Bank of Internet USA Smart Savings Account Review
Bank of Internet USA is an online bank that offers consumers an easy way to get started with online banking. The bank offers a full range of services, including deposit accounts, IRAs, and lending services.
One of the accounts that Bank of Internet USA offers is the Smart Savings Account. It offers an easy way to store your money while still allowing it to grow.
If you’re looking for a savings account, learn all about the Bank of Internet USA Smart Savings Account before you decide to open it.
Bank of Internet USA Smart Savings Account Pros & Cons
Earn a Decent Rate for an Online Bank
Savings accounts fulfill two needs for consumers.
One need that savings accounts fill is the need for a safe place to store their cash. Keeping all your money in your home or your wallet can be dangerous and can make you a target for theft. Savings accounts offer a safe place to store your money while ensuring you that you’ll be able to get it back when you need it.
While many consumers trust physical banks, they might have concerns about online banks like Bank of Internet USA. To help combat that fear, Bank of Internet USA has gotten insurance from the Federal Deposit Insurance Corporation.
The FDIC was founded in the wake of the Great Depression to help restore confidence in the banking system. When you make a deposit at an FDIC insured bank, the FDIC promises that you’ll be able to get your deposit back, no matter what. Even if the bank goes bankrupt, the FDIC will return your money to you.
The FDIC insures accounts up to a limit of $250,000, which is more insurance than most people will ever need. So long as your account’s balance never exceeds that limit, you cannot lose money deposited in a savings account at an FDIC insured bank.
How Inflation Can Reduce the Value of Your Savings
Though the FDIC pledges to protect your savings, it does not pledge to protect the value of your savings. If you deposit $1,000, then come back ten years later to withdraw it, you’ll likely find that you cannot buy as much as you once could. That is because money becomes worth less over time through a process called inflation.
Inflation is expressed as a percentage rate per year. If you hear some say that the inflation rate for the year is 3%, that means that if you had $1 on January 1st, it would be worth just 97 cents on December 31st.
To look at it another way, if something cost $1 on January 1st, that same product would cost $1.03 on December 31st.
With such a low rate of inflation, you’d be hard-pressed to see the effects in the short term. Still, over longer lengths of time, inflation can have a big effect on the value of the dollar.
If inflation holds at 3% per year for ten years, something that cost $1 at the start of the first year will cost $1.34 at the end of the tenth year. By the end of the twentieth year, that same product will cost $1.81. That’s almost twice as much as it originally cost.
In order for a savings account to maintain its value, it must earn interest. If the interest rate is less than the inflation rate, the account is losing value even if the balance is increasing. For it to have the exactly the same value, the interest rate you earn must be the same as the inflation rate.
Inflation is a complicated concept and can be difficult to understand. These rules of thumb can simplify it somewhat:
- Over time, money loses buying power
- For your savings to increase in value, you must earn an interest rate greater than the inflation rate
- If your account’s interest rate is less than the inflation rate, your savings are losing value
Why Banks Pay Interest and How the Rate is Determined
Banks pay interest for a few reasons. One is that interest rates are a great way for banks to compete and draw customers. Everyone likes having more money, so offering a better rate is a good way to get people to open an account at your bank.
The real reason that banks offer interest is because what you’re really doing when you make a deposit is making a loan to the bank. The bank will take the money you deposit and pool it with all of the other account holders’ deposits. It will then use that pool of money to make investments and offer loans to its customers.
The bank makes money from its investments and charges interest to people that borrow from it. It pays some of the interest to you and uses the rest to pay for its operating costs.
Online banks have an advantage in that they are less expensive to run. That is because they can centralize their operations and don’t have to pay rent for physical branches or for people to staff those branches. They tend to pass those savings on to customers in the form of lower fees and higher interest rates.
Bank of Internet USA’s Smart Savings Account offers a competitive interest rate when compared to online banks. It is possible but unlikely that you’ll beat inflation with the rate offered.
No Monthly Fee, Low Minimum Deposit
Can a savings account truly be a safe place for your money if you have to worry about maintenance fees eroding your balance over time? Bank of USA makes sure that your account’s balance is safe by not charging any maintenance fees to keep the account open.
To open the account, you need just a $25 minimum deposit, so it’s a great account for people who are just starting out with saving.
The Bank of Internet Smart Savings Account charges some other fees that are common among savings account. One common fee you won’t have to worry about is the excessive transaction fee.
Federal regulations limit the number of transfers and withdrawals you can make on a savings account to six per statement. For each transaction after the sixth, you usually have to pay a fee. Bank of Internet USA avoids charging this fee by preventing you from making withdrawals after the sixth in a statement period.
Don’t worry about being unable to get to your cash, however, withdrawals made by ATM are exempt from this limit.
Bank of Internet USA Smart Savings Account Fees
|Monthly Maintenance Fee||$0|
|Excess pre-authorized withdrawals, transfers or checks||Not allowed|
|Statements with check copies &/or deposit slips only||$5/Statement|
|Incoming wire transfer (domestic)||$0|
|Outgoing wire transfer (domestic)||$35|
|Stop Payment Fee||$35|
Access your cash from anywhere with a free ATM card
One concern many people have about online banks is how they’ll be able to get to their money. Bank of Internet offers account holders a free ATM card upon request. You can use the card to withdraw cash from any ATM in the country.
If you have a Bank of Internet Checking Account, you can get all your ATM fees reimbursed, so it’s a good idea to try have both accounts at the bank.
Track your personal finances using FinanceWorks money management software
FinanceWorks is a money management tool that helps consumers track their finances.
When you log into FinanceWorks, you have the opportunity to link your accounts at other financial institutions. You can link savings accounts, checking accounts, credit cards, investing accounts, and more. FinanceWorks will automatically import balance and transaction information. You can view your whole financial life in one place.
FinanceWorks is great for budgeting and tracking expenses. Any purchase you make using a linked card will automatically be imported and categorized. Once you’ve used FinanceWorks for a while, you can go back and see your spending trends. Maybe you’ll notice you spend more on restaurants than you thought, or that you’re not spending as much as you thought on entertainment.
Versatile online banking tools
As an online bank, Bank of Internet USA has invested in putting together a powerful suite of online tools that you can use to manage your account. When you log in through the website or mobile app, you can view your balance, see previous transactions, and set up transfers between accounts.
Bank of Internet USA also offers free bill paying services. Simply enter who you need to pay and how much to pay, and Bank of Internet USA will take care of the rest. That saves you the effort of mailing out checks each month.
How Does It Compare?
The savings account is the second most common type of bank account in the U.S., so you’ll have a lot of accounts to choose from. Don’t just go for the local branch of a national bank. Take the time to consider an online bank like Bank of Internet USA. They can often offer better deals than large national chains.
Fees and interest rates are the biggest factors to compare when choosing an account, but you should also look at:
- ATM access
- Sign-up bonuses
- Quality of customer service
- Online and mobile banking options
The Final Verdict
The Bank of Internet USA Smart Savings Account is a good choice for people who want a low-fee, high-interest, account.
The account has few downsides and is a good basic account for people who don’t have any unusual requirements for an account.