High Yield Account

September 8, 2010Bank Accounts and Ratesby EconomyWatch


A high yield account is a deposit account offering higher APY (annual percentage yield) than traditional deposit accounts. High yield accounts are available through both brick-and-mortar and online banks. Such an account requires one to keep a higher initial deposit and maintain a high balance. High yield savings accounts are among the most recommended investments.


Banks that Offer High Yield Accounts

Both online banks and those with a physical setup may offer high yield accounts.

  • Online banks: As these banks have no major expenses such as those on cashiers, rent and paperwork, they pass the savings to their customers via high yield accounts, offering higher interest.


  • Brick-and-mortar banks: These banks do not have as large savings as online banks. They offer high yield accounts to valuedcustomers. In order to qualify, one must meet at least one of the following criteria: (a) open with a huge initial deposit (b)maintain a high balance and (c) make limited transactions.


Benefits of a High Yield Account

Advantages of a high yield account include:

  • High interest rates: The interest on a basic savings account could be as low as 0.20%. High yield accounts offer five-to-tentimes higher interest than basic savings accounts.
  • Automatic transactions: High yield accounts include facilities like direct deposit, ACH (automated clearinghouse) transactions and automatic deposits.
  • Pay bills online: Many online high yield accounts offer the free service of paying your bills online.
  • Easy access to money: A number of high yield accounts offer ATM access at several locations.


Drawbacks of a High Yield Account

Here are some of the disadvantages of a high yield account:

  • Fluctuating interest rate: The interest rates offered on high yield accounts change frequently according to the benchmark set by central banks. This can also be a result of competition in the market.
  • Locking period: Most banks have a condition of a ten days holding time for deposits that many account holders do not accept. A thorough research could result in you finding banks that offer a short holding time.

FNBO Direct, HSBC Direct and ING Direct are some of the popular high yield accounts in the US.

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