Thinking of opening a HYSA? Here are 5 things to look for in a High Yield Savings Account.
What is a HYSA?
A high yield savings account is an online bank that delivers higher than average interest rates on the money you keep in the account.
In fact, a HYSA is able to deliver 10-16x more interest than an average savings account. They're able to do this for several reasons, but the main reason is because they are fully online. These banks don't have the overhead cost that normal savings banks have so they are able to pass that savings onto you.
5 Things to Look for in a HYSA
If you're thinking of opening a HYSA, you'll want to make sure you look for 5 things in particular to find the best option for you.
Recommendation for a HYSA can be found here.
1. FDIC Insured
Make sure the high yield savings account you are considering is FDIC Insured. This is important.
FDIC stands for Federal Deposit Insurance Corporation. This corporation is backed by the federal government and protects bank deposits up to $250,000.
If you are going with a reputable bank, it will most likely be FDIC Insured. However, you'll want to double check and make sure.
2. No Fees
Look for a high yield savings account that doesn't have fees. Some of the accounts can have monthly or yearly fees. Those are no good.
Find one that doesn't charge you any additional fees.
After all, this is money you are saving for your emergency fund and 5+ year goals so we can't be bothered with additional fees, right?
3. Good Interest Rate
You'll want to look for a HYSA with a good interest rate. Keep in mind, the interest rate you receive in your HYSA will fluctuate.
The Federal Reserve determines the rates and it's based upon the economy. The Federal Open Market Committee (made up of the members of the Federal Reserve) meets 8 times per year to discuss the plan for monetary policy going forward, with interest rates being a core topic of discussion.
Right now (in March of 2021), an average high yield interest rate you can expect to find is .5% APY. However, last year at this time, it was 1.75% on average. These will fluctuate so don't freak out or move banks when they do. Every bank is affected at the same time.
4. Easy Money Transfers
Find a HYSA with easy money transfers. It should be very simple (with a click of one button) to transfer money in and out of your account.
Keep in mind though that with a HYSA, you'll only be allowed 6 withdrawals per month so don't plan on paying bills with this account. This is because of Regulation D, which is a federal law that only allows 6 withdrawals from online banks like HYSAs. NO mimums
5. No Balance Requirements
Make sure that you find a HYSA with no minimums or balance requirements.
Ever get a letter in the mail when your checking account goes under a certain threshold? Maybe a fee even comes with it as well! That's no good.
Same thing goes for a HYSA. Make sure to look for one that doesn't have balance requirements so that you can use your funds in the case of an emergency without being punished with a fee.
Recommendation for a High Yield Savings Account
Need a recommendation? The banks below are my favorites, but they do have a low minimum that I've noted.
Axos Bank (HYSA)
Axos Bank makes it super easy to start an account and is my personal favorite. Their HYSA compounds daily, which means you will be earning compound interest DAILY instead of just monthly, quarterly, or yearly…which is pretty neat. They also don't have any fees and no minimum balance requirements. They are FDIC insured (an important thing to note) and require only $250 to open the account and will give you a free ATM card, if you need it. It's free to open an account to start earning today.
CIT Bank (HYSA)
CIT Bank is another HYSA I recommend. They are FDIC insured and don't have monthly service fees. You only need $100 to open an account and they have an automatic savings program that immediately will withdraw a certain amount per month that will go into your HYSA automatically so you won't have to think about manually putting money into your account. It's also free to open an account!
High Yield Savings Account Summary
A high yield savings account is an amazing account to house your emergency funds and 5+ year goal money.
A recommendation for a HYSA can be found here.
Make sure that your HYSA checks all the boxes to make the most of your money and keep all proper protections in place.
Happy Saving!!
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