Online Savings Accounts Series Part 2: How to avoid scams when opening an online savings account

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To read Part 1 of the Online Savings Accounts Series, go here.

How to avoid scams when opening an online savings account

The idea of opening an online savings account makes people nervous. I get it.

Online savings accounts seem so sketch. There are fake websites and spammers galore online. There’s so much talk about the next “get rich quick” scheme that sometimes even legitimate, really good strategies, seem overwhelming and high risk.

It’s good to be cautious.

But I gotta tell ya, I love my online savings accounts.

Especially right now – with interest rates around 4.25%, it sure beats the .01% my big box bank is paying on my savings.

Let’s do a quick comparison.

Let’s say I have $5,000 in my savings account.

If I keep all $5,000 at my big box bank earning .01%, this year I’ll earn $0.50 in interest.

My $5,000 is now $5,000.50.

If I keep all $5,000 in an online savings account earning 4.25%, this year I’ll earn $212.50.

My $5,000 is now $5,212.50. (That’s SOOOO much better!)

So, I just paid myself $212 more this year by saving my money in a smarter place than my local bank.

Every time I make money on my money, I tell myself I just paid myself for paying attention and making good decisions.

My goal is to see how much I can pay myself in a year just from managing my money well. It’s a game.

And you can play the game too simply by opening an online savings account.

Let’s address some of the hesitations, worries or fears you may have when it comes to opening an online savings account.

    1. How do I know if it’s a legit bank? There are a number of online banks you could choose from (in a couple of weeks I’ll give you the list we give our clients) but the #1 most important factor you want to look for is a bank that is FDIC insured or member-FDIC. The good news? You’ll likely be able to find this in the footer of every legit bank’s website. FDIC stands for Federal Deposit Insurance Corporation and it protects your money from bank failure or theft. Not every bank is insured by the FDIC and I wouldn’t put my savings in an account that isn’t.
    2. Changing over all of my banking is a pain in the butt. I hear ya. I don’t love the bank where my business checking account is, but the thought and hassle of switching banks keeps me there. The good news? You don’t need to change over ALL of your banking when opening an online savings account. Keep your checking account where it is. That way you can continue all your bill paying, auto drafts and debit card spending with no interruption. In fact, we don’t recommend making a whole bunch of changes all at once anyway. With an online savings account, you can link it up to your main checking account wherever you’re already banking (make sure of this when picking the bank for your online savings account). To get money in and out of the online savings account, you simply transfer to/from your current checking account. It really is that simple!
    3. What if I need quick access to my money? It’s both a blessing and a curse that your savings account is online. It’s accessible…but not too accessible. It’s important to know that a transfer from your online savings back to your primary checking account can typically take 2-3 days once you schedule the transfer. That means, you can’t transfer the funds back to your checking account and then immediately spend the money. (Not necessarily a bad thing unless money is tight and you’re in an emergency!) There are a few different ways to navigate this . 1) You could use a credit card temporarily (we’re not anti-credit-card). Or, 2) You could get a debit card for the savings that allows you to withdraw funds from an ATM. Or 3) You could open a checking account at the online bank as well (Transfers between your online savings & online checking accounts at the same bank should be instant). Just know, there are ways to still gain quick access to your money, if this is the thing that is holding you back.
    4. I don’t want any more bank fees. I don’t want anyone to have any more bank fees. Even if you could afford those pesky fees, I really can’t stand paying for something like a bank fee, ever. This is one of the reasons I love my online savings accounts so much – they have no minimum balance requirements (so you don’t need to leave even $1 in the account) and there are no fees! It allows you to be super strategic with the number of savings accounts you open, because it’s one less thing you even have to worry about!

I hope this article helps to calm some of your fears around opening an online savings account.

If you’re thinking “Who the hell cares how much interest I could earn, I’ve got to save money in order to make money?” then hang tight, in Part 3 I’ll share tips to make that step easier too.

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