April 8, 2020

Are Online Savings Accounts FDIC Insured

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Online banks offer a high APY and low fees. But are they safe? Find out their pros and cons, plus the best online savings accounts.

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Are online savings accounts safe?

Online banks are considered just as safe as traditional banks. In addition to being insured by the FDIC, online savings banks also take measures to protect your privacy and personal information.

How Does FDIC Insurance Work?

The FDIC (Federal Deposit Insurance Corp) is a U.S. government agency that protects your deposits, in the unlikely even that the bank fails. You are covered up to $250,000 per depositor, per bank, per ownership category.

The FDIC insures your deposits in checking accounts, savings, money markets, and CDs. This is how it works:

  • If you open multiple deposit accounts (a checking, savings, and CD) as a single owner, all your deposits combined are covered up to $250,000.

    For example, if you have $25,000 in checking and $100,000 in savings at the same bank, your total $125k of deposits are all covered. But if you add a CD for $150,000, you now have $275k total. That leave $25,000 uninsured.

  • If you open a joint account with a spouse or family member, that's a different ownership category. Each account owner would get $250k worth of coverage - for a total of $500,000.

  • If you have accounts at 2 different banks, you'd get up to $500,000 in coverage ($250k per bank).

To calculate your coverage, you can use FDIC's insurance estimator tool.

The FDIC was created to foster trust in the banking system and prevent "runs" on banks, or people withdrawing their money out of fear of a bank failure.

Pros & Cons of Online Savings Accounts


  • Higher interest rates. Higher yields are one of the main perks of online savings accounts. If you secure a higher yield on your savings, you can grow your funds more quickly. Online savings accounts offer APYs around 0.5%; that's over 5x more than what many traditional banks offer.

  • Lower bank fees. Online banks often have no monthly maintenance fees. Many don't require a minimum balance.

  • Online convenience. Conduct your banking on either the bank's website or mobile app.

  • Easy transfers. Many online banks make ACH transfers free and easy.


  • No physical branches. Customer service is one area where traditional banks may outshine online banks. With traditional banks, you can interact face to face with tellers to discuss your banking needs.

  • Difficulty withdrawing money. A lot of online savings accounts don't come with an ATM card, so you don't get ATM access.

Can you lose money in a savings account?
It's technically possible (but unlikely) that you'd lose money in a savings account. In a typical FDIC-insured bank, this would happen only if the bank fails and you have more than $250,000 in your account.

How to Protect Your Online Savings Account

Even though online banks are considered secure, you should still take proactive measures to keep your financial information safe. That's true whether you bank online or in person.

Remember, even when you bank in person, your information is still stored digitally.

  • Don't bank on public Wi-Fi networks.
    Using public Wi-Fi won't necessarily give someone instant access to your info, but people who are savvy with technology can find a way to access any information you've sent through a public network.

    When you are using a public Wi-Fi, avoid banking. And try to make sure your banking apps are not running in the background.

  • Be aware of email scams.
    A popular way for scammers to target you is through email. Some can even disguise their email address to look like it came from your bank. Never click on suspicious links in an email. Instead, call your bank directly to confirm whether they need information from you.

  • Protect and routinely change your passwords.
    Try to make your password a unique (and, ideally, long) combination of letters, numbers, and symbols. The more random your password, the more secure it is.

    You can further protect your account by applying a two-step authentication factor, meaning two steps are required to log in.

    For example, you'd enter your password and enter a unique code that's been texted to your phone before you're able to log into your account. Most banks offer, and strongly recommend, this security measure.

  • Choose a reputable bank.
    No bank is immune to failure, but the more established a bank is, the less likely it is to fail. Choose a bank with a trustworthy reputation to minimize the threat of a bank failure. You can check if a bank is FDIC insured here.

  • Always be mindful of fraudulent activity.
    Opt into and always pay attention to fraudulent activity alerts. It's always best to check and make sure, even if you're pretty sure you made the transaction yourself.

Is your money stuck in an online savings account?
Just like with a traditional savings account, you can withdraw your money from an online savings account at any time. Be aware that some banks may charge a withdrawal fee.

Best Online Savings Accounts

Bottom Line

Rest assured that most online savings accounts are FDIC insured, but always confirm that they are before you open an account.

Even if your bank does offer FDIC insurance, it's important that you continue to take proactive steps to safeguard your financial information.

Online savings accounts can provide several advantages over traditional savings accounts. Compare different terms and conditions, including yield rates, to find an online bank that meets your savings account needs.

Write to Rebecca M at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

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