If you are interested in saving money in one of the simplest and safest ways, then maybe consider opening a high yield savings account. These accounts typically have a higher interest rate compared to traditional savings account.
If you would like to learn more about high-yield savings account, be sure to keep reading this guide to learn more.
Editor’s Note: Amidst the pandemic, saving money is something crucial that must be done. Read our guide on the Do’s and Dont’s when saving money during a pandemic.
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A high-yield savings account, is a type of savings account that earns more than a traditional savings account. A traditional savings account typically earns an annual percentage yield of 1.00% APY, so anything greater than that is considered a high-yield savings account.
Typically there is not one metric that banks use to adjust their savings account rates; rates usually change after Federal Reserve rate adjustments. Such adjustments generally happen every six months.
What Do You Need To Open a High-Yield Savings Account?
To open a high-yield savings account, you need to provide identification and an initial deposit in most cases. Here are typical forms of identification that are permitted by banks:
- Driver’s license or state photo ID
- U.S. passport
- Firearms identification card
- U.S. armed forces identification card
- Other state identification
Other forms of ID include utility bills, health insurance cards, voter registration cards and employment authorization cards.
Cash Management Account vs High-Yield Savings Account
Cash management and high yield savings account are similar in the sense that they both save money on interest. However there are certain features that are only available to high yield savings account. Read on to compare cash management accounts versus high yield savings account.
Normally, cash management accounts are provided by a nonbank financial service. However, high yield savings account are typically regulated with restrictions on withdrawals. A cash management account doesn’t have a limitation on the amount of withdrawals a customer can have.
Some cash management accounts have check-writing features while others don’t. The high-yield savings account have some of these features, but have more limitations on them. There are different ways these accounts can be FDIC insured. A cash management account can also be connected with different accounts with the same bank provider. While the high yield savings doesn’t have this feature.
Things To Consider When Opening a High-Yield Savings Account
Here are some things to look for when picking a high yield savings account:
- Federally insured by FDIC or NCUA
- Find Out About the Minimum Balance Required
- Check to see how much is the opening balance
- Look how the interest rates compare
- Monthly transaction limits
- Access to digital and mobile banking
- Little to no fees. There are many accounts with no fees, so be sure to explore your options.
Money Market vs High-Yield Savings
Both money market accounts and savings accounts are deposit accounts that pay interest, and are FDIC insured up to $250,000. Each type of account offers a secure place for your balance to grow.
In addition, both money market accounts and savings accounts allow you to make as many deposits as you want. However, for both accounts there is a limit of six withdrawals or transfers per statement cycle—a limit that is set by federal law.
Money market and savings accounts are both easy to open. At most banks, all you need is some personal information and an initial deposit, and many don’t require a minimum deposit amount. Online banks offer you the added convenience of opening a savings account or a money market account on your own time, from anywhere you have internet access.
Conclusion
In conclusion, high-yield savings account rates can help you grow your savings at a faster rate than a traditional savings account. Be sure to look out for certain features that fit your needs and be sure to explore your options.
