Christian Budgeting, Finances, Savings
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Online Savings: Earn More Interest

  • Michael Milner Debt-Proof Living
  • 2007 17 Oct
Online Savings: Earn More Interest
Look around: Prices are rising on most everything you buy. If you’re a consumer—and who isn’t?—that’s no fun.  And sometimes, as in the case of college tuition, it’s enough to bring you to financial tears. But once you get past the Pity Party, there’s a very important question to ask yourself:

Is your money keeping pace as well as it could be?

We’re not talking investment savings here; this is more about the well-being of your Freedom Account, Contingency Fund and whatever other cash buffers you’ve built between you and life. If you stash these savings in the marble-pillared monstrosity called Your Local Bank, odds are that your cash is languishing. You’re earning one, maybe two, percent on your savings. And you may be feeling fortunate to get that much.

If this is the case, rest assured that the suits at your bank love you to death. They get to frolic with your money all day, and do it on the cheap. And while they’re paying you a mere pittance for your hard-earned greenback, inflation is out here, in the real world, doing subtle and ugly things.

It’s lifting prices faster than your money is growing. It’s indirectly evaporating your savings.

At an annual rate of anywhere from three to six percent, inflation is steadily eroding the value of your cash, whittling away its buying power with each passing beep of your favorite store’s barcode reader.

So what’s a conscientious saver to do?

Get an online savings account, that’s what.

Online savings accounts (OSAs, for cash aficionados) are fairly new on the horizon, but if you’re a saver, you ought to become acquainted with them real quick. In fact, do it yesterday. No, really.

Your Freedom Account and Contingency Fund will thank you.

The lowdown on linking

It’s the very nature of online savings accounts: Your money is “far away,” so to speak, accessible only with mouse-clicks and passwords. But it’s in a much healthier place. You’ll earn interest in amounts that actually matter.

“But if my money’s at some bank in New York,” you may be asking, “how do I get it when I need it?”

Easy. The answer lies in one word: Linking.

When you open an online savings account, you must specify one of your current bank accounts (typically a checking account) to act as your initial “linked” account for your OSA. It’s from that “linked” checking account that your OSA’s bank will debit your opening deposit.

From that point, all account management occurs online, and all transactions are electronic. You move money back and forth, from one account to another, all with your computer and mouse—and some other nifty background technology that I couldn’t explain if I wanted to.

And once your OSA is opened, you can specify additional external bank accounts and link them to your OSA. In this manner, you can move money to and from your online savings account from pretty much any checking or money-market accounts you might already have.

The only hang-up here—and honestly, it’s not much of one—is that your savings won’t be immediately accessible. Rather, transfers in and out of most OSAs will take anywhere from 2 to 4 business days to complete.

In fact, for those of us with itchy spending fingers, this necessary delay can be a godsend. Frivolous, spur-of-the-moment spending sprees are a lot harder to pull off when your cash takes a few days to get to your checking account.

Besides: Experts love to tell us to contemplate our big purchases overnight, right? If you’re using OSAs to house your cash stash, this “contemplation” becomes a built-in feature of your financial life.

How’s that for cool?

Now let’s talk about some of the bigger players in the online-savings-account game:

ING Direct (
When it comes to online-only savings accounts, ING are the folks who started it all. If you know any of the online banks by name, chances are you know about ING Direct—the direct-to-consumer arm of the globally ginormous ING Bank.

Back in 2000, ING Direct unveiled what’s still known as the gold (or in their case, orange) standard of OSAs: the Orange Savings Account. Great customer service, an intuitive interface, and rock-solid Electronic Fund Transfer times have made ING Direct the standard by which all other OSAs are measured. As you’ll see, though, they’re not the interest-rate leaders they once were. (They have so much market share now—and a stellar reputation—that they don’t have to be!)

Minimum Open/Maintain Account: $1

Maximum Linked Accounts:  3

Current Interest Rate: 4.5% APY

Emigrant Direct (

Emigrant Direct is the online branch of New York’s Emigrant Bank. They came along on the coattails of ING Direct, and gained customers at a zippy pace by consistently offering slightly better rates than ING.

As OSAs go, Emigrant Direct got to its lofty perch of today mostly by viral and online marketing, as savers flocking to online message boards spread the gospel of 5-plus percent savings accounts like wildfire.

If fast access to your money is important to you, Emigrant is worth a hard look. Their system is renowned in money-geek circles for laying down some mighty quick electronic-transfer times. (Two-business-day transfers are the norm, in my experience.)

Minimum Open/Maintain Account: $1

Maximum Linked Accounts:  4

Current Interest Rate: 5.05% APY


A quick scan of online personal-finance blogs inevitably turns up savers who wouldn’t be caught dead without their HSBC Direct savings accounts. They’re one of the very few OSAs who offer an ATM card for instant deposits and withdrawals of your funds. Also, HSBC is known to regularly offer special promotional interest rates for deposits of new funds.

Minimum Open/Maintain Account: $1

Maximum Linked Accounts:  Unlimited

Current Interest Rate: 5.05% APY

Other institutions offering OSAs

Citibank e-Savings Account (

eLoan (

E-Trade (

Amboy Direct (

Washington Mutual Special Savings Account (

Michael Milner and family live in Oklahoma. Check out his website,

© 2007 Debt-Proof Living. All rights reserved. Used with permission.

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