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I have to say that I really love High Yield Savings Accounts. Liann and I have had them for a year and a half now and I can say that we will always have them. I wish I had taken advantage of High Yield Savings Accounts when I was younger instead of losing so much money on a traditional bank’s savings account.
What is a High Yield Savings Account?
Simply put, it is a savings account that returns higher interest rates than a standard savings account and is not typically offered by the Brick-and-Mortar Banks (Big Banks). High Yield Savings Accounts can yield 25 times more than traditional low-interest savings accounts while having almost no drawbacks. To be honest, I attribute the difference to doing business with a bank that values you rather than one that seeks to take advantage of you.
Benefits of a High Yield Savings Account
The Interest Rate
This is by far the biggest benefit of the account. While the account won’t make enough money to consider it serious passive income, it allows you to really take advantage of compounding interest.
Often Less Restrictions or Requirements
All of our High Yield Savings Accounts, and the ones I’ve researched, have beat standard savings accounts offered by the big banks in our area. They often have:
- Lower minimum balance.
- No maintenance fees.
- Flexible rates.
When opening a High Yield Savings Account, you are not just locked into the rate offered during the sign up. One of our account’s interest rates has grown by 25%. We opened the account with a 1.25% interest rate and currently it has risen to a 1.65% interest rate.
High Yield Savings Accounts are typically FDIC-insured which means they are covered up to $250,000.
Cons of a High Yield Savings Account
There are virtually no down-sides to a High Yield Savings Account. The only true negative is that there are typically no physical ATM locations to extract money out of the account. This results in a little more pre-planning when needing to make a withdrawal. Typically, Liann and I just transfer the amount to our Brick-and-Mortar Bank checking account and then withdraw the money from there. This rarely happens though, as we use our High Yield Savings Accounts for saving, not spending
What is Wrong with Big Banks?
Brick-and-Mortar Banks, like Bank of America and Wells Fargo, offer standard savings accounts that have very low interest rates (less than 0.1%). They typically have the same restrictions, if not worse, then a High Yield Savings account. The Big Banks seem more preoccupied with making money off of their customers over facilitating a mutually beneficial environment.
Where to Open a High Yield Savings Account?
What are your thoughts on High Yield Savings Accounts? What are some of the banks you enjoy banking with? Let us know in the comments below.