Save Online Try The Online Savings Account
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Save Online: Explore the Benefits of Online Savings Accounts
Summary
A savings account is designed to hold deposits for a relatively short duration, typically offering lower interest rates compared to other bank accounts. Despite the lower rates, savings accounts still accumulate interest, largely depending on the bank's terms.
Article Body
A savings account is meant for short-term deposits and generally offers lower interest rates than other types of bank accounts. However, like other accounts, it still accrues interest based on conditions set by the bank.
Typically, commercial banks, credit unions, loan and savings associations, and some mutual savings banks offer these accounts. While savings accounts generally cannot be used directly as cash, you can still write checks under certain conditions.
These accounts provide access to liquid assets, which can be used for various transactions. Transfers from savings accounts to checking or transaction accounts are often required before they can be spent, yet they are frequently referred to as "money" due to their ease of transfer.
While checks are typically not permitted, withdrawals from savings accounts remain straightforward. On the other hand, Money Market Deposit Accounts (MMDAs) may limit the number of transfers and withdrawals.
With the rise of the Internet, a new banking model emerged: direct-to-consumer banking, which focuses on online savings accounts. This system enables direct online access to traditional bank savings accounts through electronic transfers. There are two main types of institutions facilitating these transactions: online-only banks and traditional banks.
Online-only banks cater to the increasing number of customers conducting their banking online. These banks strive to match the offerings of traditional banks but provide more attractive deals?"such as higher interest rates and lower fees.
Online savings accounts typically offer higher interest rates compared to regular savings accounts. This is due to the reduced costs of online transactions and the inherently rate-sensitive nature of the online market.
Despite these advantages, many consumers were initially unprepared for this new banking approach, causing some online banks to struggle.
However, by 2000, ING successfully launched an optimized online banking model, significantly boosting the online banking sector. They simplified savings account transactions, offering higher rates than traditional banks, though without ATM cards, checks, or other services. It was solely a secure place to store money.
For nearly three years, ING faced little competition in this banking model. Recently, however, more institutions have adopted a similar approach. Some were initial pioneers of online-only banking who returned to challenge ING's market share, offering similar high-interest rates and streamlined services.
One notable competitor is VirtualBank, which targeted tech-savvy customers. Although they offer lower rates than ING, they have managed to attract a customer base.
By 2003 to 2004, the online banking industry began expanding, and by 2005, online-only banking had revolutionized savings accounts.
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