If you keep up with the times, then you are probably familiar with the term “high yield savings account.” In fact, you will find many banks aggressively advertising such high yield savings account as the next best thing to investing in the stock market: It’s safe. Zero risk. And it promises high yields as well as tax benefits. Surely, it can’t get any better than this.
But what does a high yield savings account mean? How do you differ it from other accounts?
In this article, we’ll take a look at what a high yield savings account means and where to find them.
What is a high yield savings account?
You know what a savings account is. It is a type of account wherein you deposit a sum of money for a typically short period of time. A high yield savings account is simply a savings account with ideally competitive rates.
What is a competitive rate? In most cases, banks will offer you perks for opening a high yield savings account, and among these perks is a higher APY, or Annual Percentage Yield. But keep in mind that you may not always agree with what banks consider as a “high APY.”
What are the requirements?
A typical high yield savings account is offered only to a few special customers. So, not everyone can actually open this type of account. In order to qualify for a high yield savings account, you need to meet any one of the following criteria:
* Make a large deposit of your initial account. The banks will usually inform you how much is sufficient.
* Maintain a certain high balance for a period of time. In other words, do not be too trigger-happy with your money withdrawals. You are required to keep a certain balance in your account.
* Limit your transactions in or out of the account.
* Have other banking transactions.
NOTE: Banks often only allow valued customers to open high yield savings accounts.
Where can you find high yield savings accounts?
With the advent of Internet banking, one of the best places to look for high yield savings accounts is the Internet. In fact, most online banks offer rates that are relatively higher than those of regular offline banks. Moreover, initial deposits are very low. Some banks even allow costumers to open a high yield savings account for as low as a dollar. Note also that if you bank on the web, there are lesser restrictions. As long as you maintain a certain balance (generally lower compared to offline banks), you can make as many withdrawals or deposits as you want. The only downside to the process is that you will have to link your checking account with your savings account in order to affect a withdrawal, since online savings account do not allow you to directly funds from your account (i.e., ATM or write a check).
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