As interest rates rise, it's time to make more money from your savings accounts

One benefit of rising interest rates is higher bank deposit rates, but most brick-and-mortar banks have been slow to raise theirs.

In the last two years, the average savings account yield at banks and credit unions, the vast majority of which are brick-and-mortar institutions, has only risen from 0.18 percent to 0.24 percent, an increase of 33 percent. On the other hand, during that same time, the average savings account yield at internet banks has risen from 0.72 percent to 1.33 percent, an increase of 85 percent. Many well-established internet banks have been raising yields above this average, with a few offering yields above 2 percent.

Suffice to say, consumers are losing out if they stick with their long-time brick-and-mortar banks and don't switch to an internet bank.

Here are a few easy steps to take to make the switch and start earning more on your deposits.

Link to an online savings account

Switching to an internet bank doesn't have to be a complete switch. The first easy step is to just open an online savings account. This is the quickest way to benefit from the higher deposit rates at internet banks. When you open an online account, a link will typically be created that connects an existing checking account to the internet account.

This link will allow you to transfer money to and from the checking and internet accounts. The transfer process involves logging into the internet bank's website and initiating an electronic funds transfer. These transfers are as secure and fast as direct deposit.

This step allows you to continue to use your existing checking account without changing it. The only difference is that your extra savings can be transferred to an online savings account where it'll earn a much higher interest rate.

Choose an internet bank that offers checking

Once you've grown comfortable with an online savings account, you can consider online checking. In addition to higher rates than brick-and-mortar checking, online checking accounts have lower fees.

Maintaining a checking and savings account at the same institution has benefits. If you have to use the checking account for a large bill, you may need funds from the savings account. An electronic transfer from the savings account to the checking account can take multiple days. But when the savings and checking accounts are held at the same institution, transfers between internal accounts are typically instantaneous. 

For this reason, it makes sense to choose an internet bank that offers both savings and checking accounts.

Choose an internet bank with free overdraft transfers

An internet bank with both savings and checking accounts can often provide another benefit: free overdraft transfers. Several of them allow customers to set up overdraft transfers. When an overdraft occurs in the checking account, the bank will automatically transfer money from the savings account to the checking account to cover the bill. Many banks charge a fee for each transfer, but this service is free at several internet banks.

Free overdraft transfers can allow customers to keep more money in their savings accounts rather than in their checking. Since savings accounts typically offer higher yields, this lets consumers earn more interest on their cash.

Choose a brick-and-mortar bank that offers high-yield reward checking

Another way to earn more interest on your checking account is to switch to banks or credit unions that offer high-yield checking accounts. Often banks that offer such accounts won't keep the rates competitive over the long run. One exception is the high-yield reward checking accounts that hundreds of community banks and credit unions offer. The rates on these reward checking accounts are often higher than the top internet savings account rates.

The catch is that the bank requires monthly debit card usage and other activities such as direct deposit to qualify for the high rate. Also, the rate is typically capped at a certain balance that ranges from $10,000 to $25,000.

Even with these catches, these high-yield reward checking accounts provide an alternative to internet banks for those who prefer to stick with a local brick-and-mortar institution but still want to earn competitive deposit rates.

Snoozing is losing

Deposit rates will likely continue to rise for at least the next year as the Federal Reserve follows its policy of normalizing interest rates. However, the increases will vary greatly, with many banks keeping theirs low hoping that inertia will prevent most of their customers from moving elsewhere.

But consumers who do shop around for the best banks and embrace online banking will be able to benefit the most from higher rates.

Ken Tumin is founder and editor of DepositAccounts.com, which has been tracking and rating the savings, CD and checking account offerings of banks and credit unions for more than a decade.