ALBANY, NY (NEWS10) – Think it takes a lot of money to open a high interest savings account? Think again – two of the best online savings accounts (Marcus by Goldman Sachs and American Express National Bank), according to Nerdwallet, do not have a minimum balance.
The difference between a regular savings account and a high yield savings account, sometimes referred to as a high interest rate savings account, is that the income is up to 10 times higher. This makes them more ideal for saving on a home, car, vacation, or emergency fund, depending on businessinsider.com.
According to Federal Deposit Insurance Corporation (FDIC), the average rate for a savings account is 0.06%. The average high yield savings rate is 0.50% annual percentage return (APY) or less.
Marcus by Goldman Sachs offers an APY of 0.50% on its high yield savings accounts, and American Express National Bank offers a .40%.
For example, if you had $ 10,000 emergency fund and transferred to a high yield savings account with 1% interest, compounded daily for five years, you would earn $ 520.01 in interest only. Leave it for 10 years, and that $ 10,000 would increase to $ 11,067.05. Back in a regular account earning 0.05%, that same $ 10,000 would only have earned $ 50.82 over 10 years.
Bankrate.com Also has a list of the best high yield savings accounts online for September on their website. Unlike regular savings accounts, there are limits to the number of withdrawals people can make on high yield savings. Before signing up, ask the bank if a high yield savings account is the best option.