2008 CD Study Analysis
savings
Online or branch: Where is the best yield?

When it comes to finding the highest annual percentage yield, or APY, for your savings, it pays to shop around. But consumers have a wide choice among brick-and-mortar banks, as well as online, so take into account factors besides yield. For instance, the convenience of a local branch that doesn't charge to use its ATM might make up for a lower yield.

Bankrate gathered information from 10 of the largest banks that offer both in-branch and online products and compared the APY for savings accounts, money market accounts, six-month CDs and one-year CDs.

Here's what Bankrate found.

In-branch versus online bank offerings
  • Shop around for the best APY. At many of the banks, the online APY was much higher for the same product offered in a branch. Because different banks offer various yields, be sure to cast a wide search net.
  • Yield is not everything. For customers who want convenience, it might make sense to have a checking account at the branch and an online relationship for longer-term investments.
  • Not all banks need to compete on rate or number of deposits, so in those cases, online APY is the same as it is in-branch.

Why the difference in yields?

Greg McBride, CFA, Bankrate's senior financial analyst, says that banks offering higher online yields can do it because they have lower overhead costs, and those lower costs are passed on to the customer.

"It's more cost-effective for banks to offer online CDs, pay an attractive yield and bring a lot of deposit money with very little overhead than it is to build branches," he says. "Online offers a lot of scale, and banks can get a lot of deposits with very little overhead."

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For example, Citibank's in-branch savings account yields an APY of 0.50 percent, while its online version offers 1.3 percent. The six-month and one-year CD rates are the same in-branch as they are online.

At Washington Mutual, now part of Chase, the in-branch savings account has an APY of 0.01 percent, and online it offers 0.75 percent when linked to a WaMu Free Checking account. The CD rates are higher online, too. The in-branch APY is 0.25 percent on both a six-month CD and a one-year CD. Online, those rates jump to 1 percent for the six-month CD and 1.24 percent for the one-year CD.

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