Online Savings Accounts
Just about everything is cheaper and easier online – shopping, dating, making friends, booking a holiday or insuring the car. So why are you still making trips to the bank to add to your savings account, and eagerly awaiting the postman to bring news of your account balance to tell you whether you can afford that holiday or new car?
Opening and using an online savings account is easier and saves you in time and you don’t have to pay all of those bank fees. Plus you can earn much higher interest in an online savings account, as compared to a traditional account. As a result, online savings accounts are very popular, and the providers who offer the accounts compete hotly for you business. This means you can do a little shopping around and make some comparisons of the online accounts on offer, and come up with a very competitive interest rate, and a fee structure which is just about non-existent.
| Savings Account | Maximum Variable Rate p.a. | Standard Variable Rate p.a. | Bonus Interest p.a. | Fees | Min Balance/Min Deposit | |
|---|---|---|---|---|---|---|
 UBank USaver |
6.01% | 5.41% | 0.60% | $0 | $0 / $0 |
|
 Citibank Online Saver |
5.8% | 4.75% | 1.05% | $0 | $0 / $0 |
|
 ANZ Online Saver |
6% | 4.25% | 1.75% | $0 | $0 / $0 |
|
 St.George Maxi Saver |
5.5% | 4.30% | 1.20% | $$0 | $0 / $0 |
|
 Easy Street Bonus Saver Account |
5.61% | 0.01% | 5.60% | $0 | $0 / $0 |
|
 NAB iSaver |
5.5% | 4.15% | 1.35% | $0 | $0 / $0 |
|
You can then go ahead and apply for an online savings account at any time of the day or night, at a time which suits you – which is also a benefit when you need to check your balance, monitor your progress or make a deposit because you don’t have to rush to a branch on the way to the school run and you can instead wait until the kids have gone to bed to manage your finances successfully.
If you’re wondering where the pitfalls to this seemingly perfect savings account, you may be filled with questions about exactly how to apply and use the account, and how to maximise the interest you earn. That is why all of those questions and more are answered here for you now.
What are the benefits of an online savings account?
No matter what your savings goals or your savings style, whether you can afford to put away 10% of your wage each and every week or you can only afford $10 each month, you be benefit from an online savings account with:
- Higher interest rates. Since online savings accounts do not require as much time or effort on the part of the provider, they are saving on staff costs and overheads in having you manage your account yourself. The provider then passes these savings onto you in the form of higher interest rates paid on your balance, and low or no fees for maintaining or using your account.
- Access via a linked account. Having your savings locked safely away in an online account can remove the temptation to spend your balance before you have reached your goal. However, your savings are not out of reach when you achieve that desired balance, or if you need access to your funds in an emergency because when you set up your online account your will also need to link it to an ordinary transaction account. This is then how you transfer money into your online savings account, and how you access those funds again by transferring them out to your linked account. If the linked account is with the same provider, you will have instant access to your funds, if not, you will have to wait around two days for the transaction to be processed.
- Additional features, no fees. Some online savings accounts will also give you the online functionality you are used to with your transaction account, such as the ability to pay bills and send money to other accounts. Plus, since these transactions are all online, they are often fee free.
What are the disadvantages of an online savings account?
There can be certain drawbacks to an online savings account if you aren’t clear about how to use the account, or how best to maximise your returns. For example, watch out for:
- No ATM card. This can also be seen as a benefit because in not having access to your savings through an ATM or EFTPOS card, you are not tempted to overspend on a trip to the mall.
- Little personal contact with the provider. In most cases, to apply for and use an online savings account you will never need to visit a branch, or even call the bank and if you like a personal touch to your banking, or you like to discuss your needs with your bank manager face to face, then an online account may not be for you.
How secure are online savings accounts?
The security of your savings online are based on two aspects – the security systems employed by the provider, and your diligence with your online security.
Firstly, you bank or financial institution understands the concerns of its customers over online security, and they also know that if they can’t keep your details and funds safe online, you will go to a provider who can. Therefore, banks will use a 128-bit Secure Sockets Layer to encrypt the information you enter onto secure pages, with some even using a 256-bit SSL encryption. Plus, each financial institution will have their own methods of encrypting your password to make it harder to guess or steal. For example, some banks may SMS you a unique code to enter each time you log in, others will have a keypad you click with your mouse so scammers can’t steal your passwords by tracking your keystrokes, while others will use picture codes on the password page.
However, it is also up to you to check that your internet connection is safe, and that your computer is protected by the latest anti-virus and firewall protection. To make sure your provider is using an SSL encryption, look for the https:// in the address bar as the additional ‘s’ means the site is secure. To be sure you are logging into your bank’s real website, not a fraudulent scammer’s site, type the web address of your bank directly into the address bar, rather than clicking through links, popups, emails or advertisements. Also make sure that if you log into your account in a public place the computer you are using is secure, and that you are not disclosing your password to anyone.
At the same time, your online savings can be at risk through your choice of provider. During the toughest times of the Global Financial Crisis, the vulnerability of banks, and in turn our savings, was brought into stark relief. As a result, the Australian Government introduced a deposit guarantee where all deposits in Authorised Deposit Taking Institutions within Australia were guaranteed up to the value of $1 million, even if the bank failed. This guarantee is set to expire in October 2011 so this should put the onus back on you to conduct your due diligence in choosing a safe, reliable and secure provider, based on their credit rating, their history and their business structure.
How do online savings accounts work?
While online savings accounts have made the process easier and have the potential to grow your savings faster, an online savings account is primarily the same as a traditional account. You still need to apply with the bank and have your application processed, you make deposits and watch your funds grow. You save towards specific goals or you just save for a rainy day, and all the while you get back into the habit of spending less than you earn, and teaching your children how to do the same.
With an online savings account, rather than doing all of that in a branch, you can do it online. To use an online savings account:
- You can fill out an application form online in just 10 minutes.
- You can enter your transaction account details into your application and choose an opening deposit amount.
- That opening deposit is then transferred automatically to your online savings account once it is activated.
- You continue to use the link between your transaction account and your online account to make deposits, and withdrawals.
- You can view your account activity and balance online and be sent notifications when interest is paid or milestones reached via email or SMS.
- You can show all of these processes to your children, while at the same time teaching them about internet security, and how to keep their banking details safe.
What is the application process for an online savings account?
To apply for an online savings account can be quick and easy if you choose the right provider. When you apply online you will:
- Need to check the security of the website.
- Look for the ability to apply entirely online, rather than having to visit a branch or post office to verify your identity.
