Putting your money in a high-yield savings account is a great way to make rising interest rates work in your favor. Maximizing interest on your deposits helps you save faster while contributing to your long-term financial wellness. But what type of account should you choose?
With so many different options available, it helps to understand how they compare. The biggest difference between savings accounts is how they’re structured — and that can have an impact on how much interest you earn over the life of your account.
Standard savings: A typical savings account offers a flat interest rate that stays the same no matter what your balance is. For example, OCCU’s Primary Savings pays 0.05% APY7 regardless of how much money you’ve saved. It’s a steady, reliable place to store and grow your money.
Tiered-rate savings: High-yield savings accounts, on the other hand, not only offer a higher APY but they’re often structured to reward account holders for maintaining a larger balance. Known as tiered-rate savings, these accounts pay higher interest rates the more you deposit. An OCCU money market account is one example, with rates that start at 0.50% APY5 and increase to 1.19% APY on balances of $100,000 or more. A tiered-rate savings account works best if you already have a large sum of money saved up.
Reverse-tiered savings: A reverse-tiered savings account flips the script on your savings by paying more interest on the first portion of your balance, with declining rates on further deposits. OCCU’s high-yield Ignite Savings account, for instance, pays 5.25% APY4 on the first $500 in your account, 2.23% APY on the next $2,000, and so on. Rather than rewarding those who already have money saved up, a reverse-tiered account is a useful tool for jump-starting your savings and helping you grow your money quickly.
So which type of account will earn you the most interest? That depends on your financial situation. If you’re new to saving, we recommend starting with an Ignite Savings account to give your savings a boost right out of the gate.
As you accumulate more savings, it might make sense to transfer a portion of your funds into another high-yield account, such as a money market account, to earn more interest on your higher balance. Regardless of your financial picture, however, keeping at least $5,000 in your Ignite Savings account helps maximize your interest earnings.
While there’s nothing wrong with opening a standard savings account, it shouldn’t be your end game. If you’re not taking advantage of high-yield savings accounts such as Ignite Savings, you’re missing out on free money.
Still not sure? Here’s some more info about how our Ignite Savings account works:
Get started building your savings and on the path of financial wellness today. Learn more about how an Ignite Savings account can help.
