Strategic financial planning: Leveraging high-yield accounts
As the global economy regains its footing, individuals and businesses are seeing a new hope for their finances.
Increased purchasing power, higher wages, and more interest in the capital markets are some things we may expect to see in FY24.
After the series of unfortunate events in the past four years, we must be more cautious with our spending, saving, and investing habits. This article will give some tips for increasing your finances using high-yield bank accounts.
Check rewards
Suppose you have already improved your spending and saving habits. It is time to open a high-yield bank account to increase your savings. But before rushing to any banks or financial institutions, it is important to check as many of them as possible.
One of the things to prioritize is the perks of opening a high-interest savings account online. Many banks offer a sign-up bonus when you open an account with them. SoFi, for instance, offers a sign-up bonus of $50 to $300, depending on your balance in the first 30 days. It also offers 15% cashback for transactions with local merchants or retailers.
Many banks offer the same perks and rewards, which can be very enticing today. Meanwhile, some banks offer discounts instead of cashback.
Compare their APY
The Fed plans to make three rate cuts this year, which can reduce interest on loans and deposits. Given these, you must compare the APYs of your selected banks and financial institutions. Doing so will ensure that your savings are still earning despite the lower Fed rate.
Also, if inflation rebounds, the value of your money will not be eroded that easily.
Today, the national average yield for savings accounts is 0.59%. Quite unappealing, right? You can invest it instead. But you may not be ready at this point. So why not put it in a high-interest savings or checking account? Many high-yield accounts have an APY of 3%. Others offer as high as 5%. If you have $5,000 in your high-yield account, it will earn $250 in only a year.
Check their accessibility
You may plan to open a high-yield account for your personal and business transactions. If you’re operating a business, you may be doing about ten transactions per day or 50 per week. It can be costly if you execute these at other banks’ ATMs. In 2023, the all-time ATM fee in a single transaction reached $4.73. So, you may incur about $50 per day or $250 per week.
That is why your chosen bank must have a vast ATM network capacity. That way, you can withdraw and deposit cash almost anywhere without fees. As such, choose a bank you can easily access. For example, SoFi has 50,000 no-fee Allpoint ATMs. Meanwhile, other banks reimburse $20 monthly for out-of-network ATM transactions.
Moreover, consider their online accessibility. Most banks allow online applications and transactions today. Compare how they work on PCs and mobile phones. Remember that some banks still fail regarding user experience, especially on mobile phones. It is essential during unexpected business transactions when you’re away from home or the office.
Also, you can always check your account balance anytime you want. Just beware of public WiFi to prevent online thieves from entering your bank account.
Determine monthly fees and balance requirements
Banks often present flashy perks and APYs, while some do not impose minimum balance requirements. However, they may deliberately or unintentionally hide details about overdraft fees, which can reach about $30 and eat a portion of your account balance.
A recent study conducted by MarketWatch shows that 74% of bank clients prefer banks with low or no monthly fees. More specifically, 45% do not consider overdraft fees important.
In addition, check if your selected bank has minimum balance requirements. You could be charged a penalty fee if your account balance goes below the minimum required amount. You should also check this aspect in line with your monthly income to know if you can meet it.
Assess their security
Security is essential for online transactions. That is why you should choose banks that can prevent hackers from breaching their security.
Most importantly, choose banks that promise security even if things go wrong. FDIC-insured banks can cover a portion of your savings during insolvency and theft. SoFi can insure deposits up to $2M, much higher than the average FDIC insurance of $250,000 in many banks.
Takeaways
The crises we have experienced have taught us the importance of financial planning. Everyone learned the hard way, requiring us to get back on our feet and start again. Practicing self-discipline and consistency will improve our spending and saving habits. Most importantly, selecting the best bank will help you protect and manage wealth.