Banking Explained

Today more than ever people are looking for a high interest savings account. The money people are savings is growing considerably. This money needs to be placed somewhere that can be beneficial to the saver until that money is used or allocated to an investment. The smartest people in the financial markets take advantage of every bit of interest they can earn whether it is in the long run or the short term. High yield interest savings accounts are a perfect place for this short term cash.

When shopping for a savings account it is important to have trust in the financial institution you will be doing business with. Always insure the institution is FDIC insured. Smaller banks sometimes offer some of the highest interest rates on savings accounts, but it is important to do proper research when considering small banks that you have little knowledge of. Big banks are normally considered safe and trustworthy by many people; however, that is not always the case. Bank of America was using a software program that automatically calculated how to charge customers the most money for overdrawing their accounts. The program would clear the biggest debit first, and then charge overdraft fees on each little charge that came in after, even if the smaller charges should have been cleared first. If a bank as large as B of A will attempt to gouge their customers with a method this underhanded, then all banks should have an eye kept on them.

Another thing to consider with a high interest rate savings account is the terms of the contract. Banks are notorious for their fine print. Many of the higher interest rates normally advertised are teaser rates. These accounts may pay a great interest rate for three months or six months and then they are reverted back to a lower standard rate. In addition, many savings accounts will institute a minimum balance to qualify for the top interest rate. Many will also place a maximum balance that can earn the higher rate. If you are placing $25,000 into an account and the financial institution has capped the interest rate at $15,000, then you will only receive the higher rate on the first $15,000 and the lower rate on the remaining $10,000. Finally, fees on savings accounts need to be considered when shopping. Falling below a required minimum may result in forfeiting the accrued interest, or the institution may have account maintenance fees that wipe out any interest earned.

The type of institution that you choose to place your savings with can have a great deal of impact on the rate you will receive. Traditional brick and mortar banks have usually paid the lowest interest rate on savings. These banks have huge overhead with branches on nearly every corner. These banks generally rely on long time customers to keep there savings in the same account and never shop for a better deal. They pay paltry interest rates, but they seem to maintain a steady balance in their savings account business. Recently, many non-traditional financial institutions have entered the playing field when it comes to savings accounts. Brokerages have been offering savings accounts that can be managed online or often times in their branches. In addition, some insurance companies such as State Farm have issued savings accounts. However, some of the highest interest rate savings accounts are issued by internet only banks. These financial institutions have taken advantage on the low costs of operating online. They can be operated from one location and all transactions are placed online, over the phone, or through the mail. This saves a great deal on overhead and allows them to pay higher rates on savings accounts.

There are a number of features to consider when deciding on the best online savings account. The interface the online bank uses should be easy to navigate and use. Most online savings accounts will provide convenient links between your savings account and other accounts such as your checking account. This makes moving money between these accounts fast and easy. Also, it would be ideal if the software the financial institution uses would be compatible with other financial software such as Quicken and Microsoft Money. Programs such as these are popular for organizing your financial life, and even if you do not use them currently you may use them in the future. Finally, most online banks offer postage paid envelopes for deposits. This is a nice feature if you plan on sending in a lot of checks to your savings account.

Many people do not switch their savings accounts because of a lake of action on their part. Many believe it is too much of a hassle to switch between financial institutions. To much paperwork and phone calls to get everything straightened out. That could not be further from the truth. Many savings accounts can be set up in minutes online. A quick form must be completed with your personal information and a current checking account number and routing number. That is it! Many of these accounts can be set up with a minimum of $1. You can be on your way to earning a great interest rate on your savings with little hassle and minimal time invested.

There are a number of financial institutions that are consistently in the top of the highest paying savings accounts. Bank of Internet located in San Diego, California is consistently in the top interest payers. Do not let the funny name fool you. This is an online bank that is FDIC insured and uses their low overhead to pay great rates. Another bank that consistently pays great rates is Capitol One Direct Banking. They do, however, require a minimum balance of $2,500. This is higher than most online savings accounts, but Capitol One receives high marks for customer satisfaction. HSBC Direct also pays great rates and only requires $1 to open an account. Ally Bank in Utah has been in the top of the interest paying savings accounts recently also. Finally, American Express has ventured into the savings account realm with their American Express High-Yield Savings Account. This account offers a great rate with no minimum balance.

There are always financial institutions paying above average interest rates. The tough part is locating and confirming their rates. Remember to always do plenty of research before investing your money with a bank or other institution that you have never heard of. Look to online only banks for the highest rates and be sure they offer an easy to understand and operate website.