Open an online savings account
Here's what you need to know to open an online savings account:
Look for the FDIC logo. If putting your cash in a virtual bank account makes you squeamish, keep in mind that up to $100,000 is protected in a bank insured by the Federal Deposit Insurance Corp.
Hunt for high yields online. The highest yields recently ranged from 3.6 percent to 4.75 percent. Interest should be compounded daily and credited monthly. You can shop for yields at Bankrate.com.
Plan for some inconvenience. Online bank services are not swift. The biggest drawback for many consumers is the transaction lag time. At EmigrantDirect, the online branch of New York's Emigrant Savings Bank, initial deposits cannot be withdrawn for 10 business days. Future deposits may be withdrawn after five business days. Funds transferred in or out of the account usually take two to four business days to clear.
Moreover, there's no check writing, access to an ATM, or hand-holding from a teller. So make sure that it's easy to get your questions answered online or with a toll-free call.
Check for higher-yield accounts at your bank. Still reluctant to make a move? See what's available at your existing bank. Citibank now offers an insured e-Savings account with a yield of 4.75 percent to customers who already have a checking account with the bank. That's compared with the anemic 0.7 percent APY doled out by its day-to-day savings account. No minimum balances, free transactions, no-brainer.