Annual percentage yields on best savings accounts have been low for years now. It used to be that your savings account could earn you 4% or better. But, in the current economic climate, anything over 1% is considered a good rate. Even if you’re not going to get rich off the interest on your savings account, you still need a place to stash your emergency fund and earn at least a bit of a return on your money. So, how do you find the highest yield savings account that’s right for you?
How to Choose the Best Savings Account
While rates are not as good these days, at least we have a vast array of information online to help us find the best deal possible. Here are some tips on how to find the best savings account to keep your nest egg growing.
Tip #1: Shop Online Banks and Credit Unions First
Often, credit unions and online banks have better annual percentage yields (APYs) than traditional brick and mortar banks, so you may want to start your search there. Just make sure the institutions you’re considering are federally insured. For banks, that means looking for the Federal Deposit Insurance Corporation(FDIC) seal. For credit unions, the insurance is provided by the National Credit Union Association(NCUA). If the institution is not insured and it goes under, you lose your entire savings.
Tip #2: Consider the Fees, not Just the APY
A good savings account offers more than just a competitive APY. You want to make sure the account you choose has low or no fees, so your interest earnings aren’t consumed in maintenance fees. Let’s say you have $1,000 in the bank. If you’re earning 1.5% interest, that means you’ll get $15 a year in interest. But if you’re paying a $5 monthly fee for not meeting the minimum balance, that adds up to $60 a year, so you’re actually losing money. The lesson here is to read the fine print and compare the fees you’ll have to pay against the interest rate and your expected balance.
Tip #3: Look for Bonuses
With stiff competition among financial institutions to get your dollars into their vaults, you may be able to score a bonus for meeting certain criteria. For example, some banks will give you money if you make monthly automatic deposits for six months without withdrawing anything. Again, make sure you read the fine print so you don’t accidentally disqualify yourself from any bonus offer that made that bank a good deal in the first place.
Tip #4: Consider How it’s Compounded
Another factor that can make a difference in your bottom line is how often the interest is compounded. The more frequently it’s compounded, the more you’ll earn. Some banks even offer daily compounding interest, at least for a certain period of time after opening the account.
Tip #5: Piggyback on Someone Else’s Research
Or, let someone else do the heavy research for you. There are some great financial blogs out there that run the numbers from time to time. But, if you are relying on someone else’s analysis, you’ll still want to do your own local legwork and check out any local credit unions you may be qualified to join.
Although the Equifax breach is frightening, if it helped spark an interest in more people proactively protecting their identities, maybe it wasn’t such a bad thing.
Follow these tips and, with a little bit of research, you’ll find the savings account that’s just right for your nest egg.