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I'm looking to open a savings account (probably online) but I want to make sure I avoid any pitfalls. After looking at Bankrate.com I put toegether a bit of a list, but is there anything else I should be look for besides this stuff?

  1. minimum investment amount
  2. monthly fees
  3. checkwriting services (I don't want or need this on my savings account, personally)
    • fees for electronic fund transfers to/from another account (only fees on this end; I'm assuming I'll know about whatever fees the other bank will charge me)
    • fees to close the account
    • fees/restrictions on how much/how little I can deposit or how many EFT's I can make in a month
    • restrictions on how long my money has to be there. I didn't look at CDs for this reason (because they have penalties for early withdrawal)

Should I be wary of anything else or are there any other fees usually hooked to these types of account? If something applies to online savings accounts but not brick and mortar savings accounts that's useful too.

I saw another question (Should I switch to this high rate checking account for my emergency fund?) that talks about savings accounts linked to checking accounts that requires purchases and stuff, so I guess that's something else I should look for.

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Michael A
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    FDIC protection for a bank account or NCUA protection for a credit union account is a requirement. – mhoran_psprep Jan 01 '14 at 14:31
  • @mhoran_psprep Is that all I have to worry about? – Michael A Jan 02 '14 at 01:16
  • @mhoran_psprep I'm suspicious because the rates on these accounts seem so high relative to other savings accounts, that I'm assuming they can just make it up with hidden fees, even though I didnt see any in the terms and conditions (Im not a lawyer though so I don't knw what could b ehidden in there) – Michael A Jan 02 '14 at 14:28
  • I wanted to add FDIC to your list. So far your list is the same for any bank account, even one that is brick and mortar. – mhoran_psprep Jan 02 '14 at 14:41
  • I'm not really sure what is the question here. It seems to be more of an invitation for a discussion, which is not something this forum is for. Are you asking if you should be worried because "online" savings accounts provide better returns? – littleadv Jan 03 '14 at 00:31
  • @littleadv The question is basically what are the standard pitfalls of online savings accounts? Is an online savings account that offers a much higher yield than other accounts, without charging fees, "too good to be true?" Based on your experience and the experience of other people are these accounts just scams? – Michael A Jan 03 '14 at 04:21
  • Why would they be scams? Why don't you think that giving 0.01% APR is a scam, and not the other way around? – littleadv Jan 03 '14 at 04:22
  • @littleadv Because if two accounts appear to offer the exact same features, but one offers a much higher APR (say 0.9%, 90 times higher than the other), that seems suspicious to me. There's no such thing as a free lunch, which makes me think that something else is going on. What else is the bank offering the higher rate getting from me? Do they usually charge hidden fees, or charge for EFT's, or what? – Michael A Jan 03 '14 at 04:26
  • @littleadv A lot of these accounts don't have debit cards linked to them so I know theyre not making up the difference by charging fees to businesses (another question mentioned that as one reason they offer higher rates: http://money.stackexchange.com/questions/23206/why-does-my-checking-savings-account-offer-a-higher-interest-rate-than-a-standal) – Michael A Jan 03 '14 at 04:27
  • @user banks earn money by lending, not by charging fees. – littleadv Jan 03 '14 at 04:28
  • @littleadv Banks that offer credit cards definitely make money through merchant fees, though. (http://money.stackexchange.com/a/19151/11670) Sure the credit card processor gets a good piece of that, the bank still earns from that as well. – Michael A Jan 03 '14 at 04:31
  • I have been using Ally since 2011. I am very happy about my switch. The only issue is cash deposit. You can easily deposit check by scanning or taking a picture of the check, but for cash, you will have to mail in to their address. For me, this is not that big of an issue, since I hardly ever deposit cash. You can withdraw cash from any ATM without any fee. – zsljulius Jan 05 '14 at 18:29

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The reason "on-line" savings accounts (Ally, CapitalOne, American Express, and many others) provide much higher rates than brick-and-mortar banks is because they're not brick-and-mortar. They do not need to pay for a huge amount of real estate, utilities, public-facing employees, inter-office mail, security, etc etc. All that - allows them to pay more for your money.

The back office of these banks is the same as that of Chase, BOA or Wells Fargo. Its just that they don't have the enormous expense of having a branch in every neighborhood, while still reaching all the same population of depositors.

So no, its not a scam, these are reputable banks. Some have physical offices (for example, I know that CapitalOne has some branches in New York), some don't (IIRC neither Ally nor American Express Federal Saving Bank have physical branches). But they're banks nonetheless, insured as required by FDIC (or NCUA, in case of credit unions), and provide all the same services for less (or all the same savings for more, if you will).

IMHO, giving 0.01% APR is a scam. Not the other way around. The old-style banks want your money for free, and you're worried why would someone else treat you better... Well, that's why the US has one of the most retarded financial systems in the Western world...

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littleadv
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  • Makes sense to me. I'm not sure retarded is the right word in this context (maybe backwards in the tech and/or regulatory sense) but I definitely know what you mean. – Michael A Jan 03 '14 at 04:32
  • Wonder why the downvote... Anything incorrect? – littleadv Jan 03 '14 at 23:22
  • CapitalOne has brick-and-mortar branches all over Texas, NY, NJ, VA, and some smaller states. – RonJohn Dec 13 '16 at 14:35