High Yield Savings Accounts: What You Need to Know

High yield savings accounts are designed to pay higher interest than other types of accounts. Researching current interest rates and your options is a simple way to learn more about choosing the accounts that offer the most returns. You will want to make sure that your account is FDIC insured before applying for the account.

Insured Accounts

In the world of online banking, there are a wide range of financial institutions to choose from in both your local area and around the world. A bank or financial institution that is FDIC insured is a must, however. FDIC insured accounts are beneficial because if the bank goes bankrupt, get robbed, or had any other problem your money is protected. When choosing online banks, take the time to verify the authenticity of the institution to avoid choosing the wrong bank.

You will also find that higher yield savings accounts have slightly more risk than other types of accounts, but are generally a safe investment that you can depend on. For instance, a money market account pays out slightly more than a traditional savings account but is also riskier than simply opening a savings account. The benefit of seeing more returns is one that makes the slight risk worthwhile.

Fees and Other Fine Print

When opening high yield savings accounts, it is vital to check the fine print of your contract. Some fees, such as ATM fees, will be listed on your contract. You may also have a minimum balance in order to get the highest interest rates on your investments. For high yield accounts, the balance can range from $100 to $5,000 or more depending on the interest rates you want and the bank that you choose.

Some banks offer high yield savings accounts to existing customers without some of the fees that apply to new customers. For instance, you may get free online bill pay for a period of time or you may be able to make free withdrawals from your bank as an existing customer.

The Compounding Period

High yield savings accounts can earn more money during a shorter period of time, called the compounding period. Make sure that you won’t suffer any penalties if you don’t use the account, as well. Choosing one account for your investments is a good idea, and ensures you are aware of the movement in the account. Aim for a quarterly compounding period that accrues interest every three months, and pay close attention to the account and the fine print to ensure you are seeing the maximum amount of returns.

Annual compounding periods aren’t ideal, and typically aren’t available. Some banks provide interest on the account balance on a monthly basis rather and quarterly. Take the time to research your options carefully to ensure you have the best interest rates possible when opening a high yield savings account.

By High Yield Savings Accounts

The founder and editor of with a passion for personal finance and experience in the financial industry.