April 8, 2020

Are Online Savings Accounts FDIC Insured

Read more about Bank

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.

© CreditDonkey

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.

What is the FDIC and what does it do? The FDIC (Federal Deposit Insurance Corp) is a U.S. government agency that aims to protect your deposits at banks with insurance. It 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

Pros:

  • 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 in the range of 1.6% to 1.8%; that's 16x more than what many traditional banks offer.

  • Lower bank fees. Online banks often feature no monthly maintenance fees, sometimes in return for maintaining 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.

Cons:

  • 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. Online banks usually do not offer ATM services and may charge for withdrawals.

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. That's especially important if your deposits exceed $250,000 or, in rarer cases, your bank does not have FDIC insurance.

  • 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

    CIT Bank

    CIT Savings Builder - Earn 0.85% APY

    Earn up to 0.85% APY. Here's how it works: Maintain a minimum balance of $25k OR make at least a $100 minimum deposit every month. Member FDIC

    Betterment

    Betterment Cash Reserve - Earn up to 0.40% APY

    • FDIC insurance covering up to $1,000,000 at program banks
    • Access cash in 1-2 business days
    • No minimum balance
    • No fees on balance
    • Unlimited withdrawals
    Chase

    Chase Savings℠

    • Enjoy a $150 bonus when you open a new Chase Savings℠ account, deposit a total of $10,000 or more in new money within 20 business days, and maintain a $10,000 balance for 90 days
    • Access to 16,000 Chase ATMs and nearly 4,900 branches
    • Link this account to your Chase checking account for Overdraft Protection.
    • Chase Mobile® app - Manage your accounts, deposit checks, transfer money and more -- all from your device.
    • Open your account online now.
    • Available online nationwide except in Alaska, Hawaii and Puerto Rico. For branch locations, visit locator.chase.com.
    Discover Bank

    Online Savings Account - Earn 0.95% APY

    • No fees
    • No minimum opening deposit
    • No minimum balance required
    BBVA

    Checking and Savings Account - $250 Bonus

    You could get a $200 bonus by opening an Online Checking account and receiving a qualifying direct deposit of $500+ by October 31, 2020. Increase your bonus to $250 by adding an Online Savings account and having a savings balance of at least $1000 on October 31, 2020.

    Expires 8/21/2020
    Axos Bank

    High Yield Savings - 0.90% APY

    • 0.90% APY on all balance tiers
    • No minimum balance requirements
    • No fees to open or maintain account
    • Free ATM card upon request
    • FDIC Insured
    UFB Direct

    UFB High Yield Savings - Earn up to 0.40% APY

    • Earn 0.40% APY on balances of $10,000 and above
    • Member FDIC

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.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

More from CreditDonkey:


How to Invest $100k


How to Invest Money


How to Start Investing


Bank

Best Bank For College Students

A student checking account allows you to manage your money with fewer fees and requirements. Find the best student checking accounts offered by the top banks.
more Bank

Leave a comment about Are Online Savings Accounts FDIC Insured?

Name
Email (won't be published)


Chase Checking Account Bonus

Chase is currently offering cash bonuses for opening a new checking account. See the current checking account bonus promotions before they expire.

About CreditDonkey®
CreditDonkey is a bank comparison website. We publish data-driven analysis to help you save money & make savvy decisions.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed on this page are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

†Advertiser Disclosure: Many of the offers that appear on this site are from companies from which CreditDonkey receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). CreditDonkey does not include all companies or all offers that may be available in the marketplace.

*See the card issuer's online application for details about terms and conditions. Reasonable efforts are made to maintain accurate information. However, all information is presented without warranty. When you click on the "Apply Now" button you can review the terms and conditions on the card issuer's website.

CreditDonkey does not know your individual circumstances and provides information for general educational purposes only. CreditDonkey is not a substitute for, and should not be used as, professional legal, credit or financial advice. You should consult your own professional advisors for such advice.