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Online Savings – the smarter way to save - July 2013

The basic premise of a savings account is that it allows customers a way to set aside excess funds and earn interest from the bank that holds the funds. With a savings account, you earn money on money that’s usually just sitting around, and the bank pays you interest for the privilege of lending your money out at interest rates usually rising as the balance increases. Most banks provide simple savings account products that provide a very small interest payment for clients while offering a low minimum balance requirement. The internet has vastly changed the world of banking, but not this underlying premise.

Traditional banks face competition from versatile online-banks which offer savings account options to customers. These benefit from the convenience of managing their account online and a degree of functionality which allows them to manage their savings online. Customers may not be comfortable severing their relationship with their existing traditional bank, especially .if they have existing loans and credit cards. However, with little effort they can still take advantage of the superior interest rates offered by online savings accounts.These innovative solutions allow them to move money between traditional and online accounts. Withdrawals are free of charges and funds are normally returned to the traditional source within 48 hours. The service is generally supported by a friendly and knowledgeable helpdesk which is only a phone call away. As for security, all data transfer is encrypted and 128-bit data encryption is considered standard.

If you are curious as to why the APR (annual percentage rate) on an online savings account is high, some basic research will indicate that that online-only banks usually charge fewer fees (if any at all), in most cases require a minimum balance, and they offer great interest rates because they are not burdened by overhead costs such as wages and real estate costs which are normally associated with brick-and-mortar institutions. Customers benefit because these savings are passed onto them in the form of a competitive interest rate and the lack of maintenance fees or bank charges.

Whether you're saving for a rainy day or towards a specific goal, actively saving your money can help you learn financial discipline. So kick off a lifetime of sound financial behaviour, and begin by opening your savings account. Do your homework and find a savings product that satisfies your requirements, and then start putting your money to work. There has been no better time than now to explore the opportunities that online savings accounts have to offer. Indeed, getting an online savings account could be one of the smartest financial decisions you make.