Here’s what you must know before opening a savings account
Savings accounts are a safe option when it comes to investing money for a steady return. It is one of the alternative modes of saving for retirement. Savings accounts are easy to open and offer flexibility in accessing cash in comparison to cash deposits and other financial instruments.
Refer the commonly asked questions about savings account and find out the top 10 best savings accounts that offer a decent return on your investment.
What are the factors to consider while choosing from the best savings accounts offered by popular banks?
- Savings accounts offer nominal returns on your investment, so you must consider the interest rate for both online and traditional savings accounts.
- The compounding cycle on the interest rate will also determine the amount that will be accumulated over a period.
- The top 10 best savings accounts offer daily, weekly, monthly, and quarterly interest compounding.
- The number of withdrawals per statement cycle is another factor to consider.
What are the benefits of opening a savings account?
- Savings accounts are a great place to store cash and at the same time earn a nominal interest on the accumulated amount.
- Not many people know this but most savings accounts are federally insured up to $250,000, thereby making it a safe financial instrument.
- Savings accounts provide flexibility and liquidity that allows you to access and withdraw cash at any time during the year.
- Most forms of retirement saving accounts don’t offer this liquidity as the funds are tied up for a specific period in one investment or the other to provide a profitable return on investment.
- Savings accounts allow up to six withdrawals or transfers in a single statement cycle.
- Although savings accounts may not offer a high rate of interest, the amount compounds periodically to offer you more than what you had invested earlier.
Are there any drawbacks associated with opening a savings account?
- The low rate of interest is one of the disadvantages of keeping your funds in a savings account as alternatives like cash deposits or money market accounts offer a better rate of return over time.
- The risk is in the opportunity cost lost by investing in a low-yield savings account, even if it is one of the more safer modes of investment.
- Unlike checking accounts, savings accounts have a limit on the number of withdrawals that can be made during a statement cycle.
- There is a nominal penalty applicable in case you exceed the withdrawal limit of 6 times for most banks.
- Banks may charge a fee for opening, closing or maintaining a minimum balance in your savings account.
What are the benefits of opening an online savings account?
- Online savings account offer a higher rate of interests in comparison to traditional accounts offered by popular banks.
- The lower overhead cost to offer banking services is the main reason behind a higher rate of interest and low fees for services.
- Online banks also offer round the clock customer service and advanced internet technologies to provide better banking services.
- Ally is one of the popular all-round savings account that offers an annual percentage yield (APY) of 1.60%.
- HSBC Direct Savings is another option that offers an attractive APY of 1.80%.
- Capital One 360 offers fee-free savings account for a nominal APY of 1%.
- Synchrony High Yield Savings is another FDIC insured option to consider for a higher APY of 1.85%.
- CIT Bank High Yield Savings account requires a minimum monthly deposit of $100 but offers an average APY of 1.35%.
- Barclays is another popular bank that offers an attractive APY of 1.85%.
- EverBank is another FDIC insured popular option that you can consider with an average APY of 1.31% for the first year.
- CIBC offers one of the highest interest rates for savings accounts at 1.90%.
- American Express National Bank also offers a decent APY of 1.75% for a minimum $1 balance account.
- Consider Northfield Bank if you are looking for high returns. Of all the options for online and traditional savings banks accounts, Northfield Bank offers the highest APY of 2.25%.
- The top 10 best savings accounts offer an average APY rate of 1.85% to 1.90% and these rates may vary depending on various factors such as the economic fluctuations.