1. Banking 101

Online Savings Accounts

An online savings account differs from a regular savings account in that you deal with it exclusively through the internet (sometimes also by phone, but not in person) and it pays a higher interest rate. As of June 2021, for example, one of the highest interest rates available for a savings account was 0.70% for a Sallie Mae SmartyPig account. Meantime, Chase, the largest bank in the United States, was paying 0.01% on its savings accounts.

Some online savings accounts are offered by the same banks that provide regular checking and savings accounts, while others are offered by banks that don’t have physical branches and exclusively offer online products. If you’re comfortable with online banking, an online savings account may be a better choice than regular savings account because of its greater earning potential. Many online savings accounts also do not have a minimum deposit to open an account, minimum daily balance requirements, or a monthly maintenance fee, unlike many savings accounts associated with brick-and-mortar banks.

With some types of savings accounts, both regular and online, the rate of interest the bank will pay you depends on how much money is in your account. These accounts are called tiered-rate accounts. Customers with higher balances will earn interest at a higher rate.

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