An online savings account (OSA) is a
savings account managed and funded primarily on the
Internet
The Internet (or internet) is the global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a '' network of networks'' that consists of private, p ...
.
Features
OSAs are often characterized by a higher
interest rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...
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
An ATM card is a payment card or dedicated payment card issued by a financial institution (i.e. a bank) which enables a customer to access their financial accounts via its and others' automated teller machines (ATMs) and to make approved point of ...
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
cheque
A cheque, or check (American English; see spelling differences) is a document that orders a bank (or credit union) to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The per ...
, or direct deposit. To withdraw money, customers can initiate an ACH transfer into another account or sometimes request a check from the bank in the desired amount.
Changes in banking and investing
OSAs, combined with rising
interest rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...
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
In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reducti ...
,
stagflation
In economics, stagflation or recession-inflation is a situation in which the inflation rate is high or increasing, the economic growth rate slows, and unemployment remains steadily high. It presents a dilemma for economic policy, since actions ...
, 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 estimated the online savings account market would triple in size, from $250 billion to $400 billion by 2010.
[Boston Consulting Group]
See also
*
Direct bank A direct bank (sometimes called a branch-less bank or virtual bank) is a bank that offers its services only via the Internet, email, and other electronic means, often including telephone, online chat, and mobile check deposit. A direct bank has no ...
*
Online banking
Online banking, also known as internet banking, web banking or home banking, is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial insti ...
Specific examples:
*
HSBC Direct
*
ING Direct
The ING Group ( nl, ING Groep) is a Dutch multinational banking and financial services corporation headquartered in Amsterdam. Its primary businesses are retail banking, direct banking, commercial banking, investment banking, wholesale bankin ...
Notes
Online banking
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