Heritage Bank's New Online Savings Account - 4.60%

Update 5/22/09: The savings account rate is now 1.50% APY.

Heritage Bank is another bank getting into the high yield online savings account. The bank's new Heritage Direct Savings Account has a 4.60% APY. It requires a $1K minimum opening balance. The balance must remain above $1K to obtain the APY and to avoid a $10 monthly fee.

This savings account has the same features as the typical online savings account. It must be opened online, and it links to your existing checking account. Like EmigrantDirect or ING Direct, it doesn't offer ATM cards or check writing privileges.

Heritage Bank Online is run by Heritage Bank N.A. of Spicer, Minnesota which is FDIC insured. Bankrate.com rates this bank as 4 of 5 stars (financially sound).

With the $1K minimum at Heritage, EmigrantDirect and VirtualBank are still better deals. Nevertheless, it's good to see more banks offering online savings accounts. Last week, Citibank began offering an online savings account with 4.50% APY. The more competition, the better rates we should see.

Hopefully, we'll see more credit unions starting online-only savings accounts. Sunmark FCU of New York began one last year at RateEdge.com which has offered rates on a no-minimum savings account better than EmigrantDirect's rates over the last 8 months. Its current APY is 4.75% which began in early February (see post).