How to Choose the Best High Yield Savings Account

While traditional brick and mortar banks can be very convenient, they can rarely compete with the higher interest rates offered by their online counterparts. Personally, I think these online high yield accounts are the best place to stash your emergency fund and save up for your short-term goals, such as, saving money for down payment on your house or your car. There are many options available when it comes to online banking, with a wide variety of account features and options. To choose the best high yield savings account for your needs, here are a the five simple steps that you can follow.

1. Search for the best savings rates

A good starting point to find these high yield accounts is at your current bank. Some banks offer online savings options that you could easily connect to your existing accounts. However, these banks may not offer the best rates, as such, you should also check online to see what other rates you can get - simply type in "high yield savings accounts," "online savings accounts," or "high interest savings accounts" into any search engine and you'll see a number of options. Review the posted interest rates, then pick 3-5 banks to explore in more depth. Check to see whether the rates are introductory or not.

2. Make sure the bank is FDIC insured

Even if the bank indicates that it is FDIC insured, it's always a good idea to verify this at the FDIC website. For credit unions, check the NCUA website. If you do not see the name of the financial institution on these sites, move on to another bank.

3. Read reviews

The reason that online savings banks can offer higher interest rates is due to the fact that everything is done over the Web and there's no brick-and-mortar storefront. As a result, the two biggest complaints about online banks are poor customer service and difficult to use web interfaces. To avoid these problems, it is worthwhile to check out user reviews before you open an account. Usually, it is better to accept a slightly lower interest rate in favor of better customer service and online interface.

4. Check the fees and read the fine print

Different accounts will have different policies. Before you open an account make sure that you understand all the fees that the bank imposes on your account. There is no point in getting a higher interest rate if you're giving everything back in fees. So be sure that the combination of interest rates and fees provide you with the optimal return on your investment. In addition to fees, make sure you read all the fine print to avoid any nasty surprises.

5. Look for perks and bonuses

There are a lot of competition in the online banking space with many banks offering high yield savings accounts. As such, it pays to shop around for additional perks. Some extras to look for include free ATM access, free Bill Pay, and an automatic savings plan. Some banks, may even offers you cash sign up bonus or higher introductory interest rate to earn your business.