Why are online savings interest rates so high?
I want to open a savings account but I don’t know which one to choose. Each bank has a variety of options all with interest rates well under 2 percent. But then there’s always a type of account with no minimum balance, no fees, and an interest rate of 3 percent. I don’t get it. What’s the catch? And how is an online savings different than a regular savings? And what’s even the purpose of a money market account now with so many savings accounts offering higher rates? Are these all effects of the U.S.’s dwindling economy? I know I ask a lot of questions but if anyone has all the answers, It’ll be greatly appreciated.
Funny you mention that because I’m with Citibank and I they were considering selling themselves on Friday. I’m looking to move to another bank, but do you think it’s still safe even with the federal regulations increasing deposit insurance from 100K to 250K?
My bank (in Canada) offers online saving account too at higher interest rate. The catch: No client card: that means you need to have another saving/checking account to transfer your money to/from. The transfer is free though if it’s from the same bank. I haven’t checked by I guess I can’t withdraw $ from ATM either. So if you don’t have an account with Bank A, you need to open a regular account with Bank A first in order to open a high interest online saving account.
Why do banks offer such accounts? Bottom line: to attract more customers and bring in more money.