3 Reasons to Open a High-Yield Savings Account in August
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Chances are, you've probably heard of high-yield savings accounts even if you don't own one. These accounts, usually offered through online-only banks, have skyrocketed in popularity over the last several years.
You might wonder why you'd want to go through the hassle of moving your money into a new bank account if you don't have a high-yield savings account already. Here are three reasons it's worth your time.
1. You'll earn a lot more interest
As you might've guessed from the name, high-yield savings accounts stand out for their APYs that are well above the current national average of 0.45%. Rates vary by bank, but some of the best savings accounts have APYs around 5.00%.
To put this in perspective, say you have $10,000 to deposit and you could either put it in a savings account earning 5.00% APY or one earning 0.45% APY. The 5.00% APY account would pay you $500 in one year, assuming the interest rate remained steady that entire year. The 0.45% APY account would pay you just $45 during that time.
2. You probably won't have to worry about maintenance fees
The online banks that offer high-yield savings accounts typically don't have maintenance fees. They don't have branches to maintain so they usually have lower operating costs.
This might not be a big selling point for you if you maintain a high enough balance with your current bank to have the maintenance fee waived. But if you're paying every month just to own your account, you can do a lot better by switching to a high-yield savings account.
3. You can easily move your money around
Since online banks don't have branches you can visit, they focus on getting the online tools right. Most have strong mobile capabilities, enabling you to view your balance, transfer funds, deposit checks, and pay bills from anywhere.
Though less common than with checking accounts, some online savings accounts also include ATM cards for direct access to your cash. This could be something to keep an eye out for if you don't want to go through the hassle of first transferring your money to a checking account before you can withdraw it.
How to choose the right high-yield savings account for you
Interest rate is most people's primary focus when choosing a high-yield savings account, with good reason. But there are a few other things to look for as well. First, check to see if the APY is available to all balances or if you must maintain a certain balance to earn that rate. Some accounts have tiered APYs based on the amount in your account.
Next, look at how the bank provides access to your money. Some only permit you to transfer the funds to another account, and that's not convenient for everyone. Make sure you're happy with the options offered.
If you hope to do all your banking in one place, look at the other types of accounts the bank offers too. Some banks focus more on savings accounts and CDs and don't have checking accounts. If you go with one of these, you'll have to link your savings account to an external checking account.
Choose a few high-yield savings accounts that look interesting and then compare their offerings. If you have any questions, reach out to the banks directly. Then, when you've found one you want, you can open the account online.
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