If you have looked for the best interest rate for a savings account, no doubt you know that they can fluctuate greatly. Because they are based upon current federal reserve rates, which in turn are based on the strength of US currency. Since these types of interest yields are unpredictable, you are wise if you keep abreast of the rates of traditional banks as well as the rates of increasingly popular savings accounts online.

Many banks and other financial institutions offer a type of investment called “high yield savings accounts.” These types of banking services offer higher annual percentage rate than regular savings accounts do. This is likely to be attractive to a consumer who is interested in do a comparison before deciding on what type of account to choose for savings and investment. However, you should keep in mind that they usually require a greater minimum balance for the particular bank or institution you’re considering. You may have to commit to a higher starting deposit, a higher average daily balance, or a limited amount of transactions allowed per month. Sometimes, you may be required to have a checking account tied to the savings account.

A popular alternative to store front banks, online banking services offer rates of interest that, in most cases, are significantly higher than traditional brick-and-mortar banks. Some of these banking services include ING Direct, HSBC Bank, Emigrant Direct Bank, GMAC Bank, interest rates for these institutions are higher because there is much less overhead associated with an online-only bank. Therefore, they can pass savings from operational costs on to consumers like you by offering higher interest rates.

If you research online, you’ll find that there are many resources available to you if you want to compare interest rates and services between institutions, whether traditional store front, high yield, or online . You can easily do quick research for various types of saving products from a number of different financial institutions, as well as for versions of a savings account calculator, by going to such popular financial web sites as Financial Times and Motley Fool; you will be required to register, but it’s free. The calculator will help you estimate earnings on a particular investment based upon the initial investment, the length of time interest accrues, and the annual percentage yield received. With a little research you will be able to recognize and secure the best interest rate for a savings account online or at or at your local branch.

Introduction

Whenever one thinks of high and reasonable returns from savings accounts, money market accounts come to mind. Savings accounts have assumed several types including checking accounts, certificate of deposit accounts, etc. But the interest rates of these accounts were no where near other investment options available. This drawback vanished with money market savings accounts which offer very high interest rates.

Annual Percentage Yield

Interest rates of these accounts are expressed in APY or Annual Percentage Yield. This is the effective rate of interest when actual monthly interests get compounded. Unlike monthly rates, APY gives a direct measure of the returns one would get. Due to this fact APY appears little higher than the interest rates. Banks offer data sheets containing both rates and APY in adjacent columns to give a clear picture to customers.

Rules and Restrictions

These accounts have several rules and restrictions to compensate for the high interest rates offered. Foremost one is the criteria of minimum balance. Some banks do require a minimum balance of certain dollars to be maintained for the high rates to be applicable. Any balance below the limit wouldn’t mean interests wouldn’t be paid, but additional charge would be collected with monthly maintenance fees. But there are banks which require no minimum balance for these accounts.

Limitations

Online money transfers would be limited with these accounts. There could be limits imposed on free fund transfers across banks, online bill payments etc. Additional number of transactions would be charged.Generally there would not be overdraft protection for these accounts.

If you spend any time on line you’ve no doubt seen the name ING Direct. As an online bank they plenty of online advertising. We (my husband and I) received numerous e-mails from this bank that we sent straight to the trash folder even though we’d heard good things about this online bank. What made us finally take a look at ING Direct? Since we enjoy doing banking online anyway, the low, low (often less than one percent) interest rates we were being offered on savings from other banks became the push that finally shoved us to open an account.

ING Direct is an online banking institution that offers many of the same products and services of traditional banks. Because you’ll need to have another account to transfer funds to an ING Direct account, it cannot serve as your sole account. Also, because money transfers take up to three days and there are no ATM withdrawal options, you’ll always want to have a good reserve elsewhere. Despite these aspects, we’ve found many benefits to having this account and we’ve been pleased with our banking experience.

ING Direct and their subsidiary ShareBuilder, offer many products including:

Business accounts- savings, checking and 401K

Personal accounts- checking and savings (There are 2 types of each, Orange and Orange Electric.)

Loans- mortgage and home equity (The rates are competitive and there is a 60-day rate protection guarantee.)

Kids accounts- education savings and custodial accounts (These have no minimum balance or inactivity fees.)

Investments- securities, IRAs and IRA CDs

Investments at ING Direct are through ShareBuilder. ShareBuilder Securities Corporation is a registered broker-dealer and member FINRA/SIPC and is a subsidiary ING Bank, fsb.

Setting Up An Account is Easy.

-Log on to their website

-Fill out some forms

-Set up security questions and choose a security image

(If your account is ever compromised, the security image won’t appear and you’ll go no further. We’ve never had security issues.)

-Select accounts

-Transfer funds from another checking or savings account

It really is easy. There are many options including monthly drafts that making saving money easier.

The Pros of ING Direct:

Accounts have low or no fees and you can set up automatic investments on a certain day each month. The savings rates continue to be higher than traditional banks. The website isn’t fancy but it is easy to use and customer service is responsive, timely and helpful.

The Cons of ING Direct:

As we mentioned earlier, money transfers take up to three days and there are no ATM withdrawal options both of which need to be taken into account.

Our ING Direct Wish List:

We’re used to having more user tools and financial information available from financial websites. While we can find this information online else where at sites like Yahoo Finance, we find this is lacking from the website.

Overall we recommend ING Direct for people who enjoy banking online, have other accounts and are looking for a higher interest rate than other banks are offering.