How Do Savings Accounts With High-Interest Rates Work

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Interest is the cost you have to pay when you borrow money, but you can also collect it when you lend money to another party. However, as a regular individual and not a financial institution such as a bank, you have rare occasions for anyone to come and pay you to borrow money. So, you cannot lend funds to many people. So, how are you going to make good use of your money by taking the benefit of interest? The answer: a savings account.

When an individual credits their money in the savings account, the money is borrowed by the bank itself technically and so the bank will pay the account holder interest in return. The interest rate is determined by the bank.. 

The rate of interest decided by the bank dictates how much the bank would pay the account holder so they credit money in their savings account and let the bank borrow it. Account-holders can check out how their savings accounts fare against other savings products by using Annual Percentage Yield (APY). APY means the effective annual rate of return taking into account the effect of compounding interest. 

Since the APY is dependent on the interest rate and how many times the interest compounds, you can use it to know how much you would make in interest each year. Both are indispensable aspects of how interest is calculated on an account as they affect how much money the account holder would make over time. 

How do these accounts work?

A high interest savings account is just a simple interest bearing savings account held at a bank that provides a higher rate of interest than a standard bank account. It usually pays 20-25 times more interest than a standard one. People are most likely to have it at the same bank where they own their checking account. The reason behind it is the ease of transferring funds between two accounts.

High-yield accounts typically offer free checking, with no minimum balance requirements, and the potential for earning a high annual percentage yield (APY),1 provided certain conditions (“qualifiers”) are met. (Note: The APY is not necessarily the same as the advertised interest rate). Some common qualifiers include engaging in a certain number of debit card transactions monthly (usually 10 to 15 transactions), making at least one direct deposit or Automated Clearinghouse (ACH) payment monthly, enrolling in the bank’s online banking program, and agreeing to receive electronic bank statements.

However, these days, both internet-only banks and traditional banks are offering customers across the country the advantage of using online account opening, and it has caused the competition on saving rates among banks to be skyrocketing. But first, you need to know what interest means regarding a savings account and how it works. 


➢ Attractive rate of interest 

• Superior to current money market and short term bond rates 

➢ Full liquidity

 • Ability to withdraw funds at anytime

 • No need to match investment maturities with cash outflows

➢Ease of administration 

• Deposits and withdrawals processed with a single email request

The best saving accounts with high-interest rates

Saving AccountAPYMinimum initial deposit
Sallie Mae, SmartyPig0.70%$0
CFG Bank0.66%$1,000
Affirm0.65%Any amount
Fitness Bank0.65%$100
ConnectOne Bank0.65%$2,500
Axos Bank0.61%$250
Live Oak Bank0.60%Any amount
Prime Alliance Bank0.60%Any amount
First Foundation Bank0.60%$1,000
Customers Bank0.60%$25,000
Vio Bank0.57%$100
SFGI Direct0.56%$500
Comenity Direct0.55%$100

Savings accounts with high-interest rates can be very useful to increase your money without actually having to put it into some investment.

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The content of this website is for informational purposes only and does not represent investment advice, or an offer or solicitation to buy or sell any security, investment, or product. Investors are encouraged to do their own due diligence, and, if necessary, consult professional advising before making any investment decisions. Investing involves a high degree of risk, and financial losses may occur.

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