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Other Factors to Consider When Opening an Online Savings Account

Other Factors to Consider When Opening an Online Savings Account

For the most part, I tend to use the advertised interest rates as the deciding factor in choosing a high yield online savings account. After all, if there isn't more interest to be had, why bother with sending money to an online account when the traditional savings account at my bank will do?

Yet, as I opened up more and more accounts through the years, certain features started jumping out at me as being important than I realized at the beginning. Nowadays, in addition to how much interest I could earn with yet another bank, I look for:

Their Commitment to Service

The easiest way to figure out whether you will be treated fairly is by calling the customer service directly. Just tell them that you are planning to sign up and ask them specific questions and listen their response. You will get a feel of whether you are comfortable dealing with them when/if you need help with your account by thinking about whether they were polite and knowledgeable. What's especially important is whether they are communicating to you as an individual (rather than just reading off of a script every chance they get).

In addition, the customer support hours are extremely important too. Is there a way to contact them 24 hours every day? Or are you confined to 9 am to 5 pm in some different time zone than where you are?

Lastly, some companies offer phone service, others offer email and some even have semi-instant messaging (or all three). Obviously, the more the merrier, so which of the three does the online bank you are thinking about offer?

The Bank's Interest Rates Trend

With these high yielders seemingly changing interest rates daily, it makes sense not just to see where the current interest rates are but also how the banks have reacted to interest rate changes. Did they start off being the highest interest rate offering in town and then subsequently lower their rates to one of the lowest in the industry? Or have they tried to keep the rates steady in the name of consistency?

Their Transfer Limits

This particular "feature" is the most annoying issue for me by far. Most institutions don't really pose a problem, as their transfer limits are something like $100,000 per day, but with others, you cannot transfer more than $5,000 a day. A $5,000 a day limit may not sound like a problem now, but what if there's news that the bank may be going under and you want to withdraw all your money? Can you wait 10 days to take out the $50,000 you have in the savings account? I know there's FDIC insurance and all that, but who wants to deal with that headache.

Their Values / Culture

You will always hear someone talking about not doing business with a company because they don't agree with the CEO's political viewpoint or something unrelated. I'm not that guy. But I do care about news of how a company treats their customers in other parts of their business because that reflects company culture and in general, the same company values spread throughout the organization.

With so many of these online savings accounts being just one part of the company, you can probably find out how customers are treated not just in the banking department but other branches of their services as well. Are they primarily a credit card company? How do they treat their customers there? What about an auto financing company? Any complaints? With a bit of research, you can not only figure out potential issues online savings account customers will be experiencing, but other bad news such as cost cutting as company integration ultimately takes over any independency of different departments.

What I'm saying is let's say for example that a company has a history of sticking it to their customers in their credit card arm of the business, can you actually trust that they will take care of you if you need their help with your savings?

The Takeaway

Look. Without a high interest rate, there is almost no reason to even have a savings account. But if it might be a pain in the butt to deal with an online bank, why bother?

David Ning owns MoneyNing Personal Finance, a site that explains personal finance issues in simple terms such as how his reader benefited by getting a 0% balance transfer credit card to pay off his debt. Check it out as soon as you can!

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My ATM (anonymous)   |     |   Comment #1
These are great source of information.Thank you for sharing this very informative blog,so clean and very easy to understand.Keep it up! Cheers!
Anonymous   |     |   Comment #2
Another factor to consider is the ease of closing an account. I wanted to close an Ally savings account, and had to call them (or send them a letter) even after transferring the balance to another institution. No option to close the account on the website. When I called I was given the third degree: "Why are you closing?"; "What are you going to do with the money?"; "Are you transferring it to family members?"; "Why not leave a small amount in the account and keep it open in case you want to deposit in the future?"; etc. I thought the questions were very inappropriate, and the rep tried very hard to discourage me from closing the account. She should have just said "OK, we'll send you confirmation of closing" and that's that. That's been my experience with local banks. I was also informed that I had 19 cents accrued interest, (after transferring the balance to an account at another institution) and they would have to mail me a check. The rep seemed put out by that.  I told them to keep it, but about a week later a check for 19 cents showed up. I tossed it. All of this left me with a bad impression of Ally.
Question (anonymous)   |     |   Comment #3
What is the best way to track the history of APY changes and compare for different banks? What website would you go to?

Ideally, I would love a way to select a few banks I'm interested in and graph their rates for the last year or so overlaid together.
Sandra   |     |   Comment #4
With respect to transfer limits, the situation is actually worse than what you describe in your example (withdrawing $50,000 with a $5000 limit). You said 10 days. Actually there would be at least 1 weekend and quite likely 2 weekends included (since you can only withdraw on a business day). That pushes it up to 12 to 14 days. But it's even worse than that. There is a limit of 6 withdrawals per statement period. So unless your withdrawals happen to "straddle" 2 statement periods, you would have to wait an additional 1 to 23 days, depending on when in the statement period you start to finish making your withdrawals. The worst case would be 14 plus  23 = 37 days to withdraw your $50000. Add yet another day if a bank holiday occurs at the start or end of your withdrawals.
Anonymous   |     |   Comment #5
Transfer limits aren't necessarily a problem. Just use an outside account to initiate the transfer, and that usually solves the issue. For example, if you have an Alliant Credit Union checking account, you link NEW bank with Alliant through Alliant's website, and initiate a transfer from NEW into Alliant using the Alliant website.

Keep in mind, this has to be set up ahead of time. I usually set up EFT instructions with multiple banks at the old bank's websites whenever I open a new account.
jcgc50   |     |   Comment #6
Something I look for is how fast they handle transfers. I have had accounts at numerous online banks. Capital One transfers the money in in one day and they are proud of that. However, it takes three days to get it back.

AMEX transfers in a day as do others into your checking account.

I also like to use email alerts to know when money is being moved as a matter of security. Salliemae could never get their alerts system to work over a period of several months. In fact, when I left them it still did not work.