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Online savings accounts work just like their brick-and-mortar counterparts, which means you can deposit money into the account, withdraw your funds and earn interest. The key difference from a bank with physical locations is that you can only manage the account digitally, over the phone or at an ATM. This type of account can be convenient, but it may come with some drawbacks. Here's what you need to know.
How Does an Online Savings Account Work?
Online savings accounts are similar to their traditional counterparts, but with a fully digital experience that can offer higher returns and fewer fees. It helps to understand how each piece works before you open one. Here are the main features of an online savings account:
- Deposits: Financial institutions typically offer several ways to add money to your account, including direct deposit, electronic transfers, paper check through the mail, ATM deposits or mobile check deposits.
- Withdrawals: You can also take money from your savings account by initiating a wire transfer or ACH transfer from another account. Some accounts come with an ATM card that allows you to withdraw money at an ATM or make purchases in a store or online.
- Interest: Savers earn interest in the form of an annual percentage yield (APY). A higher APY generally helps your money grow faster. Because online banks and credit unions have lower overhead costs, they typically pay much higher APYs than standard accounts.
- Fees: Online banks typically have lower costs compared to traditional institutions. Savers may not have to pay fees, follow balance requirements or make minimum opening deposits.
- Customer service: Online savings accounts lack in-person customer service, but you may be able to get help through the phone, 24/7 live chat, email or on the bank's social media pages.
- Digital tools: The bank's online portal and mobile app are the main tools you'll use to manage your online savings account. Some banks also offer budgeting tools such as special buckets to separate your savings by goals and a round-up feature to help you save more.
- Transaction limits: Check the account rules to see if your transfers are limited—usually to six or fewer per month. If you initiate more than the allowed transactions in a statement cycle, the institution may charge a fee, convert the account or close it altogether.
- Deposit insurance: Federally insured banks offer up to $250,000 in Federal Deposit Insurance Corp. (FDIC) insurance per depositor, per insured bank, for each account ownership category. The coverage financially protects you against bank failure. The National Credit Union Administration (NCUA) provides similar insurance for credit unions.
Find High-Yield Savings Accounts
Online vs. Traditional Savings Accounts
Online and traditional savings accounts are both designed to store funds for later use. You can deposit money, make withdrawals, earn interest and access customer support with both types of accounts.
The key difference between online versus traditional savings accounts is where you can manage them. Online savings accounts are mostly handled with digital tools, including a mobile app and a website portal, and may have access to an ATM network. Traditional savings accounts can be managed through the same methods as well as at a branch location.
Here are some of the features of each type of savings account:
| Online Savings Accounts | Traditional Savings Accounts | |
|---|---|---|
| Minimum balance | Typically $0 | Typically $300 to $500 to avoid a monthly fee |
| Interest rates | Best rates are currently around 3% to 4% | National average was 0.38% as of May 2026, according to FDIC data |
| Fees | Usually no monthly service fees | Monthly service fee typically starts at $5 to $10 |
| Accessibility | Online portal, mobile app, ATMs, phone support | Online portal, mobile app, ATMs, phone support, branches |
| ATM access | Usually comes with ATM access | Usually comes with ATM access |
| Customer service | Often 24/7 | Normal business hours |
Learn more: How to Choose the Best Savings Account for Your Needs
Pros and Cons of Online Savings Accounts
Online savings accounts typically offer higher APYs and lower fees compared to traditional savings accounts. But it's good to weigh the pros and cons before opening an account.
Pros
Minimal fees: With lower overhead costs, online banks usually pass the savings to customers in the form of lower costs. Savers typically won't need to pay a monthly maintenance fee, make a minimum opening deposit or maintain a certain balance.
Higher yields: Online savings accounts often come with higher interest rates. As of May 2026, the national average interest rate on all savings accounts was 0.38%. By contrast, you may find rates ranging from 3% to 4% or more with some online savings accounts.
Deposit insurance: If your bank or credit union is federally insured, it will automatically come with FDIC insurance or NCUA insurance. This type of coverage protects you against bank failure.
Cons
Potentially limited services: Some online banks offer fewer products and services to keep costs low. That means you might not be able to do things like apply for a loan, request a money order or use financial consulting services.
Issues with handling cash: To deposit cash into an online savings account, you typically must visit an ATM or use a third-party service that charges fees. Some accounts don't allow you to deposit cash at all. This can be inconvenient if you typically get paid in cash and need to make frequent deposits.
Limited customer service: Online financial institutions lack in-person customer support. This can be a deal-breaker for some people, especially for those who want to use in-person services or need to deposit a lot of cash into the account.
Vulnerable to connection issues: When the bank's website goes down or needs maintenance, you lose access to your online savings account. This can be frustrating even if it's a temporary blip.
Should I Open an Online Savings Account?
You'll need to consider whether the benefits of an online savings account outweigh the drawbacks. Here's when an online savings account is worth the trade-offs:
- You want to maximize your interest earnings.
- You don't want to pay monthly fees or deal with balance requirements.
- You're comfortable using digital tools to manage the account.
- You won't need access to in-person services or a broader array of products.
These accounts aren't for everyone, however. Here's when to avoid online savings accounts:
- You regularly need to deposit cash.
- You need in-person banking services.
- The account's fees, requirements or limits don't work for you.
Learn more: Are Online Savings Accounts Safe?
How to Open an Online Savings Account
Most online savings accounts must be opened online on a bank or credit union's website. Here's an overview of the steps you'll take.
1. Choose a Bank or Platform
Start by researching your options at federally insured online banks and credit unions. Compare fees, minimum balance requirements, opening deposit requirements and interest rates among the institutions. Consider the size of the ATM network and any requirements you'll need to follow. All of these details help you figure out which bank will support your savings goals.
2. Complete the Online Application
The bank you choose may offer different types of savings accounts. Select the one you want, and fill out the online application with your personal details. You'll usually need to provide your name, address, contact information, Social Security number and a copy of your government-issued ID.
3. Create an Account
If the bank approves your application, you'll open the savings account and set up your username and password. These credentials allow you to access the savings account online. You can also download the bank's mobile app and use your credentials to log in there.
4. Fund the Account
Savers often make their initial deposit by transferring funds from another account—typically a checking account. You may also set up direct deposit into your savings account and have funds regularly moved there.
Alternatives to an Online Savings Account
If you think you may want different features in your bank account, like the option of banking in person, here are some alternatives to online savings accounts:
- High-yield savings account (HYSA): Many but not all high-yield savings accounts are online-only, providing all of the standard benefits of a savings account but paying a much higher interest rate compared to standard savings accounts. You can open one at either an online bank or a brick-and-mortar institution.
- Certificate of deposit (CD): A CD is a type of savings account that allows you to make one initial deposit and earn interest on the funds for a specified term.
- Money market account (MMA): An MMA is another type of bank account that often pays a higher rate than traditional savings accounts. You may be able to write checks on the account and use a debit card to withdraw funds.
- Cash management account (CMA): A CMA is an investment account you open at nonbank institutions, like a brokerage firm. It acts as a checking account and savings account, so you can typically make payments from the account and earn interest on your balance.
Frequently Asked Questions
Can I Have a Traditional Savings Account and an Online Savings Account?
Yes, it's possible to have multiple savings accounts. There's no universal limit to the number of savings accounts you can open, though individual banks may set restrictions per customer.
Are Online Savings Accounts FDIC-Insured?
Yes, federally insured banks provide FDIC insurance for savings accounts, while federally insured credit unions offer the same type of coverage through NCUA insurance. Both types of deposit insurance come with a limit of $250,000 per insured institution, per depositor, per account ownership category.
What Is an Online Savings Account Typical Minimum Balance?
Online savings accounts usually don't require a minimum balance.
Can I Deposit Cash Into an Online Savings Account?
Some online savings accounts allow you to deposit cash at an ATM or through third-party services that charge fees. You'll need to check your account terms and conditions to confirm.
The Bottom Line
An online savings account is a place where you can save money and earn interest. Its defining feature is where you can manage the account, which is through an online portal, via a mobile app or at an ATM.
It's a good idea to research your options before opening an online savings account. Compare features like interest rates, fees, requirements and accessibility among several banks and credit unions.
If you're thinking about opening a high-yield savings account, the Experian Smart Money™ Digital Savings Account offers competitive APYs|| based on your Experian membership status with no monthly fees¶, minimum balance or direct deposit requirements. You can get an Experian Smart Money Digital Savings Account through your free or paid Experian membership, which also gives you access to your FICO® Score☉ Θ, Experian credit report, credit monitoring and more. See terms at experian.com/legal.