High Interest Savings Account
High interest savings account refers to bank savings accounts that pay a higher annual percentage yield than traditional accounts. Prior to the banking crisis, the average rate of interest for savings accounts varied between 2-1/2 and 5-percent. Today, the average interest rate is less than 1-percent.
It is crucial for consumers to comparison shop high interest savings account providers in order to obtain the highest return on investment. Financial experts recommend seeking out banks that compound interest daily. Many banks compound interest on a monthly or quarterly basis which can substantially reduce the accrued interest; defeating the purpose of placing your money into a high interest savings account.
The Internet makes savings account comparison shopping a breeze. In less than an hour, consumers can compare financial institutions, rates of interest, minimum opening deposit requirements, and monthly service fees.
While many banks offer incentives for opening high interest savings accounts it is important to read the fine print and calculate the true costs associated with each bank. One bank might offer a higher rate of interest than another, but if they charge monthly maintenance fees or impose fees if balances drop below minimum requirements, the savings account could cost more than it earns.
Two great websites for researching high interest savings accounts are BankRate.com and Bankaholic.com. When comparing high yield savings accounts it is important to look for savings providers that compound interest daily, as well as provide complimentary services such as free ATM withdrawals. Also look for banks that provide incentives such as low opening balances and minimum balance requirements.
The current trend for high interest savings accounts is online banks. This refers to banks which only offer banking services via the Internet. However, many brick-and-mortar banks also offer online savings. Popular high interest savings account providers include ING Direct, FNBO Direct, Ally Bank, Zions Bank, Univest Direct, E-Loan, HSBC Advance, American Express Bank and Sallie Mae.
In today's economy, many consumers find contributing funds to a high yield savings account is nearly impossible. However, financial experts such as Dave Ramsey and Suze Orman frequently remind consumers that in order to fund retirement, consumers must commit to setting aside at least 10-percent of their income. Saving as little as five dollars per week can add up to a substantial amount of money over 20 years.
Consumers who want to pay off credit cards, save for college tuition, or buy a house should consider establishing a high interest savings account. Many people do not realize that in order to obtain a home mortgage loan they must provide a down payment using funds they have acquired on their own. Lenders prohibit homeowners from using borrowed funds from family or friends for home loan down payments unless they are obtaining an FHA or VA loan.
The average down payment requirement is between 10- and 20-percent of the purchase price. If you plan to buy a house that costs $150,000, you will need to provide a down payment of $15,000 to $30,000. The sooner you open a high interest savings account, the sooner you can reach your goal of homeownership.
Saving for your future is necessary regardless of the amount of income you currently earn. We invite you to browse our personal finance article library to discover savings strategies and resources which can help you reach all your financial goals.
Published on May 31, 2010 at 03:40 AM