High Yield Bank Account

Although the term “high yield bank account” is nothing new, many people do not have a full understanding as to what the term actually means.  However, anyone interested in making money on bank accounts, this term should be understood.  Simply put, a high yield bank account is a type of deposit account in which the Annual Percentage Yield or APY is higher than what a customer would get with a more traditional type of deposit account.  In other words, if a person were to deposit funds in a high yield bank account, the amount of money earned would be more than funds deposited in a standard account over the same timeframe.

A person can open a high yield account at most banks, whether those found locally or online.  Now, the one stipulation that is commonly linked to an account such as this is that the customer would be required to make a higher deposit initially than with a conventional account and the balance maintained would be higher.  Now, for anyone that wants a bank account that would work for them as an investment opportunity, the high yield account is considered one of the best options available.

For brick and mortar banks, the high yield bank account is typically offered only to certain customers.  These customers would need to meet specific criteria such as opening the account with a significant amount of money, maintaining a higher than average balance, and using the account only on occasion.  In fact, the number of transactions allowed with a high yield bank account through a brick and mortar bank would like have a set number.

With the other option of opening an account such as this through an online bank, keep in mind that overhead expenses are much lower than a physical bank.  This means the online bank would not be spending as much for employees, building rental, paperwork, etc.  As a result, the customer interested in a high yield bank account would actually benefit by being offered a higher interest rate than what the brick and mortar bank could offer.

Although choosing a high yield bank account through an online bank certainly has an advantage over a brick and mortar bank, both options come with tremendous benefits.  For instance, when looking at the interest paid on this type of account compared to a standard savings account, usually the amount paid is five to ten times greater.  These accounts also provide a number of convenient features to include ACH transactions, direct deposit, and automatic deposits.  With a high yield bank account the customer would also have the ability to pay bills online but without being charged for this service.  Finally, this account makes it extremely easy for a customer to access money using ATM services.

Just as there are many positive aspects to opening a high yield bank account, some negative factors should also be considered.  For instance, the interest rate paid would fluctuate.  Since the rate is set by central banks, when there is movement in the market it would be expected to see interest rates change and in fact, the rates would change often.  Additionally, for this type of account deposits typically have a 10-day holding period, which means once a deposit were made, the money would not actually go into the account for 10 business days.

Even with a few drawbacks, the high yield bank account is still a great option, especially for people who want to use the account as a type of investment.  However, it would be important to look at a variety of reputable banks, choosing the one that offers the best terms, rates, and services.