There is a trend of online-only banking institutions sweeping the Internet. These banking institutions are widely used by people who don’t deal in cash, love convenience, and look to ditch the brick and mortar banks due to lower fees and higher interest gains.
In comparison to the brick and mortar banking institutions, online banks have much lower overhead. These banks don’t have the cost of having branch buildings with leases, utilities, and maintenance costs. And due to the transactions being online, the only employees work customer service in the cases where there are issues that cannot be resolved online.
Because the overhead is lower, these banks are appealing because their fees are much lower or non-existent, where brick and mortar institutions have higher fees due to the need for revenue to pay bills. The other attraction is that many of the accounts, both checking and savings, carry higher-yielding interest rates than the same accounts at brick-and-mortar counterparts.
Since most Americans do their banking online and through apps on their various devices, even with brick and mortar banks, this seems a no-brainer that many people are ditching these banks to opt for online banks, offering them more bang for their buck. Lower fees and higher interest rates on the return are attractions even though they cannot make a deposit if a person has cash. If you are still not convinced you should consider an online banking institution, here are a few reasons you should open high-interest savings account with one.
Emergency Savings Account
If you have no other savings account, you should have an emergency fund. This savings account is solely used to cover you in an emergency or cover your income due to job loss. It is suggested that if you don’t have an emergency fund, you first save $1000 to cover emergencies in the immediate future that may or may not occur. It is further suggested that you save towards six months of income to cover you if you should lose your job. Some experts even suggest that you save up to a year of income if your reason for job loss is something that can take longer to overcome.
Security
Security between brick and mortar banks and online banking institutions is secured by the FDIC or Federal Deposit Insurance Corporation. This entity covers account holders in the bank closing, the bank going bankrupt, or if the bank is held up. However, there is a limit to the amount that will be covered, and online banking institutions are less vulnerable to closure, bankruptcy, and theft since they are not high-cost in overhead. Therefore, an online saving or checking account is preferable.
Protects Money from Overspending
Having a savings account can protect you from your overspending. Putting your money into a savings account outside of your emergency fund will help you grow your money if you have a high-yield account in an online banking institution. It will also have an amount set aside that you are not spending frivolously. Most know that if money is out of sight, it is out of mind, so putting money away money in a savings account will keep you from spending outside your means and putting yourself into debt.
Financial Freedom and Control
Almost every economist or financial advisor will give a layout for distributing your income with the same suggestion that you pay yourself first. The idea is that you have an automatic deposit made from your income where you won’t miss it, and then your remaining income will be used for bills, charity, and other allotments as decided through your budget. This type of handling of your income provides great control of your income and leads to financial freedom.
Possible Purchase or Business Opportunities
Those who have a hefty savings account have disposable income that can be used for the purchase, investment, or business opportunities. If you are a person that is looking for investment or business opportunities, that means you need working capital to participate. If you can make purchases outright instead of on credit, it protects you against possible defaults or high-interest rates on loans.
Conclusion
There are endless reasons you should have a savings account. Here a few were highlighted. You should not need to be convinced that having at least one if not multiple savings accounts is in your best interest. You now understand that you should consider online banking institutions due to their low to non-existent fees and higher-yielding savings accounts.
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