What are high interest savings accounts?

High interest savings accounts are merely cash rewards for stockpiling money at the bank or other financial institution. Banks use the cash reserves of high interest saving accounts to fund a small portion of other loans, Based on those interest fees, the bank extends the interests earned to the high interest savings accountholder.

Important note: High interest savings accounts are a catalyst for earning a high yield interest or return on reserved finances (savings).

Are high interest savings accounts risky?

No, high interest savings accounts are not risky per se. Since, the Federal Deposit Insurance Corp. (FDIC) insures high interest savings accounts with balances up to $250,000, the monetary tool offers a modicum of financial security. (However in 2014, the FDIC plans to revert the standard insurance amount to $100,000).

Are there any advantages for having a high interest savings account?

In terms of definitive liquidity, high interest savings accounts outperform certificates of deposits, imposing little risk.

What are the drawbacks of high interest savings accounts?

High interest savings accounts are the mainstay for liquid interest bearing accounts.  However, if inflation transpires, the money dwindles in purchase power.

Additionally, banks may charge high interest savings accountholders a penalty for funds below minimum account balance requirements. Federal guidelines allow customers to make as many as six transactions of transfers and withdrawals each month. Once the arbitrary withdrawals exceed the limitations, it is legal for financial institutions to impose fees.

What are the eligibility requirements for opening a high interest savings account?

The vast majority of high interest savings accounts require a higher minimum deposit to open the account.