These Popular Savings Accounts Could Cost You Hundreds of Dollars per Year
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A savings account that only keeps your money safe isn't a very good one. These accounts are supposed to reward you for keeping your cash there through monthly interest payments. But what you get varies a lot from one bank to the next.
One type of savings account in particular is really underwhelming, but that doesn't stop millions of Americans from using it. If you're looking to grow your wealth as quickly as possible, it's time to say goodbye to these forever and try something new.
Biggest doesn't always mean best
The largest and best-known banks in the U.S. are brick-and-mortar giants like Chase and Bank of America. They have branches in states across the country and a full suite of services, including one or more savings accounts.
These accounts have a few things going for them, like FDIC insurance, which protects your money up to $250,000 per person per bank in case of bank failure, and multiple ways to access your cash. But when it comes to interest rates, they are the lowest of the low.
Many brick-and-mortar savings accounts offer a lackluster 0.01% APY. With one of these accounts, you'd only earn $1 on a $10,000 initial deposit in a year. That's a really poor return on your investment. It's even worse when you consider that you could pay monthly maintenance fees, depending on your account balance and the bank's rules. This could potentially cost you money over time.
And let's not forget that annual inflation rates are almost always higher than 0.01%, so the buying power of your savings might be declining even while its dollar value grows. All in all, it's not a pretty picture.
Put your money where it'll do you the most good
High-yield savings accounts are the best place for most people to put their savings today. The top accounts have APYs near 5.00% right now. That would earn you $500 in a year on a $10,000 initial deposit. Even better, most of these accounts don't have minimum balance requirements or annual fees. They're just there to help you make money.
These banks do have some drawbacks, though. It can be a little more difficult to access cash directly from a high-yield savings account. However, several top online banks now offer ATM cards that allow customers to withdraw cash when needed.
Some of these banks also aren't as full-featured as their brick-and-mortar counterparts. You might be able to find savings accounts and certificates of deposit (CDs). But you might not be able to open a checking account at the same bank, for example.
Even if you prefer to do most of your business with a brick-and-mortar bank where you can get personalized support and access cash easily, the payoff of a high-yield savings account is worth the extra hassle of having to transfer funds back and forth from another bank. Whenever you're ready, just pick a high-yield savings account you like and open an account from the comfort of your own home.
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