Online Banks Offer Higher Rates - How to Find the Best One
You’ve likely noticed that mortgage rates have been on a steady incline for the past several months, but have you seen a similar spike in your bank account interest rates? If you’re banking with a large traditional bank, chances are that you’re getting a pretty dismal return on your money. But it doesn’t have to be that way! There are many online banks offering high-interest savings and CD accounts. Some, like Bank5 Connect, even offer extremely competitive rates on checking accounts.
Moving some or all of your cash into an online account could yield you a significantly higher return than you’re currently getting, but it’s important to remember that not all online banks are equal. Prior to making the decision to open an account, you should review the bank’s - and the account’s - offerings and weigh your options to ensure you’re getting the best deal.
What to Look for in an Online Bank
There are several things to consider when choosing an online bank. Here are some important things to focus on as you’re shopping around for the best online bank:
- Deposit Protection
First and foremost, you want to ensure that your money will be safe. You should only consider an online bank that is FDIC-insured. FDIC insurance protects your money in the event of a bank failure. Generally, it covers up to $250,000 per depositor, per ownership category, per FDIC-insured bank. To find out if an online bank is FDIC-insured, you can use the FDIC’s BankFind Suite tool. BankFind Suite allows you to search for a bank by name, FDIC certificate number, or web address. It’s important to keep in mind though that many online banks operate under trade names. Many online-only banks are tied to established brick-and-mortar banks with different names. So, if you have trouble locating an online bank using BankFind Suite, you may consider reaching out to the bank directly for their FDIC certificate number and then verifying it in the tool.
At Bank5 Connect, all deposits are protected via FDIC insurance. Our FDIC certificate number is 23286, and our FDIC insurance is under our legal name, Fall River Five Cents Savings Bank. On the Fall River Five Cents Savings Bank listing in the BankFind Suite tool, you’ll see “Bank5 Connect” listed as a trade name.
It’s also worth noting that some online banks offer deposit protection outside of FDIC insurance. Bank5 Connect, for example, has supplemental deposit insurance that covers funds in excess of FDIC limits. This additional insurance is offered through the Depositors Insurance Fund, also known as DIF.
With so many online banks out there today, it’s important to review the organization’s overall credibility.
• Does it get good press? Do a quick Google search about news related to the bank’s name.
• Has it received awards from reputable publications or websites?
• Does the bank have solid customer reviews?
- Customer Service
Nothing is more frustrating than poor customer service. Test out the bank’s customer service, before you consider opening an account. Visit their website see what options you have to get in touch. Reach out with some general questions about the account and see how easy it is to reach a real, live person.
• Are there long call hold times?
• Are the customer reps friendly, knowledgeable, and easy to understand?
• Is customer service available during convenient hours
• If someone says they’ll get back to you – do they?
With most online banks being “online only”, you want to make sure that you’ll be able to effectively manage your account without the help of a branch.
• Does the bank have ATMs? If not, how are you able to withdraw funds?
• How will you make deposits? Does the bank have a mobile app with a mobile deposit functionality? Can you easily transfer money to and from your account electronically?
• Is there an efficient way for you to digitally conduct more complex transactions like name changes, disputes, or beneficiary changes, or will you need to send documents through the mail?
• Do you have bill pay payments or direct deposits? Look for a bank that has a streamlined process to switch banks. Some banks, such as Bank5 Connect, have special services that eliminate the hassle and time of switching banks. With Bank5 Connect’s Switch My Bank service, you can change your direct deposit and update your recurring payment methods with just a few clicks.
- Product Offerings
When choosing an online bank it’s also important to consider which products they offer. You may just be looking for a savings account now, but is there an option to open a checking account later on if you are happy with the service? Try to anticipate which types of banking products you may be interested in down the road, and make sure the bank offers them. It can be a pain the butt to switch banks, so try to choose an online bank that will meet your future needs.
While shopping around for the highest rate is one option, a smarter idea is to weigh all of the above criteria along with the rates offered. For example, it might make sense to go with a bank that has better customer service, even if they’re offering a slightly lower rate than another bank.
It’s also important to review the terms of the product you’re considering. Is the rate locked in for a specific period of time, or could it change shortly after you open your account? A traditional CD is a great way to ensure a rate for a specific period of time. With most CDs, your rate is fixed for the entire term. So, a rate on a 2-year CD may be lower than what you can currently get on a 6-month CD, but your rate will be guaranteed for two full years.
With interest rates higher than they’ve been in years, do yourself a favor and consider an online bank. A great rate on a deposit account can help you reach your savings goals faster, and get you excited about your financial future.