How to Choose a High Yield Savings Account
There are many places worth investing in for long-term growth. But what about short-term savings? Shouldn’t you be able to earn a little more from this?
You might be interested in one of these “high yielding” accounts because they can bring in, as many banks will tell you, 20 times the national average. This is because the national average is 0.10%. Not 10%. 0.10%. If you’ve kept your money in a regular savings account, you may have noticed this since your money hasn’t quite flourished.
Over the past few years, newer banks (many of them online only) have been able to attract customers with interest rates that seem high compared to banks with branches on every corner – think 1.5% to 2.5%. Online banks don’t have to pay cashiers and keep branches open, so they’ll share higher percentages with you by saving on overheads.
But this is not an interest rate that will change your life. Choose a high yield account with 2% per annum and you will receive $ 10 on a $ 500 deposit that you leave there for a year. (If you put that same amount into your regular savings account over the course of a year, you’ll earn $ 0.50 out of your $ 500.)
However, there is more to come. So: what do you do with all the high yielding savings accounts you have?
What to Look for in a High Yield Savings Account
Minimum deposit or balance
While many accounts do not have a minimum deposit to open an account (remember, they want you to sign up), some charge a monthly fee if your balance is below a certain threshold. For example, Citi Accelerate Savings will charge $ 4.50 per month unless you have a minimum of $ 500 in your account.
Limits on deposits or withdrawals
Since you probably keep short-term savings in one of these accounts, you need to make sure you have access to your money when you want to withdraw it to pay for your next family vacation or new brakes that your car needs. year.
In general, US savings accounts are limited to six withdrawals per month. This is because of Regulation D , which ensures that banks have enough cash for withdrawal requests – they use a lot of your money to lend. If you try to exceed the six-digit withdrawal limit, many banks will close your account. Barclays will charge you $ 5 for every withdrawal or transfer in excess of six each month, and if you do this three times within 12 months your account may be closed.
So expect a six-withdrawal limit, but be sure to check for any other deposit or withdrawal limits. For example, Markus has an online transfer limit of $ 125,000. This is probably not a deciding factor for you unless you just won the lottery.
Interest rate
The national average for recurring savings accounts has been hovering in the 0.10-0.20% range over the past five years, with recent increases in 2019 ( 0.10% APY mentioned above, national average for the week prior to this date). articles. )
For high yielding accounts, look for an APY variable around 2%. At the time of this writing, I have found rates to be in the 2.1-2.3% range.
Remember, these APYs are not set in stone. They could also change if the Federal Reserve raises or cuts rates .
Make sure he is insured
The Federal Deposit Insurance Corporation (FDIC) insures savings accounts offered by banks. The National Credit Union Administration (NCUA) insures savings accounts offered by credit unions. Do a cursory inspection to make sure the account you are considering is insured, okay?
Most financial institutions will announce this in advance by noting their FDIC status on the home page or in the list of account features. Many banks put “FDIC Member” next to their name. The typical limit for this is $ 250,000.
Are you ready to pick it up and forget it?
Once you feel like you’ve settled on a high yielding savings account, don’t chase the bets. Don’t switch savings accounts from 2.1% per annum to 2.3% per annum. The whole idea of having a savings account is to keep your money working for you, not keeping up with interest rates. And since rates fluctuate, you may find that your interest rate increases without any action.
To learn more from Lifehacker, don’t forget to follow us on Instagram@lifehackerdotcom .