Online Savings... Is it for you?

I don't know how many people are aware that online savings accounts exist. I didn't until about a year ago when I was looking for good money market interest rates and found a link to one on the Internet. What's nice about them is because most of it is done online, they have much fewer costs than a regular bank does (like paying employees, costs of the building, etc.), so they can pay you a higher interest rate on your savings account. Trevor and I like it because it is still liquidable money, but we can earn a higher interest rate on the money. We have been using HSBC direct (I've read about others that are good as well like ING Direct. Just make sure they are FDIC insured as well) and we get 5.05% APY interest. Another really nice thing about is that you only have to have a minimum balance of $1.00. That is much nicer than money market accounts or CDs!

I was really skeptical about all of this at first, but I read all the fine print on the website. I also searched the Internet and could not find a single comment about someone who was cheated out of money or something like that (the only comment like that was someone who cancelled within 6 months, which isn't allowed, and were fined). So we signed up almost a year ago and have not had any problems since.

Okay, now you're wondering, "what's the catch?" Well, there are a couple downsides to it: It takes a while to get set up. They get your information, and then they send you confirmations through mail and send you your pin/password in different letters, , etc. It also takes a while to get the set up connected to your checking account to make sure that they have the right account and such. So it takes a couple weeks to get set up. Also, whenever you transfer money from one bank to another, it takes 3 business days. It's actually good for us because it is liquid money, but this makes it less tempting to take money out unless we really need it.

Just thought if anyone is looking for a savings account with a higher interest rate, this might be something to look into. If you have other means of investments, please share! I'm always looking for new avenues when the time comes that we want to invest...