Online banking has become one of the essentials in our daily activities. It is mostly important for those people who want to manage their finances easily and efficiently.
The all-powerful internet has greatly influenced the way of operation in the banking sector. Online banking still operates on the principles of lending, saving and earning, just as the normal banking services are offered.
One is in a position to open and fund the account in a very short period of time, with any amount. Most of these online savings accounts do not charge for maintenance fees thus your cash remains intact as it was deposited.
The difference between online saving and the normal debit accounts is that online savings accounts earn higher interest and usually have features that will guide you through what is expected of you without necessarily walking into a banking hall to consult.
These accounts are said to have better returns on your savings because competition between institutions increased when smaller competitors introduced more innovative features and lower overheads since there are no branches.
Some feature that may encourage one to save into an online account include higher interest rates, some offer bonus interest with strict conditions such as o withdrawals and a minimum regular deposit and they also set up an automatic plan that will see your money regularly deposited into your online savings accounts without the need to manually transfer your money around.
Despite the fact that online savings accounts make banking very convenient and versatile, online-only savings accounts have got some risks too. Before moving your money to an online savings account, you should understand two key risks. The first is that the interest rate is not guaranteed and can change at any moment.
If you want to lock in an interest rate for a fixed period of time, you need to sign up for a Certificate of Deposit (CD). Most of the internet banks offer CDs. It is not likely that these banks will dramatically reduce interest rates, but it is possible.
Another risk to consider is that it can take a few days for you to receive your money if you need an emergency withdrawal. To open most of these savings accounts, you provide a link to your standard checking account. The Automated Clearing House (ACH) is used to transfer money to and from your checking account. Those transfers can take two to four business days.
Article by Vera Shawiza.