A high-yield savings account is a type of deposit account offered by banks and credit unions. It’s called “high-yield” because the interest rates on these accounts can be significantly higher than traditional savings accounts. With that being said, there are some considerations before signing up for one of the best high-yield savings account or accounts:
What is a High-Yield Savings Account?
A high-yield savings account, also known as a high-interest savings account, is an account that offers a higher interest rate than a regular savings account. The rates can vary widely depending on the institution and the type of money you put into it.
What is different between these two types of accounts? You still have to pay taxes on the interest earned from your regular accounts like before, but with this type of account, you don’t have to worry about setting up monthly direct deposits or funds transfer transactions through your bank in order for it to work correctly.
Benefits of a High-Yield Savings Account
There are many benefits to opening a high-yield savings account. The first and most obvious benefit is the high-interest rate. Unlike with a checking or money market account, you can earn a much higher interest rate on your savings in this type of account. This increase in interest rate typically makes up for any fees that you may have to pay for opening and maintaining an account.
Another benefit is access to your money. With most other bank accounts, including checking and money market accounts, there are limits on how quickly you can withdraw funds from them or make deposits into them (such as through ACH transfers). “The interest is usually paid to your savings account on a monthly basis,” as Lantern by SoFi advisors say.
Why Should You Open a High-Yield Savings Account?
High-yield savings accounts can be a great place to invest your money. While it’s true that you may not earn as much interest with this type of account as if you invested in stocks, bonds or mutual funds, the risk is lower, and there are fewer fees.
Here are some of the benefits of opening and maintaining a high-yield savings account:
- Low-risk investment option: Unlike other investments, which can fluctuate greatly in value over time, high-interest savings accounts will pay consistent rates without much risk of losing money.
- High-interest rates: Many banks offer their customers high yields on their deposits for having a large balance or for setting up automatic payments from another account at the same bank or as part of a promotion that expires soon after being opened.
How to Open a High-Yield Savings Account?
You can open a high-yield savings account online, at a local bank or credit union, or at an online bank.
Suppose you want to open an account in person and need more time to go out of your way; start your search online. You’ll find several options that will allow you to apply for the account from home (and most accounts come with free apps that let you manage your money on the go).
This is especially convenient if you’re looking for a specific type of savings account with certain features and prefer not to wait in line at the bank or credit union. Online banks provide many of the same resources as traditional brick-and-mortar institutions, but without all of the hassle—it’s easier than ever before!
If you’re looking for a high-yield savings account, it’s important to do your research. Some banks offer better interest rates than others, so make sure to compare the options!