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Savings accounts provide a secure means to store your funds while earning additional interest. However, since they have lower returns than other long-term investments, many overlook the importance of opening a savings account.
Immediate access to cash reserves is crucial, especially if you’re a business owner. These funds come in handy when unplanned expenses or financial emergencies arise. Opening a high-yield savings account online can be an excellent option to earn more interest on these funds.
Here, we’ll explore how you can benefit from an online high-yield savings account. But before making that decision, understand how this type of savings account works.
Overview of Online High-Yield Savings Accounts
Traditionally, people maintained their savings and checking accounts at the same bank for convenient transfers. However, the rise of online banks and the growing adoption of digital accounts have driven competition for savings rates.
This competition consequently led to the emergence of a new category known as online high-yield savings accounts. Online-only banks or credit unions commonly provide these deposit accounts. They work similarly to regular savings accounts in several ways.
For instance, they let you make regular deposits, and the bank pays you interest in return. Likewise, you can easily access cash through withdrawals or electronic transfers. Monthly withdrawal limits may also apply to high-yield savings accounts.
Benefits You Can Get From an Online High-Yield Savings Account
An online high-yield savings account is only a portion of your financial portfolio. But it’s a low-risk investment that offers a range of advantages when you find the right account and financial institution.
Suppose you’re still uncertain about the benefit it can offer you and your business. Here’s why opening an online high-yield savings account is worth considering:
Maximize interest earnings
Online banks typically incur lower operating costs than brick-and-mortar financial institutions. As a result, they can offer more competitive interest rates to savers. Like other savings accounts, you grow your funds in high-yield savings accounts through compound interest.
That means you earn interest on the principal balance and the corresponding interest that the principal accrued. As a result, you can earn substantially more from your savings. Depending on the account, how often the interest is compounded can be daily or monthly.
Save you from paying fees
Besides offering higher interest rates, high-yield savings accounts can save you from paying fees. Online banks commonly have lower overhead costs than their traditional counterparts. They pass such benefits on to savers through zero to minimal fees.
You don’t usually have to pay monthly maintenance, withdrawal, and wire transfer fees with high-yield savings accounts. But always verify with the bank you’re interested in to ensure they don’t charge you for these fees. If they do, check if they offer options to waive them.
Easy and flexible to manage
High-interest savings accounts mostly come with online banking. Some online banks have mobile apps that let you manage your account and track your funds on the go.
Suppose you need to make withdrawals. Many of these banks have partnerships with ATM networks, often without fees for their use.
While the number of withdrawals allowed in a month or year may be limited, there’s no minimum period during which your money must be deposited to access it.
Ensure your money’s security
Typically, high-yield savings accounts are insured by the Federal Deposit Insurance Corporation (FDIC). It guarantees protection for your funds of up to $250,000 in case of bank failure. For this reason, you can ensure your money’s security as long as you deposit it in an FDIC-insured bank.
Get Ready To Open a High-Yield Savings Account Online
Opening an online high-yield savings account is an excellent way to boost your financial health. It offers a convenient opportunity to grow your funds at competitive rates.
While it’s relatively easy to open, you must gather the required documents to complete an application and make the initial minimum deposit. Equally crucial is to research your options and select an account that best suits your financial needs and goals.
Various financial institutions offer high-yield savings accounts with different interest rates, fees, and features. Their minimum balance requirements and withdrawal limits may also vary, so pay attention to these details. Lastly, carefully review the fine print to avoid surprises in the future.