- May 19, 2023
- Posted by General Electric Credit Union
- 3 read
3 Misconceptions About High-Yield Savings Accounts
When interest rates increase, it can affect your financial life in several ways – some good, some bad. One silver lining is that financial institutions often increase their deposit rates in response to rate hikes. This means you, the depositor, can earn more interest off your balance. Though traditional savings accounts may earn some interest, they don’t grow your balance at the same pace as products like high-yield checking accounts, certificates, and high-yield savings accounts (HYSA). The annual percentage yield (APY) on these accounts can help you make money off your money – and those extra funds pad your wallet when the cost of everything is up due to inflation. The very nature of a savings account, which is used to store funds you may not touch as often, also allows compound interest to really pack a punch.
But if you’ve never had a HYSA, you may feel uncertain about opening one. After all, it sounds like a win-win situation, so what’s the catch? Below, we addressed several common misconceptions about HYSAs so you can feel confident leveraging one for your financial success.
The top misconceptions about HYSAs
Some people are under the impression that HYSAs are tied to the stock market and that they’re at risk of losing their money. But HYSA have no direct link to the stock market. For this reason, they are a low-risk, high-liquidity option. Your HYSA funds are also protected up to a certain amount so long as your financial institution is federally insured.
For banks, this insurance is through the Federal Deposit Insurance Corporation (FDIC). Credit union deposits, on the other hand, are insured by the National Credit Union Administration (NCUA) up to $250,000 per accountholder, per ownership category under the NCUA. Adding a joint owner to a Money Market account can extend coverage up to an additional $250,000 so long as the person has equal rights to the funds.
- Use the NCUA’s Share Insurance Estimator to verify if your HYSA funds would be covered.
You need to be rich to benefit from one
There’s a misconception that you need to have hundreds of thousands of dollars to benefit from a HYSA. While it’s true that in some cases a higher balance will equal a higher return, you’ll still earn more interest from a HYSA than a traditional savings account – regardless of whether your balance is $100 or $100,000. Use an online savings calculator to see the power of compound interest.
The APY is the only thing that matters
Shopping for and comparing high-yield savings account rates may help you pinpoint the “best deal,” but deciding off numbers alone may distract you from things that can impact your experience. For example, an account may have the highest rate but also charge a monthly fee that offsets your return.
The best HYSAs go beyond a great rate. At General Electric Credit Union (GECU) you can enjoy a competitive rate alongside:
- No monthly maintenance fees
- No minimum balance to open or earn
- Multiple rate tiers that reward you for growing your balance
- Fee-free access to your money at nearly 100,000 ATMs nationwide and available at stores you frequent like Target, CVS Pharmacy, Kroger, and more1
- The ability to write checks (and your first book is on us!)2
- Peace of mind knowing your funds are insured by the NCUA