I want to open a savings account but I don't know which one to choose. Each bank has a variety of options all with interest rates well under 2 percent. But then there's always a type of account with no minimum balance, no fees, and an interest rate of 3 percent. I don't get it. What's the catch? And how is an online savings different than a regular savings? And what's even the purpose of a money market account now with so many savings accounts offering higher rates? Are these all effects of the U.S.'s dwindling economy? I know I ask a lot of questions but if anyone has all the answers, It'll be greatly appreciated.
Most major banks are paying less than 1% interest on savings accounts. The ones advertising 3% are usually "come-ons" to get you to open an account. You will be switched back to 1% in a few months..
I used to think they saved money by not having branches and passed those savings on to their customers.
But then I read something that said you have to be careful because some banks offer high rates cause they really need the money. In other words, maybe they're on the verge of failing.
Scary stuff...
My bank (in Canada) offers online saving account too at higher interest rate. The catch: No client card: that means you need to have another saving/checking account to transfer your money to/from. The transfer is free though if it's from the same bank. I haven't checked by I guess I can't withdraw $ from ATM either. So if you don't have an account with Bank A, you need to open a regular account with Bank A first in order to open a high interest online saving account.
Why do banks offer such accounts? Bottom line: to attract more customers and bring in more money.
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