When it comes to saving for emergencies, I subscribe to the theory “out of sight, out of mind.” Saving money with one of the best online banks helps to protect me from myself, as a recovering spendthrift. Our emergency funds are safely stashed at online banks if I need them, but not too accessible in the event I declare not having a plasma screen the week before college football season kicks off an emergency.
Four of the Best Online Banks
Online savings banks were all the rage just a couple years ago. It wasn’t unusual to score a 4 or 5 percent interest rate on online savings accounts. Today, the “high-yield” from high-yield savings accounts has all but been obliterated. Still, there are a few good deals at the best online banks, if you know where to look.
ING DIRECT I’ve had an ING Orange Savings Account for over two years now, and have to say I am very pleased with the product. We currently have a number of accounts there for targeted savings goals. While higher interest rates can be found elsewhere, I value the ease-of-use from their online interface.
WT Direct WT Direct also offers a solid interest rate, but with more caveats than other banks. While they do not require a minimum deposit, or charge fees based on your balance, they do offer a lower tiered interest rate for accounts with less than $10,000 (1.16% APY vs. 0.15%APY). If you have over $10k in your emergency fund, WT Direct is a solid option.
Again, the most important benefit of saving emergency fund money at an online bank is that is separated from your everyday accounts, limiting the opportunities to spend it away on non-emergencies. I still like the idea of keeping a local emergency fund of $1,000 or so tucked away at a local bank or credit union for smaller emergencies. This smaller, local emergency fund provides quick access without having to wait a couple days for online transfers.