2-Minute Money Manager: Are Online, Internet-Only Banks Safe?

Woman w Computer
Photo by Rocketclips Inc. / Shutterstock.com

Welcome to your “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.

Today’s question is about trying to earn as much savings account interest as possible by using internet-only banks. Many of these cyber banks pay far more than the brick-and-mortar kind. But are they safe?

Watch the following video for my take. Or, if you prefer, scroll down to read the full transcript and find out what I said. You also can learn how to send in a question of your own below.

For more information on this topic, check out “Why It’s Time to Consider Internet Banks” and “This Bank Has Raised the Interest on Its Savings Account — Again.” You can also go to the search at the top of this page, put in the words “internet bank” and find plenty of information on just about everything relating to this topic.

And if you want to do a search for the best savings rates, look no further than the savings rate search in our Solution Center.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, everyone, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by the Microsoft Edge web browser. It’s a faster, safer way to get things done on the web. You should use it: I do.

OK, let’s get to our question today. It comes to us from Charles:

“How safe are those online bank accounts with three-year CDs of 2.56 percent interest?”

I get this type of question a lot: “Are online banks safe?” Short answer: Yes, online-only banks are safe, providing they have FDIC insurance. The Federal Deposit Insurance Corp. is what insures bank accounts. So if a bank has FDIC insurance, your accounts are insured up to $250,000. Banking fees support the FDIC.

How do you know if your bank has FDIC insurance? You could look for the little emblem on their website, but here’s a better thing to do: Go to FDIC BankFind and see for yourself.

Maybe you’re wondering how internet-only banks pay so much more interest than the bank on the corner. Well, it’s because they don’t have to pay for that building on the corner. They also don’t have to pay all those tellers working in that building. They save money on overhead, then pass those savings along to you in the form of higher interest rates.

Personally, since I’m running a business, I do use a brick-and-mortar commercial bank. I sometimes still need to walk into a local branch. But the rates they pay are horrible! So, I keep my checking account there, but when it comes to my savings, I use a brokerage money market fund and internet-only banks. Traditional banks simply don’t pay enough.

You can also get decent customer service at some internet-only banks. Check online reviews and see. Also, check for services like free ATM withdrawals so you can get to your money when you want to.

Bottom line? I’d encourage you to look at internet-only banks. And I can even help you do that right on our website. We have a search tool so you can find the best rates on savings accounts, CDs or even checking accounts. Just go to MoneyTalksNews.com and look for our Solutions Center. There, you can compare rates at a lot of different banks.

One last thing: Suppose you’d still prefer to have a branch to walk into. If you really need a local bank, check out credit unions. They’re not-for-profit, so they often have lower rates on loans and higher rates on savings. So, if the internet-only thing isn’t your thing, check out a local credit union.

Make it a super-profitable day. Meet me right here next time!

Got a question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter, just as you would with any email in your inbox. If you’re not subscribed, fix that right now by clicking here. It’s free, only takes a few seconds, and will get you valuable information every day!

The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Got any words of wisdom you can offer on today’s question? Share your knowledge and experiences on our Facebook page. And if you find this information useful, please share it!

Got more money questions? Browse lots more Ask Stacy answers here.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
20 Generic Brands That Amazon Created
20 Generic Brands That Amazon Created

Amazon’s growing collection of private brands offers everything from toilet paper and coffee to motor oil and clothing.

10 Cars That Lose the Most Resale Value After 5 Years
10 Cars That Lose the Most Resale Value After 5 Years

Two types of vehicles are especially likely to see steep plunges in value.

Avoiding These 5 Foods Could Save Your Vision as You Age
Avoiding These 5 Foods Could Save Your Vision as You Age

Millions of Americans may be able to prevent an incurable cause of blindness by making a basic change.

5 Upgrades That Help Seniors Grow Old in Their Own Homes
5 Upgrades That Help Seniors Grow Old in Their Own Homes

Are you planning to “age in place”? These safety-conscious home renovations can help.

10 Products That Will Help You Save Money
10 Products That Will Help You Save Money

Sometimes, spending a little cash right now can save you a lot of money down the road.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
Will I Get My Ex-Husband’s Social Security When He Dies?
Will I Get My Ex-Husband’s Social Security When He Dies?

Two factors determine how much money is coming to you.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on these familiar purchases. Yes, even pregnancy tests.

13 Brilliant Bulk-Buy Items on Amazon
13 Brilliant Bulk-Buy Items on Amazon

Every household should have these products on hand. Buying them in bulk on Amazon saves you cash.

6 Reasons I Will Never Trust Suze Orman
6 Reasons I Will Never Trust Suze Orman

Beware: The self-proclaimed personal finance expert has a track record that suggests more sizzle than steak.

5 Household Disinfectants That Can Destroy the Coronavirus
5 Household Disinfectants That Can Destroy the Coronavirus

You likely already have some of these products at home.

America’s Most Reliable Appliance Brand Is a Surprise
America’s Most Reliable Appliance Brand Is a Surprise

Have you heard of this appliance manufacturer?

This Type of Social Security Benefit Is Often Overlooked
This Type of Social Security Benefit Is Often Overlooked

The Social Security Administration is not helping certain people get money to which they are entitled, a report says.

Getting These 2 Shots Could Reduce Your Risk of Dementia
Getting These 2 Shots Could Reduce Your Risk of Dementia

These vaccines may lower the risk of Alzheimer’s disease by up to 40%.

8 Things That Are Free in August
8 Things That Are Free in August

As summer enters the home stretch, we’ve rounded up these sizzling freebies.

9 Everyday Problems You Can Solve With Vaseline
9 Everyday Problems You Can Solve With Vaseline

Forget expensive specialty products. Good ol’ petroleum jelly can address many common annoyances.

16 Amazon Purchases That We Are Loving Right Now
16 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

19 Purchases That Buyers Almost Always Regret
19 Purchases That Buyers Almost Always Regret

Think twice before buying these things.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

8 of the Worst Things to Buy at a Dollar Store
8 of the Worst Things to Buy at a Dollar Store

Not everything sold at dollar stores is a great bargain or a safe purchase. Here’s our list of products to avoid.

41 Things You Should Never Buy
41 Things You Should Never Buy

Some purchases are just plain dumb. Give yourself — and your budget — a break. Don’t spend money on this stuff.

Homeowners Say These 2 Kitchen Appliance Brands Are Best
Homeowners Say These 2 Kitchen Appliance Brands Are Best

One brand takes five of the top honors, while another ranks highest in three categories.

The 7 Best Things to Shop in August — and 5 to Avoid
The 7 Best Things to Shop in August — and 5 to Avoid

Here’s how to navigate August sales and discounts — which might look a little different this year

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.