Investing In a High-Yield Savings Account: What You Should Consider

One of the important ways of taking charge of your finances is having some money set aside as savings. Having some savings enables you to put aside money for a down payment on a car or a home or to handle an emergency without been thrown off balance financially. It also empowers you to explore options that were previously not accessible to you to grow your money.

One of such options is a high-yield savings account. A high-yield savings account is a great instrument in helping any person build up money. It provides a way to save money and make money in the process. As opposed to a standard savings account, a high-yield savings account yields a much higher interest rate and therefore, a higher return on the money you save. By putting your money in a high-yield savings account, you create an opportunity for your money to generate more money for you through the interest that will accrue.

By deciding to open a high-yield savings account, you will be embracing the amazing opportunity of saving your money and growing it at the same time using a secured instrument, given that high-yield savings accounts are insured by the FDIC up to $250, 000 per account. This way, you will never have to worry about loss so long as you stay within the FDIC insurance limit.

While opening a high-yield savings account clearly offers a great advantage, there are factors you should consider before you decide on the bank with which you will open your account. These factors include the following:

Account Opening and Maintenance Fees

This is one of the first things you should confirm. Does the bank charge an account opening fee? How much? Would you need to pay an on-going monthly or quarterly or yearly fee on the account? While a number of banks may charge a standard fee for setting up the account, some will waive the fee for you if you are able to maintain a minimum balance. Before you proceed to open the account, look critically into this to be sure there are no hidden charges that are not apparent at the time of opening of the account but which will show up down the road to take money from you.

Deposit Requirements

Find out if the bank require a specific minimum amount as initial deposit for opening the account or if you can open it with whatever amount you have on hand. Check to see if you can meet the requirement before proceeding with opening the account.

Transaction Numbers

Typically, there will be a limit on the number of transactions you can make on your account per month. Most banks limit number of deposits you can make or the number of times you can withdraw money from the account in a month to 6 times. Furthermore, find out if there is a limit placed on the amount of money you can put into the account or if you are at liberty to put in as much as you can. For banks that have these rules in place, being able to adhere to them sometimes mean that you are given a waiver on some fees.

Rate of Interest

You are setting up this account because you expect that it will offer you an interest rate that is more than what obtains in a standard savings account. So find out the rate the bank will pay you when you save your money with them. However, in calculating how much interest you will be paid by the bank, do remember that even if the rate a bank offers is not so great, it might still be a good deal if they offer you a smaller minimum amount required for setting up the account, lower fees, more transactions and a no-limit on the amount of money you can deposit into the account per month. The key here to look at your unique needs, do some little math with the figures and then make a decision.

Minimum Balance Required

Usually, a bank would require you to maintain a minimum balance to earn the promised interest rate or enjoy a waiver on account maintenance fees. Find out what this amount is for each bank so that you can compare and determine which bank offer you the best deal.

Links to Other Bank and/or Brokerage Accounts

Ideally, the bank should have provision that allows you link the funds you have in your high-yield savings account with the funds you have in your other accounts with this bank or other banks as well as your brokerage account so that you can easily move money into and out of the account easily. If this provision does not exist, find out what other options there are.

Required Additional Accounts

Some banks would insist that you be a holder of some other accounts, such as checking account with them in order for you to open a high-yield savings account. If you do not have an existing account with them, you will need to open additional accounts after setting up a high-yield savings account. Whatever the stipulations are, consider them carefully and make a decision based on what will work for you.

How You Will Make Deposits and Withdrawal

If you are looking to patronize a brick and mortar bank, this may not be much of a concern to you but if you are looking to open your account with an online bank, you should find out exactly the channels you will have to make deposits. Will you be making deposits through online transfer, ATM transfer or by mailing checks? Will you be able to use another bank’s ATM to make deposits? Also find out if you can set up your account such that a designated amount is deposited into it directly from your pay check or your employer’s account. Furthermore, find out the options you have for withdrawing from the account. Can you issue check against the account? Would you be able to transfer funds out of the account electronically? Can you access the funds with an ATM card using other banks’ ATM network? How much would you be charged for each transfer? Make sure all your questions regarding deposits and withdrawal are answered explicitly.






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