Know The Factors To Consider Before Opening A High-Interest Savings Account
Ask any financial advisor and they will tell you that if you are making money from your business, a good portion of your profits needs to be stashed away. What better way to do so that with a high-interest savings account?
While most business use a business savings account or a business current account – a high yield or high-interest savings account is the ideal way to go about saving for your business’s future. A high-yield or high-interest savings account is a type of savings account that typically pays 20-25 times the average of a standard savings account. Before you consider opening a high-interest savings account, you must consider factors that will help you zero in on a financial institution or a bank. You might want to consider your current bank as you are already in a relationship with them – although convenient, it will not hurt to look around and find something that will be best suited to your business needs.
Factors to consider before opening a high-interest savings account –
Rate of interest
Don’t be afraid to ask questions, especially around the rate of interest. This number is one of the most critical factors in determining where you conduct your business. Is the rate of interest offered by the bank or financial institution a standard rate or it is a promotional rate? Are they offering a higher rate of interest for the first year of business followed by a rate cut? You need to know this because high-interest savings account interest rates are flexible and susceptible to change. Some banks or financial institutions might only advertise about the lucrative interest rates – so you need to make an informed decision.
Initial deposit and minimum balance
Because the account yields higher interest than a general savings account, banks and financial institutions often prescribe to certain limitations to ensure that they don’t make a loss. For instance, the bank might require you to deposit a certain amount of money when you open a higher interest savings account. Additionally, to ensure that you are paid a considerable interest every month, the bank might require you to maintain a minimum balance – higher minimum balance amounts mean your funds are locked in and cannot be used to pay for any unexpected expenses.
Operational fees and charges
While banks might not charge a lot for maintaining a regular savings account, a high-interest savings account is likely to incur a maintenance and operations fee. There will also be penalties if you fail to maintain a minimum balance. Other charges may include exceeding on withdrawal or deposit limits etc.
Fixed deposits or overdraft facilities
It is essential to know if you can convert a certain portion of your savings into a fixed deposit or if you avail of an overdraft facility against your high-interest savings account. Additionally, you must ask about charges for such facilities.
Access to funds
Can a high-interest savings account be accessed like a regular savings account? What if you need funds at an odd hour and the bank’s operational hours are over? You must find out if you can withdraw funds from your high-interest savings account using an ATM card.
A high-interest savings account can help you gather funds for large purchases or for fulfilling short term goals – perhaps you could buy your first company car by saving money in a high-interest savings account.
Remember, if you are considering opening a high-interest savings account, you need to keep these points in mind – weigh factors such as initial interest rates, deposit requirements, minimum balance requirements, and any possible account fees.