Internet-only banks or "virtual banks"  were designedwithout a traditional banking infrastructure, a cost-saving featurethat allowed many of them to offer savings accounts with higher interest rates and loans with lower interest rates than most traditional banks. The following are the features you should consider when shopping for an online saving account.

 

Annual Percentage Yield (APY)

The interest rate is the most important factor in your decision. You should be aware that these

rates can be changed at any time, and lately they changed days after the Federal Reserve changed the interest rate. On 03/22/2008, HSBC Direct offered 3.05% APY, Emigrant Direct offers 2.75% APY, and WT Direct offers 3.56% APY.

 

Member FDIC

You should be look at the web site and try to find a FDIC logo often located at the bottom of the web page. This logo indicates that the bank is insured by the Federal Deposit Insurance Corporation, a government agency, which protected the bank account deposits up to $100,000.00. If you have more than that you should split your money in another bank.

 

Flexibility

As any traditional saving account, you should be able to deposit or withdraw your money at any time. Do not confuse this with CD or Money Market Accounts where there are penalties and you loose the gained interests, if you withdraw your money before the expiration date.

 

No Fees

Why these banks can offer higher interest? Because most of their operation are automated and there are no branches to maintain, so be sure that the account does not have any typical maintenance fee or similar.

 

Our Recommendation

Wilmington Trust Corporation (NYSE: WL) is a financial services holdingcompany that provides a variety of banking and financial services. Although not as popular as HSBC, ING or WAMU, WTDirect Savings Account offers the highest APY: 3.56%, No Fees, and FDIC insured. They also have a personal service with a human touch by offering an 800 number customer service, something other virtual banks do not offer.

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