Savings Account Online

With so many banks and other financial institutions opening websites, more people are getting into the habit of opening bank accounts of all types online instead of going into the buildings where they are housed. The Internet makes savings account online access fast, efficient, easy and safe. This practice allows customers to choose from a great many more sources, since they don’t have to be concerned about the location. Being able to open a savings account online gives one the opportunity to open an account anywhere in the world, though some institutions may have restrictions concerning the location of their customers. This means, in simple terms, that in most cases a U.S. resident will not be able to open a savings account at a U.K. based bank. Whether this holds true of all online banking centers remains unclear, but it is something you will need to research when you choose a bank where you wish to open a savings account.

Savings accounts are only one of the many types of accounts that you can open online, but they are probably the most popular. Savings accounts online are easier to maintain than savings accounts established at a physical bank—making deposits is easy and convenient and tracking the account is easy via the web. It was probably the inception of online banking centers such as ING Direct that inspired other banking institutions to offer customers the option of opening an account online. Since that time, even worldwide giant Bank of America allows customers to open an account online and forward funds later either through the mail or by visiting a branch in the city where they live. After all, with the rush to conduct so much business online, a bank needs to join with the flow of the others in order to stay competitive. Customers want to do their banking online today, and that includes opening new accounts. The fast-paced lifestyles of the 21st century require more options in banking, such as online access to accounts and the ability to transfer funds between accounts.

The most popular savings account, at least for the average banking customer, is the statement savings account – formerly known as passbook savings at many institutions. This account requires a minimal balance, sometimes as low as $25, depending on the individual bank where you open the account. That doesn’t necessarily mean that you can’t maintain an account with a lower balance. However, if you do, one of two things will happen (and perhaps a combination of both): the bank will not pay you interest on your funds, and/or they may charge you a monthly maintenance fee for the account during each month that it is below the minimum balance requirement.

In spite of the minimum balance requirements, in most cases there are exceptions to this rule: student accounts, senior accounts, and accounts that fall under the Uniform Gift to Minors Act within each state. Another exception is an account for an employee of the bank, but these accounts usually require the employee to open the account through their Human Resources Department, though you can sign up for online access to make transfers between accounts. Before signing up for a savings account online it would prove beneficial for the individual if they review the various options and exceptions associated with such accounts: understanding how savings account online offers work ensures that the individual gets the most out of their invested and saved money.

Statement savings (or regular savings accounts) have the lowest rate of interest, and banks pay the lowest interest on these accounts, with savings and loans paying a higher interest rate. Credit unions tend to pay a higher rate than either banks or credit unions on the regular share account, which is the credit union account comparable to the statement savings account. Many people may be more familiar with this account, as it relates to an interest checking at the bank, because the credit union pays dividends on both the share account (savings) and share draft account (checking).

In addition to a statement savings account, financial institutions offer Certificates of Deposit (CDs). This monetary instrument pays a higher rate of interest than the statement savings account, has a higher minimum balance requirement, and must be kept on deposit for a specified number of months in order to avoid a penalty for early withdrawal. The interest rates vary on Certificates of Deposit and are contingent upon the face value and term of the CD. The lowest appears to be $500, however, in most cases, the lower the face value, the longer the term of the deposit. In many cases, one can find a $10,000 CD with only a three to six month term, but a $500 CD tends to have a term varying from twelve to thirty-six months. The reason for the difference is perhaps in the fact that it takes more time to obtain a return on the investment of a $500 Certificate of Deposit than it does on a $10,000 Certificate of Deposit, thus, your funds must remain on deposit longer for the $500 than the $10,000.

In the event that you need to withdraw the funds you have on your Certificate of Deposit, you must be aware there is a penalty for early withdrawal. The penalty is not just a reduced interest rate, but there is also a fee involved to process the withdrawal. To avoid paying a penalty for early withdrawal, you might want to consider keeping enough money in a statement savings account to cover any emergencies that might require additional funds. It is always advisable that an individual have a nest egg for any emergencies and a savings account online can serve as one’s nest egg. It may mean waiting a little longer to purchase a Certificate of Deposit, but you avoid a penalty by making a withdrawal from your savings account instead of cashing in your Certificate of Deposit before its expiration date.

Next to a Certificate of Deposit, a money market account has the next highest interest rate, and in some institutions may have a higher rate than a CD. The minimum deposit can vary depending on the institution, but in most cases, it’s at least $1,000, but in some cases, it may be as high as $10,000 or $25,000, especially if you wish to take advantage of a higher interest rate.

There are definite advantages to a money market account over a Certificate of Deposit. For one thing, unlike a Certificate of Deposit that must be purchased in pre-set denominations, you can have a money market account in any amount as long as you meet the minimum requirement, and you can add to it in any amount that fits into your needs or budget. Another advantage to the money market account is there is no required amount of time that it has to remain on deposit; again, you need only meet the minimum balance requirement.

For most people, the most attractive feature of a money market account is that you can withdraw funds by simply writing a check. You must keep in mind, however, that a money market account is not a checking account, and as such, you have limited check-writing privileges as directed by Federal law, customarily three checks per month without a penalty. If you have online access to your account, and transfer money to your checking account, the same rules apply – three withdrawals a month, whether it’s by check, funds transfer, ATM card, or going into the bank to withdraw funds. In addition, if your balance falls below the amount that the bank requires for the type of account you have, they will pay interest contingent upon that balance. For those with the lowest minimum balance, that is more than likely the same interest the bank pays on a statement savings account.

The Uniform Gift to Minors Act (UGTMA) is a special savings account that is designed for children. An adult, such as a parent, grandparent, aunt, uncle, or even a family friend, may open the account for the child upon birth or at any point prior to the commencement of the 18th birthday. Each state has its own designation, and you usually see it listed as UGTMANY, for example in the state of New York. Anyone can deposit money into the account, but only the guardian of the account can make withdrawals. Parents can open an savings account online for children and help their children to save funds responsibly: teaching children about banking early will help the child realize the value of money.

Whoever opens the account wants to be sure that they have the tax identification number of the minor child in order to avoid having to claim any interest payments on their taxes. If, as a parent, you use your own social security number, you will need to claim the dividends on your own personal income taxes, and depending upon how much money is in the account, it may put you into another tax bracket. On the other hand, if you use the child’s social security number, it’s unlikely he or she will receive enough in interest payments to need to pay taxes on the money. You only need to file taxes if your income exceeds $600, and if a child has interest payments higher than that, it means there surely is a great deal of money in the guardianship account.

When the child becomes old enough to sign his or her own name, if the guardian is willing to sign the money over to the minor child, the child can open an account in his or her own name. Unless the account is linked to the checking account of the guardian, you will need to go into the bank to withdraw the money. If you opened the account online with an out of state bank, you will need to do it by way of ATM card or request the bank to open an account in the child’s name with those funds.

Although most people do not think of a trust account as being something you can open online, that is not necessarily true. Some banks may have restrictions on the type of accounts that you can open online, however, that does not preclude the potential for receiving paperwork to open more complex accounts with mail deposits. After all, a trust account is another type of savings account, with the difference being that it is set aside for someone, usually a family member or child of a close friend to be distributed when that person turns a certain age, usually 18, 21, or 25. Unlike a guardianship account, you cannot access a trust fund under any circumstances without a court order. In other words, if your husband or wife dies and has a trust fund for the children that transfers to them when they turn 21, you can only withdraw that money if you file a petition in court proving you need it to care for the children. In most cases, this isn’t necessary because the grantor usually designates a set amount per week or month for the recipient’s guardian until they become of age.

For the most part, trust funds are usually in denominations of $10,000 or more, though some institutions do allow lower amounts. Because they are long-term funds for the bank, as well as being large amounts, the interest rate will be reflective of that. In other words, a trust fund on deposit for a child who is fourteen will not have as high an interest rate as that for a child of four, because the four year old will not have access to the funds for ten years after the fourteen year old.

A popular account a few years back, but one that may still exist with some banks, is the zero balance checking account. Though we may not think of it specifically as a savings account, in essence that is exactly what it is. With a zero balance checking account, all the funds stay in the savings account until you write a check that is presented for payment. When a check comes through the bank’s system to pay, the money is then transferred from your savings account into your checking account to cover checks and any other debits that the bank receives to pay. The interest rate on these accounts is usually minimal; however, it is better than paying a service charge to maintain a standard checking account that pays no interest on the minimum balance. When you figure that many banks charge $15 or more to maintain a checking account that does not have a minimum balance, even .25% is better than paying $15-20 for a checking account that falls below minimum balance.

Similar to zero balance checking is interest checking, a much more popular type of account today. As the name implies, this is an account that pays interest on a checking account. Even if the balance goes below the minimum, the bank will pay interest, but they will also charge a service fee. Of course, the interest will partially offset the amount of the service fee, but it has no comparison to the amount of the service fee. After all, if you had enough in the bank to offset it completely, you would have more than the minimum balance in your account.

Though one does not usually think of security instruments in terms of a savings account, they do pay dividends, so in that respect, they fall into the same category. Like banks and other financial institutions, many brokerage houses allow a customer to open an account online. You also have the option to choose stocks, bonds, securities, mutual funds, government bonds, and even foreign currency trading (FOREX). In fact, for many investors, trading online may be the easiest of the online financial transactions, and the fees are typically lower than that of a live stockbroker since you, the customer, does more of the work when trading online than you do when you trade in person. In additionally, many banks have an alternative banking division, or at least financial advisors who can assist with your trading. In the case of FOREX, no broker is involved, and thus no brokerage fee is involved, just a commission.

The typical online experience in trading is a simple transition, much simpler than doing it in person and having a broker attempt to sway you in a different direction. In some cases, that may be in your best interest, but you must be the one to make the final decision, and online you can do that. You can call your banker for advice on making a trade, but then you can do it without the unwanted advice of a broker or financial advisor.

Opening a savings account online does not have to be an unpleasant experience, as long as you know what you want to do and have all the information that you need in front of you. Individuals can easily open an online savings account for him or herself, couples can open a joint savings account online, and parents can teach their children important money saving methods by opening an online savings account for them. Research different online banks and financial providers before you open the account so that you can be certain that you are getting the best rate that is available. You also want to exercise caution concerning the information you place on the Internet and make sure that you choose a bank that has a secure site – in fact, I would question the integrity of a bank that has online banking without a secure site.

The online banking environment has come a long way since ING Direct first publicized its offering a few years ago, and though some other banks had it at that time, since then the number has increased dramatically. All the major banks allow you to open accounts online, and many banks offer only online banking and do not have brick and mortar locations. As long as an individual has access to the Internet, an online savings account can prove totally convenient and ideal. The eye of the future may be to reduce greatly the amount of business that banks do in person, but at the same time, that possibility will increase unemployment because few banking personnel will be necessary.