The Financial Student

As you can probably tell from the title, I’m a huge fan of online savings accounts. They’re easy to setup, easy to use, and best of all, offer a great interest rate.

So What Exactly is an Online Savings Account?

Online savings accounts (sometimes abbreviated OSA) are provided by virtual banks. Typically, these banks don’t have any physical branches. All account transactions are done through the Internet. Other than that, it’s just like a savings account at your local bank. You put money in, interest accrues, and you can take money out whenever you please.

What Makes Them So Great

The interest rate is awesome. While the bank down the street probably pays interest, look carefully at that number. It’s probably below 0.25%. The two banks closest to my house only pay out 0.05%! Ridiculous. An online savings account can easily pay 1% or more. The account I have right now through ING Direct pays 1.29%

Using the account is ridiculously easy. If you can use Facebook, you can use an online savings account. Most banks have a simple design and nothing is more than a few mouse clicks away.

How Exactly Do They Work?

Simply put, your online bank account connects electronically to your checking account you have at your local bank. This means you will need to setup a checking account at a local bank if you haven’t already.

Through this electronic connection, you can transfer money back and forth. If you have cash you want to save, just deposit it to your checking account and then start a transfer to savings. This is done through your online bank’s website. Transfers typically take between 2-5 days.

Also, statements are emailed instead of snail mailed.

Is It Safe?

Yes. The online banking system is encrypted using all kinds of computer code stuff that I don’t understand. That’s kind of the point, after all. All I know is that someone “hacking” my account is extremely unlikely. I’m more concerned about someone stealing my debit card from my wallet than some computer hacker gaining access to my online savings account.

Any legitimate bank, online or off, will be insured by the United Stated government. Look for something called FDIC insurance. This means that if the bank were to fail or go out of business for any reason, your money will be safe and sound (up to $250,000).

How Do I Get Started?

I’ve had a great experience with ING Direct. They’ve been around since 2000 and provide great service. But there are other banks you can take a look at such as Ally Bank, Emigant Direct, HSBC, and E*Trade.

But…if you open an account through one of the following text links and deposit at least $250, ING Direct will give you $25! That’s a 10% return just for opening the account! I’ll get $10, so it’s a win-win. Actually, you win a little more than me.

If you don’t have $250 to open an account with, that’s OK. Use the following link:

ING Direct $25 Account Opening Bonus

ING Direct $25 Account Opening Bonus

If you click one of those links and receive a message that says the offer has expired, just shoot me an email: ryan AT thefinancialstudent DOT com or use my contact page. I’ll get you hooked up.