Fact or fiction earning 7% interest on a savings account
Fact or fiction earning 7% interest on a savings account
Finding a High-Yield Savings Account: Is 7% APY Worth It?
Banks have been increasing their savings rates for well over a year now, with the average interest rate on a savings account sitting at 0.42% APY (Annual Percentage Yield). However, there are financial institutions that are paying significantly higher rates, and one that even offers over 7% interest. But is a 7% APY rate worth it? Let’s take a closer look at how a 7% interest rate savings account works and whether it’s worth opening an account with such a high rate.
Understanding the 7% Interest Rate on a Savings Account
When a savings account pays a 7% APY, it means you’ll earn 7% on your balance over a year. Most banks compound interest, meaning they pay interest both on the amount you’ve deposited and the interest you’ve earned on top of it. The more often a bank compounds interest, the more you’ll earn in the long run. Daily compounding and monthly deposits into your account are common practices.
It’s important to note that a 7% APY savings account may pay interest on all of the money in your account, a portion of your balance, or only if certain requirements are met. Before opening an account for its high interest rate, make sure to fully understand the bank’s rules and restrictions.
Landmark Credit Union: The One Offering 7% APY
Currently, Landmark Credit Union is the only financial institution offering a savings account with at least a 7% APY. However, there are some major caveats to consider.
First, it’s important to note that Landmark Credit Union’s offering is a checking account, not a traditional savings account. Second, to qualify for the 7.50% interest rate, you must enroll in e-statements and receive $250 in direct deposits every month. Finally, the 7.50% rate is only applicable to balances up to $500. Balances over $500 earn a much lower rate of 0.11% APY.
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Considering these limitations, the 7.50% APY with Landmark Credit Union is unlikely to be worth opening. There are alternative high-yield savings accounts available that pay a slightly lower rate but on higher balances, possibly even on your entire account balance.
Alternatives to Consider for High-Yield Savings
While no savings accounts currently pay 7% APY, there are plenty of accounts that offer high rates on your entire balance. Here are some great alternatives to Landmark Credit Union’s checking account:
- Betterment Cash Reserve: 5.50% APY for new customers; 4.75% APY standard rate
- Milli Savings Account: 5.25% APY on Savings Account and Jars
- OceanFirst Bank High Yield Savings Account, powered by Raisin: 5.25% APY
- Popular Direct Savings: 5.05% APY
- Salem Five Direct eOneSavings: 5.01% APY
- Bread Savings High-Yield Savings Account: 4.90% APY
- Bask Bank Interest Savings Account: 5.00% APY
These alternatives eliminate the need to meet monthly requirements to earn high rates on your savings. It’s important to assess the interest rate, compounding frequency, fees, and minimum opening deposit when choosing a high-yield savings account.
Key Factors to Consider in a High-Interest Savings Account
Choosing the right high-yield savings account is an important decision. Consider the following factors when making your choice:
- Interest rate: Look at the account’s interest rate and how frequently interest is compounded. Determine whether you need to meet criteria each month to earn the highest rate and whether interest is earned on your total balance.
- Fees: Monthly service fees can easily offset any interest earned on your savings account. Opt for online banks that don’t charge monthly fees.
- Minimum opening deposit: Some banks require an opening deposit, while others don’t. Ensure you can comfortably afford the initial deposit, regardless of the amount.
FAQs about 7% APY Savings Accounts
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Q: Is a 7% APY savings account worth it? A: The current landscape doesn’t offer any savings accounts with a 7% APY. However, there are alternatives that pay high rates on your entire balance without requiring monthly qualifications.
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Q: Which bank offers a 7% interest rate on a savings account? A: As of now, Landmark Credit Union offers a 7.50% interest rate, but only on its Premium Checking Account. This account’s limitations make it less attractive compared to other high-yield savings account options.
In conclusion, while a 7% APY savings account may seem appealing, it’s important to evaluate the restrictions and limitations. Explore alternative high-yield savings accounts that offer competitive rates on larger balances and fewer requirements. By considering the interest rate, fees, and minimum opening deposit, you can find a high-yield savings account that best suits your financial goals.
