If a bank issues a home loan, it's called mortgage. But when you issue a bank a loan, it's called a savings account. It's time to earn the most on that investment.
Do you realize that you're helping the bank earn a lot of money by keeping excess funds in a savings account? Brian gives three tips for choosing the best savings account to get the highest interest rate from your bank
The best place to earn interest is in a Savings Account. Don't waste your time looking for a checking account with a decent interest rate.
Think of a savings account like a loan to a bank. Banks borrow that money and lend it to someone else. They make profit on the difference between what they pay to you for lending (close to 0%), and what they charge people to borrow (on credit cards, usually more than 15%). Nice business! But really, why give banks a 0% loan? Often it’s because of sticky retail deposits. That's the bank's term for account holders who put a lot of money in a savings account and never touch it. Fortunately, many online banks now offer up to 0.9%, and by using our simple rules, you can start earning better returns on your money.
5 things to know
Make sure your deposit is FDIC insured.
All US bank deposits are insured up to $250,000; if you deposit more, then open accounts at multiple banks.
Don’t withdraw more than six times per month.
After withdrawals, fees kick in. For more regular access, open a money market account which also has FDIC insurance.
Make sure the interest compounds daily.
Earn interest every day, so the next day you earn interest on a higher balance, which includes the interest already earned.
You don’t need a traditional branch bank for a savings account.
If you have big cash deposits or write lots of cashiers checks, then okay. But the rate difference between online banks and traditional banks is huge!
If you open a Certificate of Deposit (CD), understand how much interest you forfeit for early breakage.
The amount can be up to 6 months, by law.
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