The use of online savings accounts has increased exponentially in the last few years. The reason is quite simple; they offer a higher interest rate compared to a traditional savings account. However, the traditional accounts have their own advantages too. If you have been wondering which one to choose, then this article will surely help you.
Advantages of an online savings account
The main advantage of an online savings account is its high-interest rates. Some of the more popular ones offer up to 20% yearly interest on your savings. Compared to traditional banks, it is quite high. The online banks also offer free the Automated Teller Machine (ATM) service and you can link it to your physical bank account to transfer money to it in times of need. The online banks have a lower establishment cost and a fewer number of employees, compared to the traditional banks. So, they are able to spend more on their customers, which benefits you directly as a savings account holder.
Advantages of a traditional bank account
The traditional saving accounts have their own benefits too. For example, if you ever find any discrepancy in your account then it is easier to visit your local branch and talk with a bank official. It can save some time and your bank can help you more effectively. In addition to that, not too many online savings accounts come with added advantages like a fixed deposit service or any facility for a loan. The physical banks have safety deposit boxes too, which is an added advantage. Depositing money is simpler with traditional banks, as you can visit your nearby ATM anytime to do so.
Which one you should opt for
Even though both of these savings accounts are for keeping your money, they have a few fundamental differences. To open a savings account online, you will need to have a pre-existing traditional savings account. You must link it with the online bank in order to be able to deposit or withdraw money. However, if the higher interest rate matters to you more, the online banks are perfect for you. On the other hand, if you are someone who values the traditional ways of dealing with finance then the physical banks are for you. They allow you to communicate with the bankers and make the whole banking process simpler.
Before you opt for an online savings account, there are a few things that you need to remember. Check for the fees that you have to pay for using the online bank and if the bank will charge you for online bill payments or other expenses. Find out how many times you can withdraw money from the online account and if it takes time for the money to be transferred to your traditional savings account.
To put it simply, if the higher return is important to you and paying the extra charges is not an issue then an online savings account is the right choice for you. However, if you are more comfortable with the old-fashioned way of banking than the higher interest rate, a traditional savings account is for you.