Wondering where to save your money? If you plan on opening a high-yield savings account at your local bank, read on to understand it. A high-yield savings account can come in handy when you want to go on vacations, make down payments for emergencies, big occasions, education, or buy a new car. Online banks and credit unions offer high-yield savings accounts, and this is a deposit account. They give higher interest rates than the national average of traditional savings accounts. According to data, the national average return on traditional savings accounts is 0.46% this year, whereas many high-yield savings accounts give interest rates of 4% and more.
Apart from this, they function like any other savings account—depositing money, getting bank interest, and withdrawing money when needed. A fee will be charged for more than a particular number of withdrawals every month. The interest rates offered by these accounts are known as Annual Percentage Yield (APY). The higher your APY, the more money you will have.
How Does a High-Yield Savings Account Work?
These accounts usually work by growing money through compound interest. This is earning interest on both the principal balance and the interest earned by that principal. A high-yield savings account works as the interest you earn on the principal increases as the interest you earn on that interest. Depending on your account, your interest will be compounded frequently. Most of them compound every day, while others do it monthly. The more often you do it, the more your returns are. When choosing a high-yield savings account, having a good APY is a key factor.
Interest Rates
This differs from one financial firm to another. The best high-yield savings accounts offer more than the national average rate, helping you get more returns on your savings. Also, keep in mind that interest rates change over time. Sometimes, it is possible to have a high-yield savings account with a 5%- 7.25% interest rate.
Compounding Interest
This lets you earn interest on your money. When looking for an account, check how often the interest compounds—daily, weekly, or monthly. The more your interest gets compounded, the more your money will grow.
Accessibility
Having a high-yield savings account allows you easy access to your money. Most online accounts provide features that help you use your account conveniently anytime and anywhere. You can withdraw, transfer, deposit, and track your balances.
Minimum Balance Requirements
You need to have a minimum balance to get the interest rate mentioned. Most high-yielding savings accounts require a minimum deposit of $0-$100.
Read Related Article: Do High-Yield Savings Account Rates Change?
How to Open a High-Yield Savings Account?
If you want to open a high-yield savings account, here are ways to do it.
Opening such an account is simple and easy, and it is just like opening another savings account; the difference is you will be doing it online instead of at the branch. You need to select an account that suits your needs and then finish the opening process with the bank. Before you start or want to open a high-yield savings account, look around for banks and credit unions that offer good interest rates. Do your research, prepare the required documents, and sign up.
Requirements
To open a high-yield savings account, you must submit the following details: name, address, email ID, phone number, date of birth, and security social number. To finish opening your account, you need to upload a copy of a government-issued photo ID. You don’t need a credit check to open a high-yield savings account. Once you open your account, you can start sending funds to it.
Finding the Right Account
After you have finalized the rates from institutions, you need to decide on the right choice. If your current bank’s savings rate is competitive, you can open a new account with your current bank. You can conveniently check accounts, instant transfers between accounts, and an efficient signup process. You can earn more if you open a savings account at a new institution. Considering national average rates, top national rates are 10-12 times more. Look out for common banking fees like inactivity, account closing, and paper statement fees.
Online vs. Traditional Banking
With advanced technology and tools, you can bank from anywhere with your phone. Data records that more than three in four Americans use banks through banking apps on their phone or visit their websites rather than visiting the bank branch. Online banking offers low fees, higher interest rates, early paychecks, free ATM withdrawals, and additional perks.
Is a High-yield Savings Account Worth It?
Yes, having a high-yield savings account is worth it. Most people own a savings account, but having a high-yield savings account can help you get a high interest rate in return. This amount can help you during emergencies. Holding a high-yield savings account can help you meet your financial goals quickly and grow your money risk-free.
Read Related Article: High-Yield Savings Account Vs. Savings Account.
Conclusion
A high-yield savings account can help you earn better interest rates than the other savings account. These rates are higher when compared to the traditional banks; if the interest rates are lower, every money earned in interest will be considered. You can apply for high-yield savings accounts through online banking platforms by signing up and filling in the details. You don’t have to pay fees as banks have fewer overhead costs. Transfer money with the tip of your fingers. For proper and smooth functioning of financial support, download the Beem app.
