Savings accounts at most Brick and Mortar banks are currently paying abysmal interest rates, even as the prime rate has been making a steady rise. For the most part, the interest earned on your savings at a typical bank is likely to be low enough that you would be well advised to simply round it down to 0%. However, there are options available that pay rates of interest that are usually unavailable locally. One example is Barclays Bank, which offers an online savings account paying 1.50%, and historically moving closely with changes in the prime rate.

What’s an online bank? It’s still a bank in the traditional sense that your deposits are used to create loans, and it still carries FDIC coverage in the event of a bank failure, but it does not have physical branch locations where you can withdraw your money in cash. Instead your online bank account is linked with your existing checking account and money can be transferred back and forth. The lack of physical locations (and the expense of operating them) is what gives online banks the competitive advantage to offer better interest rates.

But what’s the difference between earning 0.01% at the local bank and earning 1.50% keeping my savings at an online bank? Well, for every $10,000 you have earning 0.01%, your annual interest income is a measly $1.00. Just by moving the money to an online bank account earning 1.50%, your annual interest income goes up to around $151.04 (assuming monthly compounding).

It’s still not market returns, but here’s the big difference: It’s FDIC insured, and totally liquid. Granted, you will have to transfer the money back to your checking account if you wish to cash it out or spend it, but with recent improvements in the ACH processes, the traditional three day wait is in some cases as quick as next day. Since there is the possibility of not being able to access the money immediately, it makes sense to keep a small amount of savings at your physical bank for emergencies, but above and beyond that you really can’t lose with a higher yielding online account.

We are not compensated in any way to recommend one bank over the other. We have had great experiences with Barclays’ Online Savings Accounts but there are a growing number of online banks to choose from. Ally is another popular online bank with similarly competitive interest rate offerings, and they also have a convenient mobile app (which Barclay’s does not currently offer). In addition, some credit unions have recently begun offering promotional rates as high as 3.00% for local patrons, so it still pays to take a look around.