Save and Invest

You could earn 17 times as much interest on your savings if you make one simple banking change

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Online banks are leaving local banks in the dust when it comes to the interest rates offered on savings accounts. Yet many Americans have no idea.

A full 62 percent of people surveyed by WalletHub last year did not realize online-only banks tend to offer higher rates and lower fees. Currently, online banks offer an interest rate that is roughly six times higher, on average, than local banks and credit unions nationwide, according to an analysis by

Depending on what state you're in, the difference can be even more dramatic. Oklahoma offers the highest average interest on a savings account, with 0.39 percent, according to DepositAccounts. Arkansas brick-and-mortar banks offers the lowest average: 0.13 percent.

Meanwhile, online banks offer an average APY of 1.47 percent as of January 1, 2019, the site's analysis finds. And some offer even higher interest rates. Industry leaders like Marcus by Goldman Sachs offers 2.25 percent APY. Ally pays out 2.2 percent, as does Synchrony. That's about 17 times higher than the Arkansas average.

No state's local brick-and-mortar banks have an average interest rate that came close to even 1 percent, according to DepositAccounts. Overall, it finds, banks and credit unions nationwide pay an average of 0.24 percent interest on savings accounts.

It makes sense that online banks are able to pay higher rates: They don't have the expenses associated with running and staffing branches. But it doesn't change the math.

How to bank online

"People are still a little worried about online banking or Internet-only banks," Ken Tumin, founder of, tells CNBC Make It.

The safety and security of these banks is one concern people have, he says, and the other, perhaps more common, worry is how much access you have to your money. "That really discourages people from trying an online bank or trying these online savings accounts," Tumin says.

About two-thirds of Americans, 65 percent, consider it important for a bank to have a branch, according to PricewaterhouseCoopers's 2018 Digital Banking Consumer Survey. It can be a real sticking point: One in four people say they wouldn't open an account with a bank that doesn't have at least one physical branch near by.

Online banks offer workarounds. You may not be able to have conversations with a teller, but you can pick up the phone and call in with questions. And Marcus, for example, offers a live chat feature that connects you with a savings specialist seven days a week.

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To deposit money, generally, you can set up a direct deposit from your paycheck into the online savings account, or you can transfer money to it from another bank account.

Some online banks offer remote access. Ally, for example, gives you the ability to snap a photo or scan in a check to deposit your money. It doesn't allow cash deposits but, if you have another checking or savings account at a bank with a branch, you can always deposit the money there and transfer it electronically.

And while you likely won't have to use an ATM much with your savings account, several online banks have robust ATM networks, too. Synchrony, for example, allows customers to use any ATM without a fee and even reimburses up to $5 in fees charged by the operator.

Overall, Tumin says, "Opening a savings account at an online bank is often the easiest and best way to take advantage of higher rates."

Don't miss: The best high-yield savings accounts

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