Online savings accounts vs. regular savings accounts: Which is better?

The Federal Reserve raised interest rates once again this week, marking the tenth time they have done so since March 2022. The move is aimed at battling persistent inflation. But the success of that fight is still unknown, leaving many Americans wondering how to protect and grow their hard-earning savings. 

Though many adults have money stored in regular savings accounts, the interest rate environment has been a boost for high-yield accounts, many of which are offered online. But is an online savings account better for you, or are you best served by keeping your money in a regular account? That's a question many account holders are trying to answer. 

While the final determination will be a personal one, there are some significant benefits to opening a high-yield account now. Start by exploring your high-yield savings account options here to see how much more money you could be earning. 

When online savings accounts are better

Many high-yield savings accounts are offered by online banks. Because these banks don't have to pay the costs of maintaining an in-person branch, they're generally able to pass on those savings to the account holder in the form of higher interest rates. Here are three times an online high-yield savings account may be better for you:

• When you want a higher interest rate: Online high-yield savings accounts have exponentially higher interest rates than regular savings accounts. And they're likely to move higher after the Fed's most recent interest hike. The interest rate on a regular savings account is around 0.39% according to the FDIC. Compare that to the 3.5% to 4.5% (or higher) that's currently being offered by online high-yield accounts and it's clear that you're losing money by not moving your funds over to one of these accounts instead.
• When you want to pay less in fees: If you prefer to keep as much of your money intact as possible then an online account may be the better option. Many online high-yield savings accounts come with little to no fees. So you won't have to worry about a minimum balance or too many withdrawals. The new Apple savings account, for example, has neither of those requirements. Just make sure to shop around to find an account with a good balance between rates and fees. 
• When you're comfortable not having direct access: Online high-yield savings accounts are exactly that - online. So they're not for everyone, particularly those who like to do their banking in person. But if you're comfortable keeping your money in an online account, where you can still access it via a debit card, then an online account could be the better choice for you. 

Research your online high-yield savings account options here to find the best one for you.

When regular savings accounts are better

There are some substantial benefits to a regular savings account, even in today's climate. Here are three times when it may be the better fit for you:

• When you prefer in-person banking: In an age where everything and everyone is seemingly online, you may prefer the personal touch a physical bank branch can provide. You can speak to a person face to face and make real-time decisions about your account together. You can also make deposits, withdrawals or transfers at your local bank. In these cases, you may want to keep your money in a regular account.
• When you want to keep all of your banking under one umbrella: Many online banks don't have checking accounts, personal and auto loans, or mortgages. So, if you prefer to fulfill all of your banking needs simultaneously then you may want to continue using your current bank. In this case, maintaining a regular savings account could be better for you.
• When you make frequent withdrawals: To get the most value out of an online high-yield savings account you'll need to keep your baseline relatively intact. If you can't, and are used to subjecting your account to a series of withdrawals, then you won't be taking full advantage of the interest rate being offered. If this is how you currently use your savings account then you may be better served keeping it as a regular account. 

The bottom line

As with most financial decisions, the choice between an online savings account and a regular one is a personal one. 

If you're determined to secure a higher interest rate with little (or no) fees then an online high-yield savings account is better for you. Similarly, if you're OK with not having as much access, then it could be the better option. 

But if you prefer to do your banking in person and if you want to keep all of your accounts under one umbrella, a regular savings account is arguably the better fit. And if you're used to making constant withdrawals that could ultimately eat away at the interest you'd earn with an online account you're better served keeping it a regular account where you can use it more easily.

Not sure which is the better choice for you? Review your options here and learn more.