Everyone recognizes the importance of regular saving, even if an increasing number of people are finding it difficult to set aside money in the current climate. If you can manage to save, even a modest amount, a high yield savings account makes a lot of sense. Using a standard savings account will earn you very little, and at a time of high inflation could actually represent an overall loss.
So how do you go about identifying the best savings interest rates? Probably the first place to start looking is at your local brick-and-mortar banks. If a bank advertises a high yield savings account, this means that in the bank’s view it is a competitive account. The bank will claim it has a high APY (annual percentage yield), but you will need to compare it to rates offered by other banks in order to find the best savings rate.
If you do find a local bank offering a genuinely attractive interest rate, you may find that you are not eligible to apply for one of these accounts. Most banks are selective about the customers to whom they offer a high yield savings account. You may need to be an existing customer of that bank, or meet their criteria about the type of accounts you hold and the way you conduct your accounts. If they do offer you an account, they may require you to make a sizeable initial deposit, or they may set a minimum period during which you have to maintain a high balance without making a withdrawal.
If you cannot find a local bank that will offer you a favorable savings interest rate, the next place to look for a high yield savings account is online banks – that is, banks which only operate online. Most online banks are easier to sign up to than traditional banks, and offer better savings account interest on average. You need to use a reliable comparison service to find the best savings rate offered by an online bank. However, there are other criteria you need to consider besides the annual percentage yield. It is important to study the small print carefully before making a commitment.
One of the issues you need to check is that of fees. Find out whether the bank charges a monthly maintenance fee, or charges fees for using its ATM machine. Some banks will increase their fees if your account balance falls below a certain minimum, and these fees may total more than the interest you earn. You should try to choose a bank that offers a low opening balance and does not set a high minimum balance requirement, and if you can find one that also offers a cash incentive for opening an account, so much the better. Finally, look for a bank that compounds interest daily, rather than quarterly or annually, which would adversely affect you if you wished to withdraw funds.
Opening a high yield savings account with an online bank is very quick and simple, and it is much easier to get hold of your money if you need it in a hurry than it would be with, for example, a CD (certificate of deposit), or with stocks and shares. However, if you do not expect to withdraw your funds early, you can find excellent savings interest rates by investing in a high yield Certificate of Deposit, at least for a portion of your savings. Yield rates are usually higher than those for a savings account.
Without savings, you will find life difficult, especially in retirement. Saving may mean doing without some treats, such as vacations or expensive home appliances, so in order to make it worthwhile you will want to find the best savings rate possible. By using a high yield savings account, you can make the most of whatever funds you can put aside.