Alternatives To High Yield Savings Accounts

Oct, 09   -   No Comments   -   Candice

The average high yield savings account pays a mere 0.06% annual percentage yield ( APY). Many of our country’s largest banks pay much less than that. Are you sick of earning only a return around that figure? Consider making an easy switch to a high yield savings account and you will find rates of up to seven times more interest at some well-known online banks. The catch is that you need to have the wherewithal to weather the storm of ups and downs in the banking industry during the financial boom and the economic slump.

One option is called interest rate linked transfers, also called interest rate swap. If you are considering making such an investment, be sure to read through the terms. These types of transfers occur when you take out a higher than normal loan against your high yield savings account and then immediately take out another loan with a lower than normal interest rate. It sounds too good to be true but it is in fact a very popular move amongst investors during the current interest rate uncertainties. You can use this strategy for anything from home improvements to major expenditures like buying a car. What you should remember is that your original loan may be due for renewal soon and if you want to keep your interest rate on your original account lowered, this may not be the way to go.

Another option available to you is called conversion of high-yield savings accounts to low-interest bearing investments. This takes place when banks transfer the balances of high-yield savings accounts to low-interest bearing accounts in order to help them keep operating within their regulated funds and loan programs. However, there are instances where the bank may convert your account without your permission or notice. Banks rarely announce these conversions.

An easy way to convert your high-yield savings accounts to low-risk investments is called rollover. The banks will first send you a notice that they have made a change to your account. In many cases, you will have up to three weeks to make alternative arrangements. If you have not taken advantage of the opportunity, the bank will close your account and close your checking account as well. You will have to start the process all over again with a new bank if you want to open an emergency fund.

High yield online savings accounts can be closed with little notice provided you do not cancel the automatic transfer process. This also applies to most traditional high-yield savings accounts. If you close the account, it cannot be reactivated until the next calendar year. If you close the account and then reconnect the account, you cannot access any funds until six months after the reconnection. If you are trying to reestablish a High Yield Savings Account, it is possible that the high-yield savings programs you had access to are discontinued. Be sure to check with the Synchrony Bank or other institutions you had accounts with before making plans to open a High Yield Savings Account.

Another option for withdrawing money from High Yield Savings Accounts is by using debit cards and/or direct debits. Some banks may allow non-wire transfers. Be sure to read the terms and conditions of the institution before making any non-wire transfers. Also, remember that due to the high interest rates, you will incur fees on all non-wire transfers. As long as you understand the fees involved, you will be able to plan your budget around High Yield Savings Account withdrawals.