Is a High-Yield Savings Account Worth It? (the short answer…YES)
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You might ask: Is a high-yield savings account worth it?!? A high-yield savings account can help you reach goals faster, but how do these accounts work? And most importantly, how does a high-yield savings differ from a regular savings?
Growing a savings account can seem like a tedious task, especially when it doesn’t offer the highest return. Like a lot of people, you might rely heavily on a regular savings account. And while there’s nothing wrong with this, there’s a better way to save.
Looking for a way to grow your savings account at a faster rate? Now’s the time to level-up and open a high-yield online savings account.
What Is a High-Yield Online Savings Account?
High-yield online savings accounts are often used for emergency funds, as well as a place to safely stash cash you’ll need for a future event.
This type of account allows you to reach financial goals faster because it earns a much higher rate than a typical savings account.
A regular savings account earns little to no interest, in which case your money grows at a much slower pace. These accounts earn (on average) about 0.08% APY, although many accounts earn far less—as little as 0.01% APY.
High-yield savings accounts (which are often found online) can have rates as high as 20 to 25 times the national average.
Related: 7 Ways to Trick Yourself Into Saving Money
How Does a High-Yield Online Savings Account Work?
Although some brick and mortar banks have high-yield savings products, the highest rates are often offered by online banks.
The benefit of using an online bank is that you’ll have access to a wider variety of institutions—and not just those in your immediate area.
Even if you maintain a relationship with a traditional bank, opening an online savings account and setting up transfers between your local bank and online bank is an easy process. Simply link your checking or savings account to your high-yield online savings account for easy transfers.
Keep in mind, though, that some online banks offer fewer products than traditional banks. But if you’re primarily concerned with finding a high-yield savings account, this shouldn’t be a problem.
Online banks are also backed by the FDIC, so you don’t have to worry about losing your deposits.
Still not sure whether a high-yield online savings account is right for you? To help you decide, determine your goals for opening a savings account.
Will you use the account for emergency funds? Are you saving up for a large purchase like a house? Are you looking to fund a new business venture in the future? If so, this account is perfect for you.
Whatever your purpose, earning a higher rate of return and having an account that’s less accessible can help you hit your goals sooner.
How to Choose a High-Yield Online Saving Account?
Here are a few tips when looking for a high-yield savings account:
- Make sure you understand the interest rates and fees. Some online institutions have an introductory promotional APY. This is often for new customers who maintain a minimum balance in their account. How long is this incentive? Six months? Twelve months? Eighteen months?
- Look for any fees associated with maintaining the account. Some banks charge accountholders a monthly maintenance fee, but might waive this fees if they meet certain requirements. The good news is that several online savings accounts don’t charge monthly fees or have minimum balance requirements.
- Shop around. Check rates, fees, features, reviews and terms with at least three online banks before opening an account. Does the bank offer fee-free ATM usage? Does it offer a mobile app? How are the customer reviews? What is the bank’s most noteworthy feature?
Related: CIT Bank Savings Builder Review: Earn More and Grow Your Savings
Final Word on High-Yield Online Savings Accounts
A regular savings account at a local bank is an excellent place to stash cash you’ll need for an immediate emergency. For the bulk of your savings, though, an online high-yield savings account might be the best place for your money. These accounts offer better rates, fewer fees, a user-friendly experience, and of course, the possibility of higher gains without losing your money.
As far as whether a high-yield savings account is worth it…you let us know!!
– Guest Post by Erica Williams
1 Comment
Crave Freebies
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