If you would like to learn more about the 5 best high-yield savings accounts, here is a highly recommendable read for you! One of the reliable ways to be financially stable is smart saving. While there are several ways to save intelligently, high-yield savings seem to lead the chase. Unlike the traditional checking account, a high-yield savings account is a financial tool that offers a higher interest rate. More so, this form of deposit account is available online and offline. Hence, it is not only profitable but convenient. Aside from the higher rates, high-yield savings account also offer the benefits of higher annual percentage yield. Besides, account owners get to pay low or no fees.
5 Best High-Yield Savings Accounts
How Does Savings Account Interest Work?
Interest rate is the money paid by banks to their customers for saving their money with them. Depending on the bank, type of account, and amount saved, the interest rates often differ. Savings account are the regular account where you can save your funds and withdraw whenever you want. However, high-yield savings accounts provide higher interest rates to account owners than traditional savings products. In other words, you get more money as you continue to meet your savings goals quickly.
What Is An Annual Percentage Yield?
An essential feature of a high-yield saving account is the annual percentage yield (APY). In a simple term, it is the money you get in your savings after a year. This circumstance means that the APY can determine how much you will get as interest every year. The annual percentage yield is dependent on two factors, namely the interest rate and the rate at which the interest compounds.
The two factors are crucial components of how interest works on a savings account.
This fact is because they influence the amount earnable over a specific period. Depending on your agreement with your financial institution, your savings account may experience compound interest daily, monthly, quarterly, or yearly.
Example For The Interest Rate And APY
Let’s consider a practical example for the sake of clarity. If you deposit $10,000 in a savings account, the interest rate will not change if you don’t withdraw or deposit any money. Suppose the account features a 1.00% interest rate while the interest compounds annually; you’ll receive $100 every year. In this case, your annual percentage yield is also 1.00% since your interest is not compounding several times per year.
Suppose a bank provides a 1.00% interest rate on a savings account; the APY and the total earnings might be affected by the compounding interest rate.
However, it can lead to only a minor difference. With time, the total earnings may increase, especially if your savings account comes with a higher interest rate, annual percentage yield and you are depositing into the account regularly. Fortunately, several offline banks offer compounding interests daily and monthly for a savings account.
Can You Lose Money Using A High-Yield Savings Account?
While a high-yield savings account is quite profitable, it doesn’t mean you cannot lose money. Undoubtedly, you should use the account only for short-term savings. For instance, you can save for emergencies, upcoming events, or vacations. However, if you save for the long-term, you can lose money through taxes or inflation.
What Is The Downside Of A High-Yield Savings Account?
As a high-yield savings account user, you cannot make a quick withdrawal from an automated teller machine. Also, it is impossible to withdraw from a physical branch. Another downside is that it takes a few days to transfer between a physical checking account and an online savings account. Hence, a high-yield savings account can be relied upon for quick money.
5 Best High-Yield Savings Accounts
If you want to harness a high-yield savings account’s benefits, there are several banks. Depending on their APY, below are the top five options to consider.
Quontic Bank
With an annual percentage yield of 0.65%, Quontic bank has the most generous high-yield savings account. Quantic Bank’s headquarter is in New York, and it’s famously known as the Adaptive Digital Bank. As a potential high-yield savings account owner, you only need as low as $100 to open an account. Interestingly, Quontic Bank doesn’t charge a monthly maintenance fee.
Live Oak Bank
Here is an excellent bank option to kickstart your high-yield savings account journey. Live Oak Bank allows clients to open the account with zero dollars, yet it offers a 0.60% annual percentage yield. Despite providing a competitive savings account interest, the bank has no monthly fee in its terms and conditions. More so, clients are not mandated to have a minimum balance.Â
ComenityDirect
Another highly recommendable bank for your high-yield savings account is Comenity Direct. The financial institution is an online bank that offers a 0.60% annual percentage yield with a minimum opening deposit of $100. ComenityDirect is one of the new-age digital banks that you can trust.
Vio Bank
Established about half-a-decade ago, Vio bank belongs to the MidFirst bank as its online division. Since 1934, FDIC insures MidFirs. Hence, it is utterly safe to bank with the online division of the legendary bank. Vio Bank offers a 0.57% annual percentage yield and demands at least $100 as an opening deposit.
Synchrony Bank
Here is another bank that doesn’t require any opening deposit before you can open a high-yield savings account. Synchrony Bank offers a competitive annual percentage yield of 0.55%. More so, the bank provides the same competitive result for all balance tiers. If you need a money market account, you can also reach out to the financial center.
The Bottom Line
A high-yield savings account is beneficial in multiple ways. Aside from having a portfolio to keep your unused funds, every saved money get you extra earning. Unlike your regular savings account, a high-yield savings account will get you significant total earning by the end of the month or year when you choose a bank offering a large annual percentage yield. Feel free to consider any of the options discussed herein; they are not only profitable to deal with but reputable. Advisably, you should choose a bank that satisfies your financial objectives and saves money you don’t need to spend any time soon. By so doing, you’ll be making money from your savings account by year over year.
