My friend asked me the other day whether I thought high yield savings accounts  were worth it. He’s an engineer and a numbers guy at heart, so he appreciates the mathematical differences between an online savings account and your standard no-interest checking account. What he wanted to know was whether there were headaches involved in dealing with something that was online-only.
I think that as I’ve gotten older, the amount of headache I’m able to stand has dropped significantly. A few years ago, I’d be willing to stay on the phone for an hour with a Comcast rep arguing down my bill. I’d research purchases for hour, then wring my hands for days, and then research some more before pulling the trigger. Now? With all the other headaches I have, the last thing I want to do is add to the mix!
Ultimately, I feel that based on the nature of the relationship I have with banks, online savings accounts are worth it.
Here’s what you’re in for when you open an account with an online bank:
- Phone and online customer service only: You can’t go to an online bank, so all of your contact with the bank will be through online chats, emails, or over the telephone. You won’t be able to go into a branch and talk to a teller or a representative. You won’t be able to diagram what you want to do on a piece of paper.
- You won’t build a relationship with the bank. If you use a community bank or local credit union, you know what it means to build a relationship with a bank. You know the tellers, you know the manager. You talk to someone who knows you, what you want to do, and wants to help you on both a personal and professional level. You get none of that at an online bank no matter what they promise. With online banks, the relationship is strictly transactional.
- Interest rates fluctuate all the time: Online banks are very fluid and in our current economic environment, don’t be surprised if rates drop the day after you deposit funds. Remember, a savings account does not guarantee its interest rate. The rates will be higher than a brick and mortar bank, reward checking accounts  excluded, so you still win.
- Higher probability you’ll get phished: Scammers send “phishing” emails pretending to be the bank in an attempt to get you to log into a fake bank account. They steal your information and then steal your money. We’re all savvy enough to know that Bank of America won’t email us, but online banks email you all the time. As you get used to this, you may inadvertently click on a phishing email and not even realize it.
- Infrequent website outages: No website has 100% uptime year-round and when your main interface with a bank is through the website, there will be times when you want to log in but cannot. In recent memory this has happened less than a handful of times (never twice at once bank) but just once is almost too much.
Do you have an online savings account? Is there a hassle I missed?
(Photo: jbhill )