What Are High Interest Bank Accounts?

High interest bank accounts are very popular among depositors. Compared to the regular types of deposit, this account generates higher rates and therefore makes the money grow easily.

Annual Percentage Yield (APY) & Interest Rate

The least APY rate your money can make with a high interest bank account is more than 1%. However, your savings can generate more if you look for banks that offer 2 or 3% APY. Comparing each bank's rate might be time-consuming, but it is a wise move to help your money multiply faster.

E-banking offers higher interest rates than conventional banking. Regardless of the amount deposited, online banks offer a return of the money deposited even with a checking account that most traditional banks don't do. When it comes to savings account, you will find that tradional banks have only an interest rate of 0.1 to 0.3% while e-banking offers 3.5%.

Types of Bank Accounts that Gain High Rates

Money market and certificate of deposit (CD) accounts are the type of high interest bank accounts where you can get more profit. However, these types of accounts, specifically CDs, have special terms and conditions. Some of these conditions include a required amount that should be deposited and a maturity date is applied. You cannot withdraw the money until the term expires.

Other Types of High Interest Bank Accounts

Fixed-Term Deposits

Term deposits can be fixed for various durations, from as short as seven days to as long as five years, depending on the depositor’s requirements and eligibility. Generally, the longer the term and the more money invested, the higher the interest rate. Term deposits are especially useful when interest rates are high as the fixed rate will protect the savings against possible lower interest rates in the future. However, a penalty will be charged if the money is withdrawn before the term is up.

Online Savings Accounts

Online savings accounts are high interest bank accounts too, but unlike fixed deposits, they allow account holders to withdraw money without restrictions. In general, an online savings account gives a much higher interest rate than a normal savings or transaction account. It’s a good place to park money and earn interest while waiting for other better investment opportunities to come by. Plus, money can be easily accessed when needed without penalty, as an online savings account is often linked to a transaction account, allowing money to be transferred and withdrawn quickly when needed.

Do note that the interest rates are variable and not fixed, meaning that they may go up and down. So online savings accounts holders will benefit when interest rates are up and similarly affected when they drop.

Source: www.finweb.com & www.familyfinances.suite101.com