Online savings accounts: what to look for and what to avoid

Rising interest rates have dramatically increased the rate advantage of online savings accounts over physical savings accounts. Now, more than ever, is the time to open an online savings account. But before doing so, there are a few important factors to consider.

The fast pace at which The Federal Reserve raised its benchmark interest rate this year, which created an opportunity to earn a lot more interest on your money. But this opportunity does not come from most physical banks, which have increased their savings account rate at a snail’s pace.

The average national savings account return, as documented by the FDIC, has only increased from 0.06% to 0.24% this year. Online banks, on the other hand, have increased their savings account rates much faster. In 2022, the average return on online savings accounts as tracked by DepositAccounts.com increased from 0.46% to 3.02%.

But not all online savings accounts are the foolproof interest earner they appear to be. Here’s what to look for when selecting an online savings account.


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View account rate history

One thing to look out for is an online savings account with a short history. This is particularly important when interest rates rise.

Instead of increasing the interest rate of a savings account, a few online banks have regularly created new savings accounts with flashy promotional rates to attract new customers, but this will end after a few months. If a bank’s high-interest savings account has a short history while old savings accounts held by existing customers are kept below competitive rates, that’s a sign the online bank can use this tactic. Opening an account at this bank may not affect you immediately, but ultimately you may miss out on higher savings rates.

Unless account statements contain specific duration guarantees, banks are free to adjust rates on checking and savings accounts. Therefore, before opening an account, review their account’s rate history to ensure that it remains competitive over several years.

Consider Money Market Accounts

Online savings accounts aren’t the only high-yield bank accounts available: Look for online money market accounts as well. These are essentially the same as a bank savings account but with a different name.

In online banks, money market accounts often have the same features as savings accounts. However, money market accounts are more likely to require a minimum balance to avoid monthly service charges and some offer limited check writing capabilities.

However, when looking for the highest rates on savings accounts, both money market accounts and savings accounts should be considered.

Look for banks that offer checking accounts

Even if you don’t need a new checking account right away, an online bank that offers both a checking and savings account has an advantage over ones that only offer a checking account. ‘saving.

After familiarizing yourself with the online savings account, you may find that the online banking checking account has many advantages over your checking account. For example, online banks often offer free checking accounts with several perks such as free use of ATMs and free checks.

Beware of electronic funds transfer fees

Beware of online banks whose websites contain few account details, such as their electronic funds transfer capabilities. This is an essential feature for online banks, as electronic funds transfers are often the only way to make deposits and withdrawals.

Also, some online banks have small limits on the amount of money that can be transferred. A few banks even charge a fee for transferring money out of the account. Details of the account’s electronic funds transfer capabilities and limits should be clearly stated on the bank’s website.


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By knowing what to look for and watch out for, you can find an online savings account that will benefit you in the long run. As interest rates rise, online savings account rates are dropping physical savings account rates, making it increasingly advantageous to open a savings account online.

Ken Tumin is the founder of DepositAccounts.com by LendingTree, which has tracked and rated savings, CD and checking account offerings from banks and credit unions for over a decade.

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