Should you Consider a Long Term High Interest Savings Account

Saturday, December 29, 2012

Should you Consider a Long Term High Interest Savings Account

Defining Long Term High Interest Savings Accounts

 Long-term high interest savings accounts are exactly as their name indicates. Individuals who deposit their savings into such savings accounts can earn higher interest rates than others, but should expect those deposits to become long-term commitments. Although individuals with long-term high interest savings accounts can make use of the deposits in said accounts, doing so comes with a range of restrictions designed to deter them from doing so. 

 Advantages and Disadvantages

 Long-term high interest rates savings accounts come with a number of advantages that put them above standard savings accounts and other forms of investment:

 * There is little risk to using it. In fact, the only chance of incurring losses on such savings accounts is either if the bank collapses or through the user's own actions. Otherwise, the value of the deposits in such savings accounts only increase over time.

 *It provides higher interest rates than other savings accounts. Although not as high as the returns on riskier assets or even the most reliable government bills and bonds, the interest rates on such savings accounts are reliable and quite good and almost risk-free.

 * Savings put into long-term high interest savings accounts are liquid. Although users can be charged fees for making use of their savings, they can do so in an instant and for whatever purpose they desire. In contrast, most investments take time to sell and often do so at a discount from their true value.

 However, these advantages also come at the price of these disadvantages:

 * Long-term high interest savings accounts have high deposit requirements. Depending on the saving account in question, these deposit requirements can range from $1,000 as an absolute bare minimum to heights of $50,000 or more. Failing to maintain these deposit requirements means that users incur fees.

 * Similar to other savings accounts, long-term high interest savings accounts come with hindrances and penalties to discourage individuals from using the deposits held in them. After all, savings accounts are not checking accounts and should not be used for daily activities. Otherwise, users risk incurring penalties and transaction fees.

 * Deposits put into long-term high interest savings accounts produce little interest compared to most other forms of investment. Savings put into such savings account are liquid, but in exchange, they are also less effective at enriching their owners. The FDIC provides more information on what you should be looking out for with certain types of certificates of deposit.

 Types of High Interest Savings Accounts

 Long term high interest rates savings account describes a range of products sharing similar qualities rather than one kind or product in particular. As a result, there are several types of such savings account available out there:

 * In general, most high interest savings accounts resemble standard accounts except in the aspects mentioned above. Most of these have no particular name other than high interest savings accounts.

 * Money market accounts pay interest based on the current interest rates in the market, but come with a host of restrictions on the savings. These savings accounts are meant to be competitive against money market funds.


 Customers interested in high interest savings accounts should take the time to shop around and compare prices. You should find out more information on account options and different deals available. Doing so with help will net them better interest rates than simply approaching the closest and most convenient bank.

 About the author:

Alan Wiser is an independent financial consultant and writer. His articles mainly appear on personal finance blogs.

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