Published in: Banks | Jan. 13, 2019

How to Open a New Online Savings Account

Interested in opening a new online savings account? Follow these steps to make the process easy. Man typing on laptop while holding a cup of coffee

Image source: Getty Images

Putting your money into a savings account often makes sense. Saving accounts generally pay more in interest than checking accounts because these accounts are specifically intended to help your money grow. Savings accounts also make it easy to access your funds, so they're a good place to keep an emergency fund or other money that you'll need soon.

Savings accounts are offered by local banks,  credit unions, and national banks. They are also offered by online-only banks. Online savings accounts often provide better rates and terms than savings accounts made available by traditional financial institutions. So, if you want to get the most competitive rates, opening an online savings account could be the best choice.

If you think an online savings account may be the right place for your money, you can follow these seven steps to open one and start investing in it immediately.

1. Research your options for online savings accounts

First things first: you need to pick an online savings account. You have many options, so you should compare offerings by different financial institutions to get the best account for your needs.

Some of the key factors to look at when you compare account options include:

  • The interest rate: This is one of the most important considerations. Look for an account with the highest possible interest rate so your invested funds can earn the most returns. When you research rates, be sure to find out if there are any specific requirements to meet. For example, you may get the highest rate only if your account balance exceeds a certain value. If you don't have enough to earn the more favorable rate, another account may be a better fit. Also, pay attention to whether the rate you're being offered is just a teaser rate that will expire soon after you put your money in.
  • The minimum deposit requirements: Does the savings account require you to deposit a certain minimum amount of money to open the account? Are you required to maintain a certain minimum balance to avoid account fees? Know how much money you'll need and don't try to open an account if you don't have enough to meet its minimum requirements.
  • Any fees or penalties you have to pay: Will the account charge you a monthly maintenance fee or a fee for opening the account? Are there fees or penalties for withdrawing your money? Fees add up and often negate any interest your account earns, so look for no-fee options.
  • Mobile and online banking features: Can you easily set up automatic deposits to your savings account? Is transferring money simple using the site's online and mobile app? You want to be able to access your account and do necessary financial transactions both on your computer and your phone or tablet without a lot of extra effort on your part.
  • FDIC Insurance: The Federal Deposit Insurance Corporation (FDIC) provides insurance for up to $250,000 per deposit account per insured bank. Make sure your financial institution is FDIC-insured (or insured by another trusted institution) so your money is protected in case the bank goes under.
  • Customer service: Does the bank have a good reputation for taking care of customers? Are you able to talk to someone on the phone or via online chat? Does the bank have any physical locations you could visit if you need help? Make sure you can get the support you need.

By comparing all of these different factors, you can find a reliable online savings account provider so you'll have the peace-of-mind of knowing the money you're investing is in good hands.

2. Decide who will own the account

When you open a savings account, someone needs to own it. You'll have to decide if you are going to be the sole account owner or if you want a joint account. If you open a joint account, be aware your co-owner will have access to all the funds and typically can take out the money in the account without your permission. Make sure you trust the person you're opening a joint account with.

3. Gather the information you'll need to open your account

You'll need some basic information to open an online savings account. If you'll have a co-owner on the account, you'll need their information too.

Typically, you'll need to provide your name, current address, other recent addresses if you've moved recently, and your Social Security number. Depending upon the bank's application process, you may also need to provide additional information, such as your driver's license number.

Some banks will ask you to answer questions verifying your identity, typically using information pulled from your credit report. This could mean answering how much your mortgage loan payments are or whether you've ever lived on a certain street.

You'll want to be prepared with all the info you could potentially need so you don't start the application process and end up unable to finish it.

4. Submit your account application

Next, you'll need to actually apply for your savings account. You can do this online on the website of the bank where you've decided to open the account. In most cases, it takes only around 15 minutes at most to submit an application to open your account.

You'll need to specify in your application what kind of savings account you're opening if the financial institution has multiple choices. You'll also need to specify if the account has a single owner or is a joint account.

For most online savings accounts, you'll get an answer immediately about whether your account is approved. But, if the bank needs to review your info more carefully, you'll be notified at the end of the application process of when you'll receive a decision about opening your account.

5. Designate your beneficiaries

Once you've successfully opened your account, you'll typically need to specify who your beneficiary on the account will be. The beneficiary is the person who would inherit the money in your account if something happens to you. Take the time to designate someone you care about so you have control over what happens to your funds if something happens to you.

6. Decide how much you want to put in your account

Next, you'll need to decide how much money to transfer to your newly-opened account. Typically, it's a good idea to put money into a savings account -- rather than to invest it in stocks, bonds, or other assets that could produce a higher rate of return -- if you're going to need the money within the next two years or so.

You don't want to invest money you're going to need soon in stocks because you should be able to leave funds in the market to weather any downturns that occur. And, you don't want to invest in assets where there could be a penalty for selling early or assets that are hard to sell. A savings account is an ideal choice for money you'll need in the short term because it's easy to get your cash out.

At the same time, you don't want to put more than necessary in a savings account because returns you earn are likely to be lower than with other investments such as stocks and bonds. So, only invest money you have to be able to access easily or that you'll need imminently and put the rest elsewhere.

7. Fund your account

Once you know the amount to put in your account, the last step in the process is to actually transfer funds to your new online savings account. You can do this via electronic funds transfer for free with most financial institutions. You could also send in a check if you'd prefer.

After initially funding your account, you may decide you want to set up automated transfers to move more money into savings on a regular basis. This can be good if you're trying to build an emergency fund or save for a down payment since cash can be moved into savings without any effort. You can set up automated transfers when you first set up your account or you can come back and do this later if you'd prefer.

Open your online savings account today

As you can see, opening an online savings account is simple and easy. You should do it today so you can start investing money for your future and earning the best return possible on an account that's accessible to you.

Savings account rates are skyrocketing -- Earn 25x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 25x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2019.