Private mortgage insurance (PMI) can be an expensive requirement for your home loan, as it adds more to your monthly payment costs. This is a safeguard that your lender will take out to cover a portion of the amount you borrowed in case you default. Up Next: P.I.T.I.: Understanding The Parts Of Your Mortgage Payment […]
Do You Need a High-Yield Online Savings Account?
Saving up your money in order to buy a home shouldn’t be complicated. But if you’re looking for a low-risk investment, a high-yield online savings account may be for you. These types of savings accounts are offered solely online and have higher interest rates than traditional savings accounts.
Pro: High Interest Rates
If you want your money to earn interest quickly, high-yield online savings accounts can have up to 1.00% annual percentage yield (APY). APY determines the total amount of interest paid on an account over the course of a year. However, higher doesn’t always mean better so don’t be tempted by high rates. Find an account that has the services and features you want.
Con: Longer Waiting Period
If you need money immediately, a high-yield online savings account isn’t for you. These accounts typically have a five day waiting period before funds can become available to you after you make a deposit.
Pro: Little or No Minimum Balance Requirement
High-yield savings accounts often have a smaller minimum balance requirement than traditional savings accounts. That way, if your account falls under a certain amount, you won’t be charged fees. The reason online savings accounts can have little or no minimum balance is because unlike physical banks, they have less upkeep.
Con: No In-Person Customer Support
Because this type of savings account is purely online, you will not have the option of in-person customer support. If you run into an issue, you will have to call customer support or chat with them online since there is no brick-and-mortar bank for you to go to.
Pro: 24/7 Account Access
Because the savings account is online, you have 24/7 access to your funds to withdraw or deposit money. This unlimited access is good if you tend to do your banking after traditional banking hours are over so you don’t have to wait for the next working day.
Con: Limited Deposits & Withdrawals
If you need to make large or frequent deposits, or make more than six withdrawals a month, a high-yield savings account is not for you. These actions are limited because Federal Regulation D states that in order to be classified as a savings deposit, the account cannot be withdrawn from more than six times per month.
Your deposits and withdrawals are also limited in order to prevent tax evasion and money laundering. If you deposit or withdraw more than $10,000 at one time, the bank is obligated to notify the government.