High Yield Savings Accounts

Everyone knows that in order to make the most money on your money, you have to receive the most interest on your money. This much most people understand, but few understand how the power of their savings account can be used to grow wealth, nor how to use high yield savings accounts to generate the most amount of money on their savings.

When contrasted to checking accounts or other bank accounts, the savings account is already a high yield instrument—it pays the highest of all the extremely liquid accounts, and offers some of the best protection for your investment capital. However, many people, after seeing that their savings account pays more than their checking account, often decide that their savings account is inherently high yield. This is not the case. A high yield savings account operates independently of other savings accounts or bank accounts.

Promotional High Yield Savings Accounts
Banks spend billions of dollars each year in order to attract new customers to their establishment. But while advertisements on TV and full page ads in financial magazines may have attracted customers years ago, simply throwing money at the problem isn’t helping banks grow their customer base. Instead, they realized they need to start throwing money at their customers.

High yield savings and checking accounts are very much a new product on the banking scene, and are often the project of the marketing department to persuade savers that their savings accounts are the best. As mentioned before, banks spend plenty of money marketing their products—some credit card companies pay as much as $100 in marketing just to get a new customer!

So how do you access promotional high yield savings accounts, and where can you find them? In most cases, promotional high yield savings accounts will flash right before your eye. While there is no best place to begin your search, it is likely that every financial magazine in your local bookstore has at least one ad for a high yield savings account with a promotional APR. This promotional APR often exceeds the stated rate of interest. (At the time of writing, regular savings accounts offer only .5% per year, whereas high yield promotional accounts are offering as much as 4% per year!)

Because banks want their new customers to be active customers, they usually require a few actions by new members in order to meet the requirements for achieving a high yield. Generally, this includes:

Account minimums – Often, high yield savings accounts require at least $1,000 in savings, and some even require $10,000 or $25,000 in order to qualify.

Account maximums – Seeing as the rate banks pay on promotional high yield savings accounts is part of their marketing budget (they certainly aren’t making 4% a year on your savings in lending!) they also have account maximums. This limit may be anywhere from $25,000 to $100,000, at which point the bank starts paying the regular rate of interest.

Account Activity – Banks may require that you make a certain number of transactions per month, or a number of ATM withdrawals. This kind of clause insures that banks get active customers, but it doesn’t mean you have to stay there!

Whether or not the time investment is worth it to each person is an individual decision. However, seeing as the difference between $25,000 in a high yield savings account and $25,000 in a standard savings account is 3.5% per year, or $825 per year, most will find that the time it takes to open an account, set up a direct deposit and make ATM withdrawals (which most people do anyway!) well worth their time.

Plus, with the number of banks offering promotional offers exceeding 5-10 any day of the week, savers could open as many as 10 different accounts at 10 different banks and make 4% on up to the account maximum of $25,000 at each bank, for total interest revenue of $10,000 per year. That’s no small change!

Standard High Yield Savings Accounts
If promotional offers aren’t your cup of tea, there are many different standard high yield savings accounts that are offered at any one time from a variety of banks. Plus, unlike promotional offers, standard high yield savings accounts pay interest for an infinite period of time, compared to 12 months for promo deals.

These standard accounts, though, are not nearly as rewarding as promotional offers. Expect to earn anywhere from .5% to .75% more on your money, with the requirement to deposit at least $1,000. (At the time of writing, this would equal 1-1.25% per year on your money, compared to .5% for a non-high yield account.) Additionally, a few banks give special “love” to customers who deposit even more, with “super savings accounts” providing higher interest on accounts exceeding $50,000.