, online savings accounts offer you an opportunity to get a better rate on your savings immediately. If the number of online accounts continues to grow, that should mean even more options for finding better savings account rates.

Your responses to ‘10 online accounts that pay best’

Showing 0 comments | Add your comment
Add your comment
(required)
(will not be published, required)