High Yield Savings
The average rate of interest on high yield savings is currently hovering at a little over 1-percent. Unless you are able to deposit $100,000 or more, it will be difficult to obtain a decent return on investment. However, with an hour or so of online research, you can compare nationwide and local banks to determine which offers the highest annual percentage yield (APY).
The most trusted source for high yield savings comparison is BankRate.com. When comparing savings account providers it is important to look for FDIC insured banks with a minimum 3-star rating. The higher the rating, the less risk there is bank failure
Presently, Capital One Direct Bank offers one of the highest savings account rate of interest at 1.35-percent APY. Capital One Interest Plus Online Savings requires a minimum deposit of $2500. Customers can earn a quarterly bonus of 10-percent of earned interest by maintaining a $15,000 balance each month the account is open and being an active Capital One credit card member.
Another popular high yield savings account provider is American Express. Most people are familiar with the AmEx elite status credit card; however, American Express offers a multitude of banking products. The current rate of interest applied to American Express high yield savings account is 1.30-percent APY which is compounded daily.
Financial experts recommend looking into online-only savings accounts to obtain higher interest rates. Online-only savings accounts refer to transactions which are conducted online from the comfort of your home. Most online banks are FDIC insured and offer higher interest rates because they do not have the overhead expenses of traditional brick and mortar banks.
Some of the more popular online savings account providers include EverBank, Ally Bank, e-Trade, HSBC Direct Bank, ING Direct Bank, FNBO Direct Bank, and Lending Club. Most of these banks do not charge monthly service fees as long as minimum balance requirements are met.
Lending Club has been featured in the New York Times, CBS News and Harvard Business Review due to their whopping 9.6-percent return on investment. It is important to note Lending Club is not a traditional high yield savings account. Instead it is a peer-to-peer lending club that offers loans to low-risk applicants.
Customers fund these loans by investing between $25 and $5000 into each cash flow note. As with any type of lending, there is risk for borrower default. Lending Club carefully scrutinizes loan applicants to reduce risks. However, depositors must carefully read the prospectus and understand they could potentially lose all invested funds.
In today's economic chaos, individuals must take time to become educated about various financial tools that not only safeguard savings accounts, but also provide a high return on investment. Individuals unfamiliar with high yield savings, money market accounts, IRA and 401k accounts should consult with a financial planner to determine which investment products are best suited to their short-and long term goals.
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Published on April 19, 2010 at 02:32 AM