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High Yield Savings vs. Basic Savings

Authored By: MIT FCU

When it comes to saving money, not all savings accounts are created equal. You might be familiar with a basic savings account—it's the standard option offered by most banks. But have you heard of a high yield savings account? If you're looking to let your money work a little harder for you at no additional cost, you may want to open a High Yield Savings Account. 

The Key Difference: Dividend Rates

The biggest distinction between a high yield savings account and a basic one is the dividend rate. A high-yield savings account offers significantly higher dividend rates, meaning your money grows faster over time. While a basic savings account might earn you around 0.01% to 0.10% APY (Annual Percentage Yield), a high yield savings account can offer 4.00% APY or more—depending on the current market and the bank.

Why the Boost?

High-yield savings accounts are often offered by online banks or financial institutions with lower overhead costs. Since they don’t have to maintain physical branches, they pass those savings on to you in the form of higher dividend rates.

Other Things to Consider

  • Access: Both account types offer similar access to your money, though high yield accounts may have some online-only limitations.

  • FDIC Insurance: Most high-yield and basic savings accounts are insured by the FDIC (or NCUA for credit unions), so your money is protected.

  • Fees: Some high yield accounts may have minimum balance requirements or withdrawal limits, so be sure to read the fine print.

Final Thoughts

If you're looking to maximize your savings with minimal effort, switching from a basic to a high yield savings account can be a smart move. Over time, the difference in interest can really add up—making your money work for you, not the other way around.



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