Are you a person that has a traditional savings account with your current bank? You know, the typical savings account that is paired with your checking account? Are you a person without a savings account at all? If you answered yes to any of these questions, please read on. If you have never heard of one, I am here to tell you a little bit about high yield savings accounts. It is essentially a normal savings account, only you get a higher interest rate. What is an interest rate? It is a percentage of your money that a bank will pay you just for having your funds housed with them. Free money — who doesn’t want that? Traditional savings accounts usually have a very low interest rate. For example, my interest rate through Chase bank is 0.01%. This is a common rate based on studies from Credit Karma. On my high yield savings account though, I have a 2.15% interest rate. This is a difference of 2.14%. Now, I am not here to tell you to get a high yield savings account, but I do think you should do some research into the benefits of opening one. NerdWallet is a great resource to research as well as find a bank that you are interested.
I know this might sound too good to be true, like what’s the catch? And there are some potential downfalls of a high yield savings account if you do not research. One of the biggest is service fees. These can sneak up on you and really bite you from behind if you are not aware of them. You also want to make sure that if there are service fees, they do not outweigh the interest you are receiving. There are plenty of banks that do not have fees on their accounts, but you just have to make sure you find the right one. You can also run into banks that require high minimum amounts that you must start with and not go below. If you are just starting your journey in savings this may not be practical for you. Another potential issue with this account is the transfers between accounts. If you are opening an account in a separate bank from your normal everyday bank, and an emergency arises, there may be an issue with getting your money in time. These are all items that you can avoid if you are paying attention to what money you are holding where and the banks you are going through. Talking to a representative is a great way to find out any hidden potentials that may not fit into your goals.
If you are still interested in one of these accounts, make sure before you open one you research, research, research. There are so many to choose from and they all may offer different incentives, fees, and options. Don’t just pick the one with the highest rate. I have had an amazing experience with one of these savings accounts, and it is potentially an easy step to make a huge difference in your long term financial goals.
Article Contributed By: Dakota Otis
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