How Online Savings Accounts Work

How to Get an Online Savings Account

Some online banks, like E*Trade Financial, allow you to link your bank accounts to your investment accounts.
Some online banks, like E*Trade Financial, allow you to link your bank accounts to your investment accounts.
Scott Olson/Getty Images

The savings account application processes at HSBC, Virtual Bank, E*Trade, ING Direct, EverBank, EmigrantDirect and any other online bank are pretty similar and fairly simple. Traditional banks that offer online banking have similar processes, although some may require you to apply on paper.

To open an online savings account, you visit the bank's Web site and click a button that says something clever like "Open an Account." Then you proceed to fill out the bank's online application. If you prefer, many online banks can provide a paper application for you to fill out and mail.

Online bank applications will ask for the following information:

  • address
  • personal and work phone numbers
  • date of birth
  • Social Security Number or Tax Identification Number
  • ID number, such as a driver's license number, and expiration date

The application will also ask you for a login name and a password. Memorize your login and password, or write them down and store them in a safe place.

As far as security goes, online banks need information to verify your identity. Many banks, such as EmigrantDirect, ask for a previous address and your mother's maiden name. Other banks, like Virtual Bank and ING Direct, ask you to choose security questions, such as, "What is your favorite pet's name?" You provide the answers to these questions. When the bank needs to confirm your identity -- when you log in, for example -- the bank will ask you one of these security questions.

Online savings accounts link to traditional or online checking accounts. To establish a link to your checking account, you enter your bank's routing number and account number in the online application form. Once your savings account is open, you can transfer money between the linked accounts.

Some banks, such as ING Direct, take an extra security step when you establish this link. The bank will deposit into your linked checking account two amounts of less than $1. You enter the value of these deposits on the online bank's Web site. This theoretically confirms your identity, since only you should have access to your account's transaction records.

Interested in starting an account? Most online banks require only a very small opening deposit (a whole dollar for HSBC). Whatever the minimum amount, this opening deposit comes from your linked checking account. If you are applying on paper, you can include a check in the envelope with your mailed application.

To choose the best online bank for you, consider the following points:

  • Account APY: These vary from day to day and from bank to bank. Some are just introductory rates. Read the fine print.
  • Customer service: Will you be able to talk to a live person when you really need one?
  • Fees and service charges: Most online-only banks have done away with fees. But, again, read the fine print.
  • FDIC insurance: Be wary of online banks (or any bank, for that matter) that isn't insured by the FDIC.

If you'd like to know more about online savings accounts and other personal finance topics, you can follow the links to articles below.

Related HowStuffWorks Articles

More Great Links


  • Bank of America. (Accessed 5/9/08)
  • ConsumerSearch. "Online Banking." 2008. (Accessed May 9, 2008)
  • E*Trade Financial. "Free Quick Transfer." (Accessed May 9, 2008)
  • E*Trade Bank. "Save to the Max." (Accessed 5/8/08)
  • EmigrantDirect. "4 Easy Steps to Apply." (Accessed 5/8/08)
  • EmigrantDirect. "Frequently Asked Questions (F.A.Q.)." (Accessed 5/8/08)
  • EmigrantDirect. (Accessed 5/8/08)
  • FDIC. "Failed Bank Information, NetBank, Alpharetta, GA, Closing Information." (Accessed May 9, 2008)
  • HowStuffWorks. "How do savings accounts work?" April 14, 2008. (Accessed May 8, 2008)
  • HSBC Direct. "Online Savings Account: The Breakdown." (Accessed 5/8/08)
  • ING Direct. "Orange Savings Account." (Accessed 5/8/08)
  • ING Direct. "Orange Savings Account." (Accessed 5/8/08)
  • Investopedia. "Annual Percentage Yield (APY)." (Accessed 5/8/08)
  • Investopedia. "Savings Account." (Accessed 5/8/08)