Many banks will provide you with high yield savings accounts but how can you find the best rates on these accounts and what is the difference from a traditional savings account? A high yield savings account will give you a higher rate of interest compared to a traditional savings account rate. In the current economy the interest rate can be as much as 0.75% higher from savings account rates offered from your local bank. The best interest savings accounts are usually found online. The online banks can provide you with the best rates as they have lower operating costs to pay for, giving them a chance to send more money toward their customer’s accounts. Do not get discouraged by the current rates on savings accounts. The rates are lower than usually but this is only due to the economy. In the past the interest rates on high yield savings accounts were closer to 5% and this gives investors hope that the rates can go up again!
How Do You Find High Yield Interest Savings Accounts?
To find savings accounts with high interest you will need to shop around and compare rates with several different banks. High yield savings accounts are commonly offered to customers that have been loyal to a bank for several years or they may be offered if you are willing to make a large initial deposit to the account. Unlike a traditional savings account the high interest rate savings account may ask for $25,000 or more to open the account. Read the terms of the account since they usually ask you to maintain a higher balance in the account and you will be penalized if your account drops below a certain limit. High yield investments also ask that you limit your transactions from the account and that you maintain a strong relationship with the bank to remain in good standing and to qualify for the best rates.
Online Banks Versus Local Banks
If you do have a significant amount of money to deposit into a high yield savings account you need to compare rates with several banks. Use our helpful high interest rate savings comparison tool in order to find the best rates. Local banks usually work with existing customers to reward them with the higher rates where the online banks can provide higher rates to just about anyone that is willing to make the large initial deposit amount. Read over the account terms as you may have penalties on the account if the balance drops below a certain amount or if you are making too many account withdrawals each month.
When you are working with online banks you will have more responsibility as far as managing the account goes. However many banks are switching over to online account access so you may not really notice the difference in working with a local bank to an online bank. The interest rate will be the main difference between the two accounts.
In many cases you can acquire high interest checking accounts when you open up your high yield savings account. This is a great way to have additional access to your money as you can move it back and forth between the accounts. The only downside may lie with the account fees for transferring the money between the two accounts. Sometimes you can earn more when you use a rewards checking account over a savings account. The rewards checking accounts usually come with a deposit requirement and you may need to make a certain number of withdrawals from the account each month in order to be eligible for the rewards.
Points To Consider
As you are doing your research to find banks with high interest rates you must consider some of the following features:
- Deposit requirement. (These accounts are usually broken up into increments, $10K, $25K, $50K, and $100K)
- Is there an introductory period on the account?
- Are you guaranteed a permanent rate or will it fluctuate?
- How will the interest rate be compounded?
- Does the bank require a balance amount? (some banks will penalize you if the balance falls below $10K or whatever the deposit requirement was)
- Can you manage multiple accounts on the same account? This is helpful if you have not only a savings account but also if you have a money market account, a CD account, or high yield bonds. Is it easy to transfer money between all of these accounts?
- If you are a new customer will you need to pay a set up fee?
- Does the bank require you to open a high yield checking account in order to open a high yield savings account? There are some banks that will only give you the highest rate on savings accounts if you will open at least 2 separate accounts with them.
- How do you make deposits to the account? If you are dealing with an online bank will you need to mail in checks or can you transfer funds from your checking account? Does the bank require some type of direct deposit in order to maintain the account?
- Will the bank charge you for ATM withdrawals?
- How long will it take for you to transfer funds from your savings account to your checking account? (with online banks it usually averages out to be 5 business days)
- How much money are you permitted to withdrawal each month and with each transaction?
What Is The Purpose Of The Investment
If you are depositing $10,000 or more, you need to really look at your investment options. Your age is something to consider. A high yield savings account makes sense for older investors that do not want risky investments and still want to have a chance for their money to continue growing. Younger investors should consider using mutual funds as this will earn you more money and can help you to grow your retirement. If you are using the high yield savings account to help you build up money for a short-term need like a down payment on a home, it is a smart investment. Having high interest on savings accounts is smart if you want to have an emergency cash fund account to use when you need it. Always check on the flexibility of the account to ensure you can get the money when you need it and you are not going to struggle financially while you wait for the money to be transferred from your account.