You’ve heard of high-yield savings accounts. They’re the new buzzword in personal finance, and for a good reason. High-quality institutions like Ally Bank, Mango Financial, and TIAA Bank are offering world-class interest rates on their savings products. But what are high-yield savings accounts? And why do they matter? Here’s everything you need to know about this exciting new trend:
1. They earn higher interest than regular savings accounts
So, what is high-yield savings account? High-Yield Savings Accounts are FDIC-insured and insured by the NCUA. This means that if your bank fails, your money will be safe! In addition to protecting you from a bank collapse, they also offer a guaranteed rate of return on deposits. Also, according to SoFi’s professionals, “Offered by traditional banks, online banks, and credit unions, high-yield (also called high-interest) savings accounts often pay significantly more than standard savings accounts.”
With this security in place and an interest rate that’s higher than regular savings accounts, high-yield savings accounts are great for people who want to earn more on their cash but aren’t willing to take on any risks associated with investing in stocks or other financial instruments.
2. Your money is relatively safe
One of the most important benefits of a high-yield savings account is that your money is relatively safe. Although it’s possible for banks to fail, this risk is very small. The FDIC insures deposits up to $250,000 per depositor, and bank failures are rare. But even if your bank fails, you still have access to your money—you just won’t get paid interest on it during the time between when you deposited it and when you can access it again.
3. Provides special value-added services
This differs from the standard savings account, which only offers you a place to keep your cash. A high-yield savings account provides many value-added services that help improve your banking experience. These include:
- Credit cards and loans – You can get access to credit cards, loan products and other lending options through these accounts.
- Insurance and investment services – Most banks offer insurance policies for customers along with investment advice.
- Online banking and ATM services – Some banks allow you to access their online banking portal remotely through the Internet or mobile apps so that you can check balances, transfer funds or pay bills at any time of day or night from anywhere in the world.
4. They can help you reach your savings goals faster
If you’re looking to set aside money for a specific goal, a high-yield savings account can help. With the interest rate on these accounts often being higher than most other financial products, they can prove to be an excellent way of increasing your level of savings. This is because the money you deposit into these types of accounts will grow faster than what it would in a traditional savings account or CD.
In addition, high yield savings accounts are FDIC insured; this means that if your bank fails and goes bankrupt while owing you cash from your HYSAs, then the Federal Deposit Insurance Corporation (FDIC) will reimburse all customer deposits up to $250,000 per person/per bank holding at any given time.
5. Income generating account
You can also use this account as a savings or money-generating account. You can open a high-yield savings account and use it to store the extra money you earn or simply let it sit in your checking account until you have enough to invest in something more profitable like stocks.
The key to earning income from this type of account is the interest rate and the number of days in which your funds will be available for withdrawal. Generally speaking, when you open an HSA with one bank over another, they’ll give you higher rates for deposits for longer periods (from 30 days up to 120 days).
Savings accounts aren’t the most exciting financial instrument, but they can be very useful. And high-yield savings accounts are even more so. The best part about them is that you don’t have to have much money or pay any fees before opening one.
Take advantage of these benefits by opening an account today!