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★ Best answer
I switched my savings to an online bank a few years back and haven't looked back - the interest rates are genuinely better than what you'd get at a traditional bank, sometimes by a decent margin. The main tradeoff is convenience: you lose the ability to walk into a branch and handle things in person, but most operations are straightforward enough online that it's rarely a real problem. If you're just parking money and don't need frequent cash withdrawals or in-person support, it's worth the move. Just make sure whoever you pick is properly insured and has a solid reputation.
The rate advantage is real, but the thing most people don't mention is the friction when you actually need the money fast. If there's a delay transferring funds back to your main account during some emergency, that's a problem - so make sure whatever online bank you pick has reliable next-day or same-day transfers, not the slower options. Beyond that, yeah, if you're just parking money for a few months or longer, the yield difference usually makes it worthwhile, especially in a higher-rate environment like we have now. Just verify their FDIC insurance coverage first and don't move money you'll need within a week or two.
But don't pick an online bank just for the interest - pick one because you won't need to touch that savings account often. That's the actual advantage. Most online banks have no physical branches, which sounds like a drawback until you realize savings accounts shouldn't be somewhere you pop into on a Wednesday afternoon. You're building a buffer, not accessing cash weekly. The rates are genuinely better because they cut overhead, sure, but that only matters if you actually leave the money sitting there.
Where I'd push back a bit on the earlier answer: those better rates can be a trap if you're comparing them to the absolute bottom-tier offerings at big banks. Yes, some traditional banks have abysmal savings rates - that part's accurate. But plenty of regional banks and credit unions match online rates these days, so don't assume online is the only game in town. The real question is whether you're comfortable with no in-person support if something goes wrong. I've never had an issue, but I also know exactly where my money is and check it maybe four times a year. If you're the type who needs to walk in somewhere and talk to a human about your account, or you like having a local branch as a safety net, the extra 0.5% on your interest probably isn't worth the friction.
The switch itself takes maybe ten minutes online. If you've got a chunk of money that's genuinely just sitting in savings for an emergency or a goal, moving it makes sense. Just make sure the bank is FDIC insured - that part matters way more than rate chasing.
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