High yielding accounts offer an incredible method of growing funds and capital. They do so by offering interest rates that are much higher than a normal checking or savings account. As a result, many people use high yielding accounts to build emergency funds and save for large expenses, such as down payments on a home. Large investments present another great example of high yielding account usage. As an investor yourself, you may be in the market for a high yielding account that will simplify your next big investment. However, there are many banks out there offering high yielding accounts with various interest rates, fees, and minimums. Read on to discover how to choose the best high yielding accounts.
Interest rates display the first and perhaps most important consideration when choosing a high yielding account. The Annual Percentage Yield (APY) of an account determines the amount of interest earned yearly. Higher APY’s mean faster capital growth. The FDIC states that the average savings account APY is 0.05%. When deciding on a high-yielding account, make sure the APY is greater than this standard. However, high yielding savings accounts tout APY’s as high as around 1%. Surely, taking interest rates into consideration displays one method of choosing the best high yielding account.
Thinking about any fees that may be present of the account demonstrates an additional consideration for the best high yielding accounts. Fees involved depend heavily on the bank being used. Some have fees, some do not. Therefore, this is important information to consider. If your prospective account does involve fees, think about how you can avoid them. For example, a common fee is levied for reducing the balance below a minimum threshold. In addition, high yield accounts have a federally mandated limit of six withdrawals per month. Finding out your bank’s penalties for violating this mandate is also imperative in getting value out of your account. Absolutely, examining the fees your financial institution levies displays an important decision in choosing high yielding accounts.
Balance And Deposit Minimums
Balance and deposit minimums are often imposed by financial institutions besides fees. While high yielding accounts without such limits do exist, most impose these limits, with minimum balance and deposits being the most common. However, the presence of one does not guarantee the presence of the other. For example, if there’s a minimum deposit but no minimum balance, you can withdraw the initial deposit at any time. Therefore, it is important to determine whether your bank imposes these limits and what they are before opening your high yielding account. Ideally, you should consider doing a business balance sheet test. Certainly, recognizing balance and deposit minimums present an additional factor in choosing the best accounts.
Sign-up bonuses are sometimes offered by banks, and display another important consideration for choosing the best high yielding accounts. While the bonuses can be nice injections of capital growth, they require you to make several comparisons. The first of which is with the account’s APY as well as any applicable fees. A sign-up bonus may not be worth it if this comparison isn’t favorable. Additionally, many bonuses have restrictions such as the need to maintain a certain balance for a certain time period. If the balance drops below the minimum, your bonus may be forfeited. There also may be delays in receipt of the bonus. For instance, your bank may withhold the bonus until a month or two after the required time period. Definitely, examining sign-up bonuses presents another factor in choosing the best high yield account.
Withdrawal considerations and restrictions demonstrate a final consideration for determining the viability of a high yield savings account. Thinking about how often you’ll need access to the money within is imperative in opening any type of bank account. However, this is doubly true for high yielding accounts, as many people use them for emergency funds. As stated before, a federal mandate known as “Reg D” limits high yield accounts to six withdrawals per month. This does include online and phone transfers, credit and debit transfers, as well as overdrafts. However, withdrawals made physically at an ATM business or the bank itself do not count towards this limit. Banks’ rules on withdrawing and transferring funds vary greatly, so get these details from your specific bank.
High yielding savings accounts demonstrate an incredible way for individuals such as investors to grow their funds. However, there are several aspects to consider when shopping for one, such as the APY, or interest rate, on the account. To avoid losing account value, consider any imposed fees. Balance and deposit minimums demonstrate important aspects to examine for the same reason. In addition, think about any sign-up bonuses or promotions that can increase your account’s value. However, there is a federally mandated limit on withdrawals from high yield accounts, so it would be prudent to consider how often you’ll need access to the funds within. When choosing what to look for in a high yield savings account, consider the points described above.