A savings account is a type of banking product designed to help consumers save for major purchases, retirement or the cost of unforeseen events. An online savings account provides an alternative to visiting a bank to open an account.

Opening

With an online savings account, the account holder visits a financial institution's website and enters the identifying information, including the Social Security number, date of birth and address.

Linked Account

An online savings account is typically linked to a checking account at the same online bank or at a traditional bank. The account holder has the ability to electronically transfer money from the linked checking to the online savings account to deposit money or from the savings to the checking to withdraw money.

Features

Online banks typically assign or let users select a username and password to access their savings account information. Some online banks also send email statements each month to let customers know how much money they have and what interest they have earned.

Benefits

In many cases, online savings accounts offer higher interest rates than those found at traditional banks. Like all savings accounts, all or part of the balances in an online savings account are subject to protection from bank failure from the Federal Deposit Insurance Corporation, provided the bank is FDIC ensured.

Considerations

Federal Reserve Regulation D limits the amount of transfers made out of savings accounts when not completed in person at a bank. Because of this, online banks may charge fees if you make more than a pre-disclosed number of withdrawals from your online savings account,.

Source:

University of Idaho Extension: Saving Money

University Federal Credit Union: Regulation D FAQs