High interest savings account is a type of savings that pays a higher rate of interest than conventional accounts. Prior to the economic recession banks paid interest rates as high as 5-percent on savings accounts. Today, the average rate of interest is less than 1-percent.
Consumers should take time to compare high interest savings account providers to obtain the best return on their investment. Banking industry leader, BankRate, recommends opening savings accounts with banks that compound interest daily. Many financial institutions compound interest quarterly which can reduce the amount of accrued interest.
Fortunately, the Internet has made comparing savings account providers easy and convenient. With the press of a button, consumers can quickly compare banks, interest rates, minimum opening and balance requirements, and service fees.
Many banks offer incentives when customers open high interest savings accounts. However, it is important to read the fine print and determine the true costs. One bank may offer a high interest rate, but charge hefty fees if balances drop below minimum requirements. Others may charge fees for ATM transactions, paper bank statements, or monthly maintenance fees. Fees can quickly deplete earned interest and end up costing more than they earn.
When comparing high yield savings it is best to look for banks that compound interest daily and provide complimentary services. Also seek out banks offering incentives such as low opening and minimum balance requirements. Two good sources for comparing savings account providers are BankRate.com and Bankaholic.com.
Presently, online banks offer higher rates of interest than brick-and-mortar banks. Online banks refer to financial institutions that only offer banking online. However, some conventional banks offer online savings as well. Popular online savings account providers include: SallieMae, American Express Bank, HSBC Advance, Univest Direct, Zions Bank, Ally Bank, FNBO Direct, and ING Direct.
Although the economy is improving, many consumers find setting aside money for savings is nearly impossible. Financial experts such as Suze Orman and Dave Ramsey reinforce the fact that in order to fund retirement, consumers should strive to set aside a minimum of 10-percent of their income. Setting aside as little as ten dollars per week can add up over the years.
Consumers who want to buy a house, save for college tuition, pay off credit cards, and fund retirement should consider opening a high interest savings account. Many first time home buyers are unaware that in order to obtain a mortgage loan they must provide a down payment using money they have acquired on their own.
Lenders prohibit borrowers from using down payment funds from outside sources unless they obtain a VA or FHA loan or NSP grant money through the Department of Housing and Urban Development. The average down payment requirement for buying houses is between 10- and 20-percent.
If you plan to purchase a home that costs $200,000, you will require a down payment of $20,000 to $40,000. The sooner you contribute to a high interest savings account, the sooner you can realize your goal of owning a home.