Most of us got at least one letter from ING Direct five or six ago with a check for $25 to open an online savings account with them, the first of its kind. I think their interest rate back then was about 2%, which was quite a leap from the .03% regular banks were offering. Nowadays though, with the rise of competitors and consumer participation in these online banks, you can easily find an online savings account with an APY of 5%. 5%!! You won’t get rich on that, but that’s a nice Christmas gift or two these companies are offering to pay for! Not to mention that having a savings account is one of the most important things to have if you are serious about managing your finances.
These online only accounts are linked to your regular checking account so you can move money back and forth easily. It’s exactly like a PayPal account, except PayPal isn’t FDIC insured and it takes money from you. The electronic transfers have become quicker and take more like 2-3 days instead of the 3-5 it used to.
I only know of three: ING Direct (4.5%), HSBC Direct (5.05%), and Emigrant Direct (5.05%). But there are a lot right now and I’ve heard some go as high as 5.5% (though I think the higher ones require at least 10k). It is time to get your money out of your checking account and into an online savings account. It’s quick and secure – just like doing online banking.
If you want to do some more leg work, here are a few sites to start with:
bankrate.com has a comprehensive and current list of rates
pfstuff.com has a quick and dirty summary of some of the popular ones
Fatwallet’s best current APY/APRs thread has over 62 pages to browse through
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