Here’s Why I Just Opened a New Online Bank Account

January 15, 2021
Why I Opened a New Online Bank Account

Three minutes signing up for a new online bank account is helping me score a solid return on my savings.

If you’ve been listening to the How to Money podcast for a while, you know that Matt and I get pretty excited about investment properties. I just recently took out a fairly substantial home equity line of credit to further pursue my goal of purchasing solid properties that provide good returns and will ultimately help me achieve financial independence over the next few years.

Having a large chunk of cash in the bank affected me in a couple of ways. It’s now much more exciting to peruse the FMLS knowing that I’m poised to make solid offers on properties that fit my criteria. It also made me even more concerned about maximizing the interest rate that I earn until I actually find that perfect rental property (or two).

Different financial institutions specialize in different products. For instance, if you need a mortgage loan – consider your local credit union. Do you want to start investing? May I recommend Vanguard or Fidelity? Neither of those options is typically great for earning copious returns on your savings, though – which is what I was in need of after securing my HELOC. As most of you smart savers know, online banks are typically the best for high-interest rate savings accounts. So that’s exactly where I turned.

Make higher returns on your money simply by switching

I specifically decided to open an account with CIT Bank. They are currently offering a 0.45% interest rate on their savings account as of writing this article. I’ll be honest, that doesn’t sound like much. And compared to what interest rates were a year or two ago it’s pretty paltry. BUT, compared to the interest rates that many of the other banks out there are paying, it’s excellent! That’s because the largest banks in the country pay 0.01% on money that you save with them – in addition to the copious fees they like to tack on.

So, since there’s such a large gap in the interest rate being offered by online banks like CIT and the giant banks that advertise on television, it makes sense to jump ship and open a new account. And for me, that extra cash that I’ve got on hand means I would have lost hundreds of dollars a year in earnings had I not made the switch. Those two factors led me on the search that finally ended in opening up this CIT savings account.

Great customer service and no stupid fees

I’m not sure what I hate more – bad customer service or obscene bank fees. Well, the good thing is that I didn’t have to deal with either anymore. I called up CIT Bank in order to see how quickly I could speak with an actual human and was happy that it didn’t take long at all. The account I signed up for also has no monthly maintenance fees which was foundational to my decision.

Most of the big banks make you jump through multiple hoops in order to eliminate the stupid fees that they charge. You might be forced to have a minimum balance of $1500 or a direct deposit of your paycheck in order to avoid a $12-15 a month account maintenance fee. So not only are you getting paid far less in interest, you’re likely paying that bank money every month just for the privilege of parking your money there. Not cool.

What is CIT’s monthly account maintenance fee? It doesn’t exist. An additional perk is zero fees on wire transfers if you have an account balance of $25k or more! As someone who is specifically opening this account up with the desire to wire funds for an investment property closing in the near future, that is a welcomed perk.

Your money is safe

It should go without saying, but only do your banking with an institution that is FDIC insured. This means that all of your deposits up to $250,000 are safe in the event of that institution’s failure. It isn’t very often that I see banks without FDIC protection, but if you are digging around the internet searching for the highest interest rate payout from an online bank, this is something to be cautious of.

You don’t have to ditch your other bank completely

Most people get nervous about opening up a new bank account. While the vast majority of my funds will be with CIT Bank for the foreseeable future, I won’t be closing my longstanding Capital One or Discover accounts. Since the account only takes three minutes to open and because the minimum to open it is only $100 you can ease your way into this new relationship.

Seriously, if you have avoided opening up an account with an institution that is paying higher interest rates because you think it’s a giant pain – think again.

The main reason to consider a new bank

If you are in the same boat that I am in and have lots of cash on hand right now, you should strongly consider opening up an account with an online bank that will generate you a much higher return than the bank you are currently with.

To put it in perspective, the annual interest you’ll earn on a balance of $25,000 with a bank like CIT will net you over $100 more than what you would earn with the likes of Wells Fargo, Bank of America, or Chase. And that’s in addition to the $100+ you’ll be saving from not paying those pesky fees to those banks too!

The bottom line

The best online banks can offer great customer service, no-fee account options, and solid interest rates that dwarf what’s being offered by the biggest banks in the country. And that’s exciting for anyone who cares about seeing their money stash grow. And specifically, if you have a large chunk of liquid cash for any reason (like an emergency fund), a high-interest savings account should be of particular importance to you.

Why I Opened a New Online Bank Account

Rates change constantly in the high-competition world of internet banking. Find one that pays consistently high rates and is easy to work with. There are lots of options out there. I beg you, just don’t let your pile of cash sit there gathering dust when you could actually be putting it to work for you every month!

Cheers!

*At How to Money, we don’t write about anything that we don’t believe in or actually use ourselves. Some links on our site will result in us making a small commission. Thanks for supporting what we do!

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9 comments on “Here’s Why I Just Opened a New Online Bank Account

  1. Chris May 17, 2019

    Hi. I’ve been using Barclay for a few years and they offer 2.2%. I’ve been happy with them but I’m now noticing that there are several other options that offer a little higher APY. Do you think it’s worth switching banks? And in in general, is it worth moving money from bank to bank chasing the highest interest rate or should I just choose one and stick with it?

  2. JJoseph Jul 10, 2020

    This article badly needs to be updated as CIT has greatly reduced their rates since April. Also, be forewarned that CIT’s app AND WEBSITE are total disasters and 100% of the time fail to work at all. You should not expect much help by calling their customer service number as it regularly says wait times are over 2 hours. I’m not sure how CIT stays in business as it is by far the most poorly run bank I’ve ever had the misfortune to deal with. As a result of the I closed by CIT accounts and moved the money to Axos Bank.

  3. Jason Jul 11, 2020

    To anyone reading this article it is several months old from April 2020. Interest rates have been dropping across the board for everything since the pandemic. This rate mentioned in the article has dropped below 0.95. My personal savings has dropped from 1.4, to 0.7, and now to 0.4. The best current rates from need wallet are no better than 1.0%

  4. Edith Jul 11, 2020

    I am about to close my CIT account from 2.15% to 1.45% is a huge loss for me.

  5. ashley Jul 14, 2020

    Great Article! Discover also has a pretty competitive rate 1.01% as of 7/13/20
    https://www.discover.com/online-banking/savings-account/

  6. Lee S. Jul 28, 2020

    I had a Mutual of Omaha account for a couple years that was just fine for me. CIT took over, and everything went to hell. Within a few days they denied a loan deposit, which resulted in overdrafts, and then when I was trying to make a deposit to cover my impending rent check, they kept my ATM card!
    They also denied a transaction I was trying to make simply because the company is based in Canada. For Christ’s sake, everybody shops online now, and most stuff comes from another country!
    They seem to want to control people’s accounts and activity much more than a bank should under the guise of fraud control.
    I don’t need their fraud control. I certainly don’t need the headaches that their actions have caused.
    They lost a customer.

  7. LOL well that rate is gone way way down it’s about .50% now

  8. warren trout Jan 19, 2021

    Sadly, the real return is negative. With inflation you are paying the bank. Negative interest rates are here.

    Thank the government and the Fed.

    • True. Putting tons of cash in a savings account won’t make you rich in today’s interest rate environment. But even still, having access to liquid cash is crucial even when interest rates are insufferably low.