Online savings accounts attract million of customers with their high-yielding interest rates and limited risk. These accounts are great for storing short term investments because they normally require no minimums and generate interest fast.
Banks like Emigrant Direct and HSBC offer online savings accounts at a high APY, which act as great substitutes for money market accounts and bonds.
Online savings is the perfect vehicle for your short term savings, particularly when you have doubt in bonds or money market accounts. High yield savings accounts provide an outlet for investors that earns a high return on investment.
There are a few drawbacks to online savings because online accounts are setup for online access only. You cannot make purchases from your online savings like normal bank accounts. Your money must be transferred to a checking account before it is accessible. Transfers take a few business days, usually no longer than that. Any temporary wait is outweighed by the high yield savings account.
High Yield Online Savings Account Options
The following banks offer online savings:
ING Direct (ING Direct Review) offers 4.4% APY.
Emigrant Direct offers 5.05% APY.
Washington Mutual offers 5.05% APY.
Emigrant Direct and WaMutual offer the best rates, so those would be my two recommendations. Rates often change so be sure to lock in the best rate before you sign up.
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