Highest Interest Savings Account, Online Savings Account, High Interest Rate

Highest interest savings account that is also known as online savings account is one of the most convenient and profitable tools for keeping and generating cash in modern banking system. A lot of questions usually appears about what exactly is highest interest savings account and what features does it have. Below we try to answer some of the briefly.

What is highest interest savings account?

Highest interest savings account is savings account that is provided by an online bank and pays significantly higher annual percentage yield (APY), than similar accounts provided by traditional banks do. The name itself suggests that such accounts pay “high” interest rate, and in most of the cases this is the case.

What is an online bank?

Online bank is licensed financial institution that provides highest interest savings account to its customers. Usually it does not have physical office, where it serves its customers. This allows online bank to reduce costs and offer its customers much higher annual percentage yield than traditional banking institutions can offer. Instead of providing traditional “face-to-face” banking services, online banks have a secure website that allows online bank customers to conduct financial transactions online. Such websites allow customers to open and close accounts, transfer money from and to savings account, pay bills and etc.

What benefits do such accounts have?

These accounts have a few important advantages:

- offers high annual percentage yield (APY) (Check APYs for 2010);

- since cash is hard to access, it helps you save;

- it is secure, deposits are insured by FDIC;

- since you get interest income, it helps you overcome adverse effect of inflation;

- lets you set up automated bill payment and earn interest before the money is actually transferred;

- lets you create “bad times” reserve;

This type account has many more benefits.

What is the Annual Percentage Interest that such savings accounts pay?

Interest varies from one banking institution to another, but on average they pay 1-4% annual percentage interest in USA (check out our rates guide). In other countries rates are different and in many cases considerably higher than in USA.

How can calculate what I will get in 1, 2 or 20 years, if I decide to put my money on highest interest savings account?

Use the calculator below. It is pretty easy to use. Just enter amount of money you are going to deposit as you open the account (Initial Investment), interest rate that the bank offers (Annual Percentage Yield), number of years you are going to keep your money in the savings account (Number of Years to Invest), amount of cash you are going to deposit additionally (additional contributions) and contribution period.

Are online banks and highest interest savings accounts safe?

The first thing you ask, when you hear the phase “online bank” is whether it is safe or not and should you trust your money to “some website”. What if it shuts down? Where should I look my money for? The answer is simple: online banks are as safe as traditional banking institutions. They are also licensed and their highest interest savings accounts are also insured by Federal Deposit Insurance Corporation (FDIC) (up to $250,000). So virtually in this sense there is no difference between this type of savings accounts and ordinary savings accounts.

How can online banks provide higher interest rate on their highest interest savings account, than traditional banks on their certificates of deposit and savings accounts?

As it was already said above online banks do not have physical office that serves their customers. Neither do they have the staff that would work in the office, so online banks manage to save a lot on this. This allows them to pay higher and more competitive interest rate to their customers than traditional banks do.

What should I take into consideration, when choosing highest interest savings account?

There are two points that you should take into consideration while choosing among highest interest savings accounts. You need to specify interest rate that an account offers and customer services associated with it. Interest rates are important because they bring you income and customer services are important because they make your relationship with the bank easy or complicated.

In terms of customer service the main thing to consider is whether a banking institution provides secure and reliable website that allows you to easily navigate and make transfers. It should not be necessary to call or write to customer services department every time you access your online banking website and ask for help. But if you do need to call customer services department anyway, this process must be easy and quick.

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