High yield online savings accounts

Some people actually keep their money in non-interest bearing checking accounts. Granted yields on savings rates are low at the moment, they will tend to go up as the economic environment improves.

One option for your emergency funds are high yielding savings accounts. These types of accounts do not differ much from standard savings accounts, except for the so called higher yield.

Typically banks offer these savings account to customers with higher average balances, a limited number of transactions per account, and require you to maintain other banking relationships with the bank. However, and due to their lower overhead costs, online banks usually offer the benefits of a high yield saings accounts without the requirements listed above.

When looking for a high yielding savings account online, remember to check if it FDIC (Federal Deposit Insurance Corporation) insured. Obviously you can opt for non-FDIC insured savings options, but then you will be comparing apples to oranges.

Also, make sure that you can link your high yielding online savings account to your local bank. This will make it easy for you to manage your money and transfer funds between accounts. Pay close attention to any related fees for such service.

In the current savings environment you should expect annual percentage yields (APY) of about 1.5% to 2.5%. Some banks may offer promotional rates, teaser rates, for the first few months.

Aside from the rate, you should also pay close attention to fees and the minimum amount required to open an account. You should expect to find online banks offering no minimum and low minimum ($1) amounts required to open an account. Some banks also offer automatic savings plans.

Additional services might include checks, ATM or Visa/MasterCard debit cards. Keep in mind that if you don´t have ATM access to your money it could take 3 to 5 days to get your hands on it in the event of a sudden emergency.

If you have a high balance in your savings account, you might consider chasing high yields. What this means is that you move large sums of money from one bank account to another, be it offline or lesser known online banks, searching for the best possible yield.  Sometimes you keep the money in these accounts for very short periods of time, taking advantage of any promotional yields.

I small difference in the APY, of say 1.5% compared to a 2.0% yield, can mean an additional 33% in monthly interest.

Savers that employ the high yield chase strategy usually have savings account at many online banks, those that more consistently offer higher yields, and then move money around between these savings accounts chasing the best rate. Most of these banks are usually banks that either operate exclusively online or have a strong online presence. E-trade and HSBC Direct are a couple examples of such banks.

If you are still unsure if you should open an online high yield savings account, here are some good reasons you should:

• Higher rates than traditional brick and mortar banks
• Easy to use and setup - Today, opening an online savings account is an easy and quick process.
• Setup an online savings plan - setup automatic transfers of money from your paycheck or from your regular savings account. Usually this is a free service.
  
• Setup automatic bill payment - Automatically pay regular bills each month. No more need to write and mail checks. Also easier on the environment.
• Easy access to your funds - You can easily and quickly withdraw your money using a variety of means: checks, ATM or Visa debit cards.
  

If you are interested in personal finance related issues, I would also suggest the following reading:

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• What to do if going bankrupt
• Home equity loans for bad credit borrowers
• Passive income with domain parking
• Consolidating student loans
• Mortgage refinancing without closing costs