Maximizing your wealth with online savings accounts

Over the past ten years online banking has increasingly become past of everyday life and is now used by more than 80% of internet using adults. Online banking has opened up major new opportunities to banking institutions to enter new markets. Online only accounts don't require the huge costs of a major branch network and all the overheads that go with it. And so, the online savings account was born, passing on these cost savings in the form of higher interest rates and lower fees. At first glance it's certainly a good situation all round for both the online banks and consumers.

When selecting an online savings account, there is no one size fits all product. Your account usage is a deciding factor when selecting an online savings account - especially your volume of transactions and pattern of making deposits and withdrawals.

Here are some of the things to look for when comparing online savings accounts.

Interest Rates: Check the interest rates payable on the account and compare them to others on the market to ensure they are competitive. Make sure you know if the interest rate is a standard variable rate or simply an introductory rate for a fixed period, e.g. 6% for 12 months. Check how the bank calculates and pays interest. The most common method used is to calculate interest daily and for it to be paid monthly.

Minimum Deposit: Look out for the minimum deposit required when opening an account. Many online high interest saving accounts have no minimum deposit required but there are some that may require an initial lump sum, say $2,000 to open the account.

Account Fees: Check whether there is any fees payable on the account. These may be in the form of a monthly account fee or usage related fees such as charges for making a transaction or contacting customer services via phone instead of online.

Interest Penalties: There may be indirect account fees payable too. Look out for online saving accounts that charge an interest penalty when withdrawing money from your account. One indirect charge made by some banks is to penalize you by paying no interest for the months in which any funds are withdrawn from the account.

Read beyond the headlines: Ensure that you understand the full details of the online savings account offer that you see. A promotion may advertise 'earn up to 6% interest'. In this example you would want to make sure all your savings were earning the full 6% interest rate. Some banks have a range of interest rates that apply depending on how much money you have in the account. Ideally every dollar should be earning the same high interest rate.

Accessing your money: Before applying for an account, think about how you may need to access the money and how quickly you'd need to access it. Many online banks work by linking your savings account to your normal everyday bank account. This is cost effective and often fee free but may take a couple of days for the money to get to your bank account. Some online banks provide an ATM card providing instant access to your funds.

Build your savings faster: It's easier to set up an online savings account and then neglect to add money on a regular basis. When applying for an account you should think about setting up a regular direct debit from your everyday bank account. By making a regular deposit each month you'll soon find your savings and interest earnings starting to add up.

The Good News: The good news is that many of the online saving account offers on the market are very competitive and you will find a range of offers with high interest rates, no minimum balance requirements and no fees or penalties. Just be sure to compare the variety of online savings accounts available before you apply online.