If you've paid any attention to your bank statements lately, you've probably noticed the interest rate on your savings account is nearly at zero. Financial titans such as Chase, Bank of America and Wells Fargo offer only a sliver of a percent annually, which translates to just a few cents a year on every $100 you deposit.
But elsewhere, the numbers look much better. Several online-only banks are running national ad campaigns promising interest rates 5 or 6 times greater than most of the traditional banking powers. Should you make the leap and leave your brick-and-mortar branch for a web-based bank?
The answer depends largely on your financial temperament. If you're comfortable doing all of your banking on the Internet and communicating with customer service reps solely via phone and email, online-only banks definitely can help you get better rates on savings and checking accounts and CDs. Some also offer a wider range of products, including IRAs, mortgages and credit cards.
Top companies such as Ally, ING Direct, HSBC Advance and Discover Bank are offering 1.25% to 1.49% savings rates and 1.25% to 1.70% on 12-month CDs. You can also check out USAA, which is open to military members and their descendants, or the online banking available from big names such as American Express, Capital One, Met Life and State Farm.
Just keep your eyes open, advises Linsey Knerl of Wisebread.com, a personal finance site that promotes "living large on a small budget."
Provided you select an institution insured by the FDIC, you're unlikely to run into disaster -- at worst, you'll still save as much as you would at a traditional bank -- but it's a lot like choosing a credit card.
"I would definitely read the fine print," Knerl says.
Potential inconveniences might include minimum deposits to open an account or limits on how quickly or how often you can access your money. Online-only banks don't have ATMs, but many will reimburse you for fees incurred while using someone else's ATMs.
But if you're comfortable online and simply want the best rates, it's worth a try. As Knerl points out, there's really no risk in opening an account and depositing a modest amount of money for a month or two.
Read our ING Direct reviews >>
Read our HSBC Advance reviews >>
Read our USAA reviews >>
Crunch the numbers yourself at MyBankTracker.com and BankRate.com >>
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Photo used under Creative Commons license: Chase Bank