High Yield Savings Accounts
Is there a catch? What to consider
As the world of financial technology evolves, the more options you have to make your money work for you. Banking is no exception, with new online options that empower customers and cut out the middle man. High-yield savings accounts available through these easy-to-open accounts offer returns at virtually no risk. Is the hype too good to be true?
While the potential returns may not be moon-shots, High Yield Savings Accounts offer an easy savings option for those looking for a relatively safe way to earn interest on their money that eclipses the rates offered by traditional brick-and-mortar banks. Before you take the simple first steps to open your own account, consider the following factors that differentiate the options out there.
Interest rates should be your paramount consideration. You will see many different options with the “APY” listed. It is essential to note that this number is the Annual Percentage Yield, or the total percent return you stand to gain on your principal balance, *taking compounding interest into account.*
Minimum balance required to start and penalties for dipping below. Most online banks have fairly low barriers to entry, making this form of savings approachable and accessible to many. You can expect to see some options that have zero minimum balance required to start, up to $100, and so forth.
Fees. Read the fine print. Fees can take many forms, and there are some common ones in this space to watch out for. Maintenance fees are a classic monthly charge. There also may be penalty fees if you make a certain amount of withdrawals within a given time, or fail to maintain a certain balance. Include this when you are calculating your potential gains.
Mobile Check Deposit. If you have a regular income that comes in check form and have become accustomed to skipping the drive to the bank or ATM when you know you still need to pick up the groceries, double-check if the account offers mobile deposits.
Compounding Frequency. You may remember some quotes from Ben Franklin or Albert Einstein about the power of compounding interest. That power is dependent upon how many times the bank compounds your interest, so pay attention to this.
ATM Card. In a pinch, you will thank yourself when you need some cash to pay for a vendor that doesn’t accept Venmo or Apple Pay.
*Use a savings interest calculator to enter the specifics of the accounts you are comparing.
*Check for an initial bonus while you’re at it! Some banks employ various promotional offers - why not start with a bit more right off the bat?
High yield savings accounts can be instrumental in accomplishing many financial goals including setting aside money for emergencies, saving for large goals, and diversifying your financial portfolio. Make sure that the account features are right for you and provide access to your money when you need it. If you’re going to save, high-yield savings accounts help you earn while you do it — you can believe the buzz.
