Pros And Cons Of High Interest Savings Account

By Simon Volkov

High interest savings account refers to accounts that pay a higher rate of interest than traditional savings. While the term ‘high interest’ is somewhat of an oxymoron, those deemed as paying a higher rate of interest will yield account holders with around .75-percent more than a regular account.

It is helpful to compare high interest savings accounts before depositing funds. One good source for account comparison is Bankaholic.com. A division of Bankrate, Inc., Bankaholic provides an extensive list of banks and credit unions along with interest rates, deposit requirements, service fees, and transaction limits.

According to Bankrate, consumers should look for banks that compound interest daily. The majority of banks compound interest either on a quarterly or annual basis. This tends to cause adverse effects when account holders withdraw funds.

Compounded interest isn’t going to make a big difference when balances are below $10,000, but can add up over time. If you don’t plan on depositing large sums of money into a high interest savings account it is smarter to spend time comparing service fees and minimum balance requirements.

For example, if you locate a bank that compounds interest daily, but requires a minimum balance of $1,000 and charges a monthly service fee it might be smarter to deposit money into a lower interest account that does not charge fees or require a minimum balance.

Another important consideration of any savings account is hidden fees. These can come in the form of ATM fees, monthly maintenance fees, and transaction fees. Banks often limit the number of transfers that can be made between savings and checking accounts.

For most, the limit is four transactions per month. Account holders who exceed the limit may be subjected to fees for each transaction. This can quickly eat-up funds and eliminate the additional interest earned through high yield savings. If you aren’t able to comply with terms it is best to seek out banks that do not place limitations on accounts even if it means earning a lower rate of interest.

It can be beneficial to seek out online banks offering high interest savings accounts. Internet banking is offered through many of the national banks, as well as banks that only engage in online transactions. Some of the more popular Internet banks include: E*Trade, EverBank, and First Internet Bank.

Current economic conditions have let many people unable to contribute to savings. However, even when times are hard most people can find a way to deposit $10 a week into a savings account. While minimal deposits won’t make you rich overnight they can add up over time.

Individuals struggling to make ends meet may find it helpful to obtain credit counseling to review personal finances and determine where expenses can be slashed. Nearly every metropolitan city has credit counseling agencies that offer reduced cost services.

Those unable to enter into credit counseling should at least sit down with a pencil and paper and make a list of income and expenses. People are often unaware of the nickel-and-dime expenses that eat away at their household budget. A good way to find out where your money is going is to track daily expenses. This can be as simple of writing down every penny spent on a piece of paper or creating an expense spreadsheet.

While it may seem impossible, it is important to work toward the goal of saving at least 10-percent of your monthly income. Reaching the goal may take a year or two, but with patience and perseverance anyone can save money if they take time to develop a household budget and stick to it.

In order to have money for the future it is imperative to start saving today. Start by opening a high interest savings account and deposit as much as you can afford while striving to reach the 10-percent goal.

About the Author: Simon Volkov is a private real estate investor who shares personal finance and money management information and resources. He provides additional benefits of

high interest savings account

, along with budgeting tips and wealth building strategies at

SimonVolkov.com

.

Source:

isnare.com

Permanent Link:

isnare.com/?aid=754685&ca=Finances