A large segment of the population strives hard to grow their income in all possible ways. Demanding a higher salary is a more difficult task compared to learning how to save more money for increasing overall income.
In case of interest-generated income, various types of online savings accounts can be used to maximize interest rates, creating better options for debt management and savings.
The importance of high yield savings accounts
Well, majority of you may say that in case of all interest paying bank offers, the lowest rates are generally for savings and money market accounts. So what’s the reason to put money in a savings account rather than other lucrative markets?
The actual reason is that there are a number of understated advantages associated with saving accounts.
One of the perks of online banks is that they offer considerably higher interest rates as compared to conventional bank savings accounts. A good example is a discover bank online savings account or other interest generating accounts are excellent examples of growing income money via an online savings account.
The reason why online banks have higher interests is that they have less overhead costs. Therefore, they can offer better savings to customers. According to the US Treasury, the Annual Percentage Yield of online banks offering online savings and money market accounts is 1 percent. This is high as compared to the 0.11 percent of national average.
Another reason why this strategy works better is that bank accounts have less risk as opposed to the stock market. You can also compare it with other investment vehicles, and the results will reveal savings accounts are secure growth places. Since the money is FDIC insured, there’s no risk that you may lose your principle.
Additionally, the saving accounts let you access your money. This is different from the case of conventional certificate of deposit where the withdrawal of principal can only happen once. So, if the account is closed pre-maturely, you also have to pay a penalty.
The online accounts related to savings and money market allows up to six transactions/ statement cycle. For those who need consistent access to money, such an account would ideally serve their needs.
Crash budgets are important to bear the unexpected hits. The fiscal meltdown of 2008 left many financially crippled in its wake. The presence of liquid assets that can work as emergency funds is vital.
This leads to another advantage of the online savings accounts that they work well for emergency funds. So, the first section of the post highlights advantages related to flexibility when it comes to such accounts.
It’s possible to sum up the benefits in this manner:
- There are no recurring service charges.
- You have low to non-existent minimum balance requirement.
- There are no initial opening payment requirements other than the starting balance.
- These accounts can be opened instantly.
- The amount of paperwork needed is very little.
Boost your savings.
The notion of debt management can be catered in a better way if you have more savings. As the trend has been described above, the notion of online accounts can have a positive effect on your wallet.
A number of fiscal analysts agree on the figure that the online savings related accounts offer a rate that is generally six times higher than traditional banking rates.
As far as the interest rates are concerned, the Federal Reserve has specifically announced that it would maintain them until the unemployment mark goes below 6.5%. Considering even the most optimal of scenarios, this figure can’t be possibly achieved this year. So this means that if you need to increase your saving, an online account seems like a viable option.
In the case of Discover Bank online savings account example above, the rates go as high as 2.2% which means that such an online savings account would generate sufficient money to be a choice of priority.
This being said, the factors for choosing an online account depends on the size, location, online presence, range of financial offerings and interest rates are paramount.
In addition to the bank that has been described above, Ally Bank, American Express Bank and Sallie Mae Bank have performed well in 2013.
Using the online account
A related parameter to be addressed here is the usage of the online account. If the savings account is being used for merely checking the balance/transactions, it’s simply being underused.
It’s also a reality that many people miss out on the major benefits of the service.
It’s possible for the account holder to use it for making payments through a simple dashboard. In addition to managing your savings, online accounts make your financial life easier. The control panel can be used to pay your household bills online.
The point about paperwork that was highlighted earlier is also relevant. A survey was conducted from Fiserv, a financial technology provider, related to financial services. One of the important inferences from the survey was that as many as 64% of their consumers have lost paper bills. Additionally, 57% often lose them in mail.
If the online account is used, such concerns can be removed. E-commerce integration in finance allows not only savings management, but also allows management of e-bills, all in the same platform.
College students can use these saving accounts as a worthwhile financial choice. It has been often seen that in the case of financial matters, a majority of students aren’t able to make the right choice.
The areas that college students target should include good options such as checking accounts, savings accounts, credit cards, loans and investment accounts. All of them are intricately linked to the performance of the savings account, since they are going to generate money in the long run.
So, students would ideally need financial products that charge low and require minimum balances. These are all hallmarks of the savings accounts.
In a nutshell, the description that has been presented gives a holistic overview of the range of usage of savings accounts. It also allays conventional fears, which aren’t backed up by logical explanations. Your financial decisions are quite important, so it’s better for you to step on the right foot since the start.