Online savings account
Encyclopedia
An online savings account (OSA) is a savings account
managed and funded primarily on the Internet
.
or lower fees, compared with traditional savings accounts.
Many of these high-yield accounts have no minimum balance. Account holders may link their OSAs to their existing external bank accounts for easy transfer of funds between multiple accounts. Some also offer ATM card
s so customers can directly access the funds in their OSAs.
, or direct deposit. To withdraw money, customers can initiate an ACH transfer into another account or sometimes request a cheque from the bank in the desired amount.
s, have made cash an increasingly attractive investment option. They provide a relatively low risk option for investors looking for a place to park their money, especially in uncertain economic times. Inflation
, stagflation
, recessionary fears and stock market
volatility are among the economic indicators that have encouraged more and more investors to consider cash as a way to balance their portfolios. In fact, more than 8.5 million customers signed up for OSAs with leading U.S. banks in 2005 alone and some industry experts estimate the Online Savings Account market will triple in size, from $250 billion to $400 billion by 2010.
Specific examples:
Savings account
Savings accounts are accounts maintained by retail financial institutions that pay interest but cannot be used directly as money . These accounts let customers set aside a portion of their liquid assets while earning a monetary return...
managed and funded primarily on the Internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
.
Features
OSAs are often characterized by a higher interest rateInterest rate
An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender. For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for...
or lower fees, compared with traditional savings accounts.
Many of these high-yield accounts have no minimum balance. Account holders may link their OSAs to their existing external bank accounts for easy transfer of funds between multiple accounts. Some also offer ATM card
ATM card
An ATM card is a card issued by a bank, credit union or building society that can be used at an ATM for deposits, withdrawals, account information, and other types of transactions, often through interbank networks.Some ATM cards can also be used:* at a branch, as identification for in-person...
s so customers can directly access the funds in their OSAs.
Deposits and Withdrawals
Some banks offering OSA's may not have bank branches and a customer may deposit funds into their account by either ACH transfer, mailing in a chequeCheque
A cheque is a document/instrument See the negotiable cow—itself a fictional story—for discussions of cheques written on unusual surfaces. that orders a payment of money from a bank account...
, or direct deposit. To withdraw money, customers can initiate an ACH transfer into another account or sometimes request a cheque from the bank in the desired amount.
Changes in banking and investing
OSAs, combined with rising interest rateInterest rate
An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender. For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for...
s, have made cash an increasingly attractive investment option. They provide a relatively low risk option for investors looking for a place to park their money, especially in uncertain economic times. Inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
, stagflation
Stagflation
In economics, stagflation is a situation in which the inflation rate is high and the economic growth rate slows down and unemployment remains steadily high...
, recessionary fears and stock market
Stock market
A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...
volatility are among the economic indicators that have encouraged more and more investors to consider cash as a way to balance their portfolios. In fact, more than 8.5 million customers signed up for OSAs with leading U.S. banks in 2005 alone and some industry experts estimate the Online Savings Account market will triple in size, from $250 billion to $400 billion by 2010.
See also
- Direct bank
- Online bankingOnline bankingOnline banking allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building society.-Features:...
Specific examples:
- HSBC Direct
- ING Direct