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There has perhaps never been a better time to ditch a brick-and-mortar bank for an online bank.
Not only has the Federal Reserve been raising rates for a year and a half now, which benefits folks saving money in bank accounts or CDs. But the interest rates offered by online banks these days beat the pants off those offered by brick-and-mortar banks.
You stand to earn more than four times as much interest on your money just by moving your savings account from a branch-based bank to an online bank, according to a WalletHub banking survey.
Comparing interest rates
WalletHub ran the numbers for multiple types of accounts, including personal checking accounts and personal savings accounts.
For interest-bearing checking accounts, the average annual percentage yield (APY) is:
- 0.42 percent at online banks.
- 0.34 percent at branch banks.
For savings accounts, the average APY is:
- 0.87 at online banks.
- 0.16 percent at branch banks.
Let me put that another way: Folks who simply move their savings accounts from a brick-and-mortar bank to an online bank will earn more than 400 percent more in interest, on average.
Finding the best interest rate
If you do a little research, you can gain even more.
The above figures are all averages. That means numerous online banks are offering even higher interest rates.
For an example of an online bank that now pays 1.4 percent with no minimum balance requirement, check out “This Bank Has Raised the Interest on Its Savings Account — Again.”
For help completing your interest-rate research in a matter of minutes, check out Money Talks News’ account comparison tool. It enables you to compare rates for interest-bearing checking accounts, savings accounts, and money market accounts and CDs.
Why online banks can offer more
Online banks are also referred to as internet banks. That’s because they don’t operate branches, which is key to the financial advantages they tend to offer customers.
As we note in “10 Tips for Finding a Bank With More Bang for Your Buck“:
“They don’t need to maintain a network of brick-and-mortar branches, so their expenses are lower, which can mean they pay higher interest rates and charge lower fees.”
Have you ever used an online bank? Tell us about your experience below or on our Facebook page.