What is a High Yield Savings Account?
When you are saving for your goals, every penny counts. While all savings accounts earn interest, which helps your balance grow, certain accounts pay dividends at a higher rate. These are known as high yield savings accounts.
High yield savings accounts are interest-earning accounts offered by credit unions and banks that typically offer a higher interest rate compared to traditional savings accounts. These accounts are designed to help you save more money quickly by providing a competitive interest rate on the balance held in the account.
How Does a High Yield Savings Account Work?
A high yield savings account is a deposit account at a credit union or bank. You can deposit money into a high yield savings account whenever you choose. You can make deposits to your high yield savings account in many ways, including:
- Check deposits, either in branch, at an ATM, or through Mobile Deposit
- Cash deposits, at a branch or ATM
- One-time or automatic transfers through Digital Banking
- Direct deposit
Your balance in a high yield savings account earns dividends. Dividends are paid monthly into your account, which helps grow your savings. A high yield savings account pays dividends at a higher rate—or annual percentage yield (APY)—than traditional savings accounts, which means you earn more money at a quicker rate.
What Are the Benefits of a High Yield Savings Account?
The biggest benefit of a high yield savings account is the rate, which is typically very competitive and significantly higher than a traditional savings account. This means you can grow your savings much more quickly than you can with a traditional savings account.
Another benefit of a high yield savings account is the flexibility of the account. You can typically make withdrawals from your high yield savings account as needed. This is different than share certificates (CDs), which also have higher interest rates but require you to keep your money in your account for a set period of time in order to earn those dividends.
What are the Requirements of a High Yield Savings Account?
Most high yield savings accounts will have a minimum balance required to earn dividends. That means you have to keep a certain amount of money in your account in order to accrue interest.
For Credit Union 1’s high yield savings accounts, that minimum balance is $1. Keeping your balance higher than this minimum will ensure that you can continue to grow your savings.
What Should I Use a High Yield Savings Account For?
A high yield savings account can be used for any savings goal. Since a high yield savings account earns dividends at a faster rate than traditional savings accounts, it can help you reach your goals sooner, while keeping your money accessible.
High yield savings accounts are a great place to have an emergency fund because you will be able to grow your savings while also being able to make withdrawals as needed. You can also use a high yield savings account to save for certain short-term goals, like a vacation, a new car, or a wedding, as it will give you the best return on your money.
Credit Union 1 offers a high yield savings account that pays a highly competitive rate and has no minimum balance to open and no monthly service fees. You can open a high yield savings account online, in person at your local branch, and over the phone.
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