What should I be wary of when opening a savings account?

Question

I'm looking to open a savings account (probably online) but I want to make sure I avoid any pitfalls. After looking at Bankrate.com I put toegether a bit of a list, but is there anything else I should be look for besides this stuff?

1. minimum investment amount
2. monthly fees
3. checkwriting services (I don't want or need this on my savings account, personally)
   • fees for electronic fund transfers to/from another account (only fees on this end; I'm assuming I'll know about whatever fees the other bank will charge me)
   • fees to close the account
   • fees/restrictions on how much/how little I can deposit or how many EFT's I can make in a month
   • restrictions on how long my money has to be there. I didn't look at CDs for this reason (because they have penalties for early withdrawal)

Should I be wary of anything else or are there any other fees usually hooked to these types of account? If something applies to online savings accounts but not brick and mortar savings accounts that's useful too.

I saw another question (Should I switch to this high rate checking account for my emergency fund?) that talks about savings accounts linked to checking accounts that requires purchases and stuff, so I guess that's something else I should look for.

Answer 1

The reason "on-line" savings accounts (Ally, CapitalOne, American Express, and many others) provide much higher rates than brick-and-mortar banks is because they're not brick-and-mortar. They do not need to pay for a huge amount of real estate, utilities, public-facing employees, inter-office mail, security, etc etc. All that - allows them to pay more for your money.

The back office of these banks is the same as that of Chase, BOA or Wells Fargo. Its just that they don't have the enormous expense of having a branch in every neighborhood, while still reaching all the same population of depositors.

So no, its not a scam, these are reputable banks. Some have physical offices (for example, I know that CapitalOne has some branches in New York), some don't (IIRC neither Ally nor American Express Federal Saving Bank have physical branches). But they're banks nonetheless, insured as required by FDIC (or NCUA, in case of credit unions), and provide all the same services for less (or all the same savings for more, if you will).

IMHO, giving 0.01% APR is a scam. Not the other way around. The old-style banks want your money for free, and you're worried why would someone else treat you better... Well, that's why the US has one of the most retarded financial systems in the Western world...