Reviews of the best online savings accounts:

We all want our bank savings account to earn as much interest as possible when we are not using the money ourselves. Interest rates fluctuate as the Federal Reserve raises or lowers their interest rate to lenders. For a while interest bearing savings accounts where lucky to get 1% return on their investment. At that level you are not even keeping up with inflation and it's better to invest in stocks, bonds, or real estate for better returns. As of this writing (June 2006), you can get an e-savings account online from Citibank with a high yield of 4.75% with no minimum balance required. That has notoriously been the hitch with any bank savings account, if you don't have a minimum amount, you pay them or get little or no interest at all. With the recent Fed rate hikes, banks are now able to pay a higher yield on your money which is good for many of us who have cash reserves that were before just sitting there essentially collecting dust and losing value when adjusted for inflation. All the large banks offer online savings accounts - Wells Fargo, Washington Mutual (WaMu), Bank of America, Citibank, American Express (Amex) and stock trading companies like Etrade and Charles Schwab.

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For the most part, we feel that getting your money out of a traditional bank (such as Wells Fargo) and into an investment banking institution is the best move. You can always keep your cash in a money market interest earning account that pretty much matches what regular banks are paying you, plus you can always invest that money when you want to through the online trading those companies offer. Another option beyond online savings accounts, are certificate of deposits (CDs). You have to leave your money in these types of accounts for a specific time period (6 months, 1 year, 5 year) or else you get a penalty for early withdrawal. The upside to CDs is that they pay more interest on your money than traditional savings accounts. One caveate, don't deposit money into an online banking institution that you have personally never heard of or friends of yours personally didn't refer you to. There are lots of scams (with offshore banks) that promise big returns only to find out you have been swindled and your money is gone. Go with the big name trading companies like Ameritrade, Charles Schwab, or Etrade. Also you could open an online savings account with Merrill Lynch, Fidelity, or Morgan Stanley. The great thing about online savings accounts is that you can pay bills online and setup automatic payments to be taken right from savings account each month as payment. You can check balances 24/7 and even transfer money between accounts. The advantages are huge if you like to be able to do your banking online.

High Yield Savings Account - High Interest Savings Accounts:

As we mentioned above, no one likes to see that their $10000 in savings earned a piddly $10 of interest over a year, so the higher yield we can get, the better. An excellent site to start with is Bankrate.com, they offer a complete listing of the high interest banks right on their site. Go here for Money Market (MMA) and savings account rates plus view sample interest rates for CDs. You can put in different dollar amounts ($10,000, $25,000, $50,000, Jumbo) and see who offers the best rates. They supply phone #'s, bank name, website, and the current rate offered. For CDs, you can view any timeframe that makes sense for you (1 month, 1 year, etc). 5 1/4% to 5 1/2% was the average yield we could find at the time of this article. Ask your own bank what type of rates they offer, often if you have a combined amount of money in various accounts with them, you can get a better high interest savings account with them.

How do I open an online savings account?

It's actually really easy to open an online savings account with almost any bank. They just need some information like date of birth, name, social security #, type of account you want to open (we recommend Money Market), and how much you would like to start the account with (your deposit). Often you can fill out the online form and mail in your check to the address they give you. Others let you do an online transfer directly into your new account. Do whatever makes you comfortable and again beware of online banks that are frauds/scams. Go with a recognized banking institution. The last option, is to go to the bank you currently bank with and ask them to open up access to an online account for you. The whole process shouldn't take more than a 1/2 hour or so. Ask about online bill pay, transfers, viewing returned checks, and other account features when you first sign up. Also, make sure there are no fees associated with having an online savings account. I have banked with Wells Fargo Online for years now and love the freedom it gives me.

Medical Savings Accounts - Health Savings Accounts:

A relatively new type of savings accounts are the medical savings accounts or health savings accounts that are related to high deductible health insurance policies. They are very popular and are a great way to get a tax write-off when April comes around each year. You need a high deductible health insurancy policy to qualify for many of these accounts, but you then get to deduct from your taxes any health or medical related costs that you didn't get covered by your policy (up to a certain amount - usually $2500-$5000/year). Not bad considering the money sits in these accounts year after year accruing interest. Hsainsider.com is a good site for information and resources on how these work.

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