You’re saving! That is great, and something I will always encourage here on Money Multiplied. Though, are you making the most of your savings? A high-yield savings account is a type of savings account that typically pays 20 to 25 times the national average of a standard savings account. Most people save their money with the same banking institution as their checking account making transfers easy. However, electronic transfers are simple to set up between a high-yield savings account and your checking account even if you hold them at different banks.
What you need to consider:
Online banking institutions offering high-yield savings accounts have limited features as many don’t offer checking accounts and very few provide ATM cards. Though, what is important is the fact that you’re provided the same federal insurance from bank failure with the Federal Deposit Insurance Corporation (FDIC) along with credit union failure from the National Credit Union Association (NCUA).
Note that this account should only be a part of your financial portfolio. It is generally good for saving towards a big purchase such as a house, vacation or new car. Putting savings away in a high-paying savings account protects your principal while applying interest earnings toward your savings goal. So basically, you literally watch your money multiply. 😉
What to look for and compare:
With anything, you should be shopping the marketplace. It is wise to compare options and consider the following:
Interest Rates:
How much interest does the account currently pay and is that a standard rate or promotional rate? These rates are flexible and can change at any time. Be sure to ask! Make it a point to find out whether there are minimum or maximum balance thresholds for earning the promoted rate.
Minimum Balance:
Do you know how much money you are required to keep in the account? Is that amount something you can maintain? You shouldn’t be touching this money but you also want to feel comfortable meeting the minimum threshold so you can avoid fees if you fall below the minimum.
Fees:
Does the banking institution charge any fees on this account? How can you can avoid these fees? (e.g., keeping your balance above the minimum threshold as previously mentioned) Also, what is the bank’s fee for violation of exceeding the federally mandated limit of six withdrawals per month?
Making Deposits:
It would be smart to check if the bank has a smartphone app that offers mobile check deposit. Unless of course you are okay with mailing checks or depositing them by ATM if that feature is available.
Are you ready to open your High Yield Savings Account!?
If you bank at a traditional brick & mortar banking institution that offers a competitive high-yield savings account, opening a new account will be simple! As your personal information has already be verified with the institution.
If you’re opening a savings account at an institution somewhere new, the process is still simple but a bit more involved. Set aside some time – this shouldn’t take more than 15 minutes and you can fill in an electronic application on your computer. You will need your driver’s license, social security number and primary bank account information. Just like that, you are on your way to watching your money multiply!
