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It’s not just about the convenience factor.
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We live in a world that’s growing increasingly digital. These days, a lot of people do their work online, hold meetings online, and do the bulk of their shopping online. And a lot of people have shifted from physical banks to keeping their money in an online bank.
Banking online can be a huge time-saver. Think about it — instead of having to get in your car and drive over to a bank, you can simply point and click your way through a given task. Plus, online banking can be super convenient. Out of stamps? You can pay your bills electronically online rather than having to mail a check.
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But while banking online can be ultra convenient, that’s not even the main reason to consider a switch to an online bank. Rather, the main reason has to do with earning interest — more of it.
Don’t sell yourself short
The money you have in your savings account may not grow at the same pace as the money you have in your brokerage account. But it still pays to score as high an interest rate as possible on that cash. And chances are, moving over to an online bank will be your ticket to doing just that.
Online banks don’t tend to have the same operating expenses as physical banks. After all, they don’t have to pay for rent and other overhead that comes with maintaining a physical branch. Because of this, you’ll commonly be able to snag a higher interest rate on your money with an online bank, whether you have your cash in a savings account or a certificate of deposit.
If you’re wondering how much of a difference moving over to an online bank will make, consider this. Many online banks today offer an annual interest rate of 4% or more for savings accounts. Let’s say you have $10,000 in your savings, and you’re currently earning 3% interest. That means you’re earning $300 a year. But with a 4% interest rate, you’re looking at $400 a year. That’s a pretty notable difference.
It may be time to make a switch
If you’ve been using the same bank for many years, then moving over to an online bank may be an adjustment. But if that adjustment makes you richer by allowing you to earn more interest on your money, then it’s worth going through the motions.
A 2022 survey by Forbes Advisor found that 78% of Americans prefer to do their banking online than in person. Now, it’s possible to keep your money at a physical bank and still conduct transactions online. But if you’re going to be banking digitally anyway, then you might as well snag a higher interest rate on your money in the process.
Moving to an online bank could put extra money in your pocket at a time when living costs are stubbornly high. And if you really want to score the best interest rate on your savings, shop around with different online banks and see what sort of return on your money they’re offering.
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