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By Laura T. Coffey
TODAY contributor
updated 4/17/2007 6:50:40 PM ET 2007-04-17T22:50:40

Are you tired of the sad little yields you’ve been getting from your savings account? Many traditional savings accounts offer low annual percentage yields in the 0.2 percent to 0.5 percent range, and traditional money market savings accounts tend to be only slightly better.

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One way to counteract this punishing trend is to put money into online savings and money market accounts, many of which are paying rates between 2 percent and 4 percent.

The following tips can help you figure out where to stash your cash and keep your savings safe at the same time.

1. Know where to investigate. Go to Bankrate.com and click on “Compare rates.” Select “Checking & Savings” as the product you want to check, then click on “MMAs/Savings Accounts,” then “Search by 100 Highest Yields.” Keep choosing MMAs and savings accounts as you click through, and you’ll arrive at a list of banks offering above-average yields.

2. Check the safety rating. Some banks offer unusually high yields because they’re trying to drum up business and increase deposits. To make sure you’re dealing with a financial institution that isn’t too shaky, check the “Safe & Sound” rating it’s been given by Bankrate.com here. (You’ll also see “Safe & Sound” ratings in the form of a star system in the overall bank list mentioned in Tip No. 1. One star is the lowest rating; five stars means “superior.”)

3. Lookfor government-backed insurance. Opt for an institution that is insured by the Federal Deposit Insurance Corp. (FDIC) or the National Credit Union Share Insurance Fund (NCUSIF). That means up to $100,000 of the money you deposit will be insured by the federal government.

4. Understand how it works. Online banks and bank divisions save millions on operating expenses because they don’t have branches to maintain. They are able to pass that savings on to customers in the form of higher yields on deposits. 

5. Don’t be duped. Online divisions of well-known banks should be federally insured, but it’s still a good idea to check. Some sneaky copycat sites look and feel similar to the sites of real banks, so examine the bank’s name carefully and make sure it’s legitimate, with headquarters based at a real, verifiable address.

6. Prepareto link up to your checking account. If you open an online savings or money market account, you won’t need to cancel or close your existing accounts at your current bank. In fact, the online entity most likely will want to link your new account to your existing checking account so you can transfer money back and forth with ease.

7. Don’t get too hung up on precise rates – unless they won’t last. You could spend a lot of time and energy hunting down an interest rate that is, say, 0.03 percent higher than another rate, but that won’t make a huge difference in your overall yield. Just try to get a big enough rate bump that you’re losing less money to inflation every year. Here’s one rate-related detail that really does matter, though: Make sure you’re not being seduced by a high teaser rate that will plummet in three months or so. The idea is to keep the higher yields rolling in month after month.

8. Examine the fees. Some online accounts require high minimum balances to avoid monthly fees. Be certain you’ll be able to deposit enough money – and keep enough money in your account – to avoid getting walloped. Also check to see whether you’ll be hit with fees when you make deposits at a brick-and-mortar bank branch or use an ATM card to withdraw cash.

9. Choose challenging passwords. When selecting passwords for your online accounts, avoid obvious ones such as your mother’s maiden name, your date of birth, the last four digits of your Social Security number or a series of consecutive numbers. Opt for a hard-to-guess combination of letters and numbers.

10. Be a savvy computer user. Update your virus protection software regularly, don’t download files or click on hyperlinks sent to you by people you don’t know, use a firewall program and use a secure browser for online transactions. Also, avoid storing financial information on your laptop. (Laptops are much too easy to steal.)

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