Online banks are giving traditional banks a run for their money. Interest rates at online banks are up to four times higher than those at traditional banks and credit unions, according to a survey published by DepositAccounts.com, a blog that compares bank accounts across the country.
The survey compared the annual percentage return, or APY, of the savings accounts of 6,278 physical banks, credit unions and online banks over a one-year, five-year and 10-year period. Internet banking has consistently allowed savers to put the most money aside while earning more money on their balances.
âOnline banks are just as secure as traditional banks and allow you to grow your money faster without the added risk,â Ken Tumin, founder and editor of DepositAccounts told USA TODAY.
Since January 2016, the APYs of online banks have increased by 29%, which is three times the increase of 9% for physical banks. Credit unions were even weaker, with an average APY increase of just 2%.
This means that if a customer invested a thousand dollars a year in an internet bank, they could earn over $ 8 by the end of the year, compared to less than $ 2 in physical banks – and the savings only add up. increase as there is money in the bank. Account.
It may not seem like a lot to a small investor, but every little bit counts.
âInterest can really start to pile up when you take a look at your account as a whole,â says Chris Hogan, financial expert and author of the book. Inspired to retire: it’s not an age. It’s a financial number.
Without expenses such as payroll and building maintenance, online banks can afford higher interest rates. Internet banks, many of which are unknown, also offer their customers attractive interest rates in order to compete with more well-known banks.
Consumers also save money by reducing costs, such as overdraft and maintenance fees. This is especially beneficial for people who wear smaller balances.
âIt’s a better overall banking experience,â Hogan says.
Some banks to consider are Ally Bank, Synchrony Bank, Discover Bank, CIT Bank, and Barclays Bank. As long as the bank is FDIC insured, Hogan says, it is just as secure as other banks.
And customers not only save money, but also time, since online banking eliminates commute times.
âI would never go to a bank,â says Kathryn Luttner of New York, New York. Luttner made the transfer to Ally Bank in 2010 after being frustrated by the excessive charges on her Bank of America account.
âI was constantly calling Bank of America,â she recalls. I was like, ‘Hey, I’m not that crazy spendthrift. But you keep charging me a fee because you don’t show me my real balance on my statement. ‘ “
And while credit union customers have enjoyed lower fees for some time, Tumin says even credit unions don’t offer the highest interest rates on savings accounts.
âIf interest rates are your main concern, then online banking is the way to go if you want the most bang for your buck,â he says.
While consumers have the option of banking with more than one business and linking accounts, Tumin says one of the downsides could be the time it takes to transfer money from one business to the next. bank to another, which can take up to four business days.
âThere is a potential problem if you need quick access to this money,â Tumin says.
Luttner, however, says she has never had a problem with her online banking and is not aware of any charges.
âAlly Bank gives me an APY of 1.15%, and Bank of America is 0.01%, so it was a no-brainer when I decided to change banks,â she says. âIf interest rates were the same at all banks, that would be one thing. But if they are different, why not take more money? ”
Follow Kellie Ell on Twitter: @KellieAutumnEll
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