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.
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!
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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.
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.
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