Author: Richard Greenwood Added: July 7, 2008
Savings accounts are wonderful tools to help you save toward a goal, establish an emergency fund, or keep cash handy for unexpected expenses. Comparing savings accounts is a good way to make sure you find a high interest savings account, as well as other factors that might matter to you, like electronic access, debit card access, or automatic monthly transfers. Banks, of course, are always looking to attract new customers, and introductory interest rates are one way they do that. Just as credit cards may offer zero-percent rates to bring in new customers, banks offer higher-than-normal interest rates for a specific amount of time. When comparing savings accounts, this is one thing to take into consideration, but not the only thing. Assuming you keep the account for a while, the ongoing interest rate will actually be more important in the long run than the initial interest rate. However, if you have a large amount of short-term money to invest, for instance, money you'll be using to close a house within a few months, the higher short-term rate can make a large difference. Some of the best long term savings accounts do have opening offers but others use the offers to pull you in but have downsides hidden in the small print. In some cases banks require a minimum balance to be mainatined either permanantly or for a certian period after you open the account to avoid being penalised by fees. If you withdraw before the specified time period is up, you'll pay for it. In some cases the penalty amount can more than negate the interest you earned. Some accounts may be assessed fees, either to open, to close, or on an ongoing basis. Again, these must be disclosed, but they're usually in the fine print. Especially if you choose an online high interest account, you'll want to think carefully if there are fees involved. One of the main advantages of online accounts is low or no fees, since the bank doesn't have to maintain brick-and-mortar branches. If you find the account with the highest rates has it's benefits countered by high fees then you might want to keep looking. Another thing to look for are hidden interest penalties in the month you withdraw your funds. These fees are often not noticed in the small print but can have a significant impact to the real return you make on your investment. Getting less than you thought could put a crimp in your plans. Sometimes, in order to get an advertised rate, you need to deposit a fairly high minimum. This can be $10,000 or more, in some cases. The minimum deposit amount can be combined with an early withdrawal penalty, turning a high interest savings account effectively into a short-term certificate of deposit. Make sure an account with these restrictions will serve your needs before signing up and sending your money. High interest savings, whether via a standard bank or an online bank, are a great tool, and should definitely be considered as an addition to your savings plan. Just be sure you read all the information about the account before you sign up, and know about any dates for withdrawal and any fees that might be associated with the account, either on a one-time basis or on an ongoing basis.
--- Richard Greenwood is Director of the Click 4 Group which run a number of financial comparison websites compare savings accounts from leading banks such as Raboplus saving accounts and
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