The Basics of Online Savings and CDs

Make sure you’re making money instead of spending it
That’s right, you can lose money in an “investment” account if you’re not careful. Inspect the fine print whenever you sign up for a new investment account, whether it be savings, checking, CD, money market, and even 401k and retirement plans. Make sure that you meet the requirements for minimum balances if stated and understand the early withdrawal penalties.

Online Banking-now is the time
If you currently have money in a regular bank savings account, now is definitely the time to consider moving it into an online CD or savings account. Many banks offer higher rates online when compared to their normal branches simply because there are lower overhead costs to managing online accounts. If you need instant access to your money then nothing can beat normal banks. However if you can wait just a few days for transactions to go back and forth then an online savings account will work fine for you. Typically you will still need a normal checking or savings account to link up to your online savings account. Online savings accounts can yield 2 to 4 percent higher interest rates than normal banks! That can be more than double your current savings account rate.

Online CDs-Get the Best Rates
Online CDs have different terms ranging from 3 months to 10 years and they will sometimes also have minimum deposit requirements. Typically the higher interest rates require a higher deposit. Early withdrawal fees vary greatly from bank to bank. Make sure you can part with your money for the specified term and you’ll have nothing to worry about. Researching the best CD rates available when you’re ready to invest can help make the most from your money.

Get Rid of Old Accounts-Make More Money Online
Close out old accounts that are not gaining as much interest. Assuming you’re investing less than 100 to 200 thousand dollars, you will benefit from putting the bulk of your money in the investment that offers the highest interest rate. It’s easy to get lazy and leave some money here and there however if you consolidate the money from all of your bank accounts that are seldom used you may have more than you think.

Schedule reoccurring deposits into your new online savings account
You cannot add money to a CD once you’ve opened one, however you can add money into your online savings account at any time. Some banks such as ING DIRECT have tools available that allow you to schedule deposits for a future date or on a regular basis such as weekly or monthly. There are other banks that have great interest rates but don’t offer this functionality (as of today ELOAN does NOT offer future scheduled deposits with their online savings account.) Just putting in a small amount out of each paycheck will add to your total investment and you’ll soon realize the power of compounding interest.

If you do get a charge from your bank you should always call in to customer service and ask for a one time courtesy refund. I find that it’s best to be courteous and honest with the bank representatives. Of course you cannot do this often but some people often forget that they are the customer and the banks want your business. You can easily save $30 or more depending on the type of fee you incurred (overdraft fees are a very easy and common fee for banks to charge.)