What Are the highest interest-bearing accounts?
The highest interest-bearing accounts offered at your credit union are usually share certificate accounts. These accounts pay several times as much interest as standard savings accounts in the United States.
The difference in interest rates between the highest interest-bearing account rates and the national average is large, so the increase in earnings is substantial. For example, if you have $5,000 in savings and the national average APY is 0.10 percent, you would earn just $5 a year. If you put that same $5,000 into a share certificate account that earns 2%, you’d get $100.
Key point: If you have $5,000 in savings and the national average APY is 0.10 percent, you would earn just $5 a year.
You can take comfort in knowing that the National Credit Union Association (NCUA) will insure your savings if your credit union goes bankrupt.
This means that no matter which type of account you choose, you will be protected if something happens to your money. With all of this in mind, you should learn how to find and open the highest interest-bearing accounts and consider whether they would be a good addition to your financial portfolio.
Considerations to Make Before Opening the Highest Interest-Bearing Accounts
Your financial portfolio should only have a few different investments, and one of them should be an account that earns the most interest. Think about how you will best use the account to add to your current savings and investment plans, and based on that, decide how much cash you think it’s smart to keep on hand for your situation.
For instance, is the goal of the savings account to have money on hand in case of unexpected costs? Financial experts often say you should have three to six months’ living expenses if this is the case.
You could also use the highest interest-bearing share certificate accounts to save money for a big purchase you want to make in the next five years, like a house, a car, or a big trip.
When looking at this time frame, it’s best not to invest the money in something that might lose value. So, opening the highest interest-bearing share certificate account will help you protect your initial investment and use the interest you earn to help you reach your savings goal.
Key point: You could also use the highest interest-bearing share certificate accounts to save money for a big purchase you want to make in the next five years, like a house, a car, or a big trip.
You can simultaneously use more than one of these accounts to split your money for different uses or goals. You can open more than one share certificate account at your credit union, and you can even give each one a different name (e.g., Car Fund, Vacation 2023, etc.).
Having multiple share certificate accounts can make it much easier to track your progress toward your goals and keep your hands off money you don’t want to touch, like money you’ve set aside for an unexpected expense. This strategy is called laddering the discs of share certificates.
Laddering your share certificates is a great way to save money and make the most of changing interest rates. Make a “share certificate ladder” by opening a lot of share certificates with different interest rates and dates when they will mature. When you save this way with share certificates, you’ll always have some that are about to expire. When interest rates go up, you can cash out your share certificate early or roll it over into a new one at a higher rate.
Key point: Make a “share certificate ladder” by opening a lot of share certificates with different interest rates and dates when they will mature.
Instructions for Creating the Highest Interest-Bearing Accounts
Opening a share certificate account with a high-interest rate is not too hard. Most of the time, you can open an account using the internet or your mobile device. However, some credit unions may require you to visit their physical location to open an account. Most of the time, the following steps are needed to open the highest interest-bearing accounts, but the specifics may change depending on the credit union:
Carry Out Your Investigation
Find your banking needs, and then do some research and comparison shopping to find the highest interest-bearing accounts that meet those needs as much as possible. Look closely at the minimums, the cost structure, the annual percentage yield (APY), and the schedule for compounding.
Submit An Application For An Account
When you find a credit union share certificate account you want to open, you can either do it in person or fill out the application for the account online. The credit union may ask you for information about yourself and your finances to ensure you are who you are. This information could include a photo ID from the government, your Social Security number, your physical address, and your date of birth.
Make a Deposit into Your Account
Once your account has been reviewed and approved, you will add your investment. Pay attention to the minimum for the share certificate. Some credit unions also offer jumbo share certificates for individuals who have larger investments.
What Features Should You Search for in the Highest Interest-Bearing Accounts?
It is always a good idea to compare the different options on the market, whether you are looking for the highest interest-bearing accounts at a new credit union or are lucky enough to have one at your current credit union already. If you plan to open a large share certificate, it’s important to compare the interest rates and fees offered by different credit unions. Here are some things to compare and look for:
Interest Rate
What kind of interest is being added to the account right now? Is this the normal rate or a special rate for a limited time? Can you step up the interest rate during the duration of the share certificate? Another thing to consider is whether you need a certain minimum or maximum balance to qualify for the above rate.
Initial Deposit That Is Required
How much money must be put into the account? Are you comfortable putting in such a large amount of money at first?
Savings Accounts vs Share Certificates
It can be easy to confuse share certificates and savings accounts. Savings accounts are a form of deposit account, where the credit union pays interest to the account holder for use of their money. Savings accounts may be subject to certain limitations set by the credit union, such as limits on daily withdrawals and deposits. These restrictions typically depend on what type of savings account is being opened. The majority of savings accounts offer competitive interest rates, but there are other types of savings products (such as certificates) that may offer higher rates and more flexibility in terms of withdrawals and deposits.
Share certificates are a form of investment for those who want to diversify their portfolio with investments that have lower risk than stocks or bonds.
Key point: Share certificates are a form of investment for those who want to diversify their portfolio with investments that have lower risk than stocks or bonds.
So, should you open a savings account or a share certificate?
Savings Accounts: Pros and Cons
Pros
Your money can grow and earn interest in a savings account. Your cash is safe. By law, the NCUA will protect the money in your savings account up to $250,000. You can easily access these funds for quick purchases, and tie the account to any subscription services you pay for.
Cons
There may be limits on how much you can take out. Rates of interest may not be very high. There are different interest rates for savings accounts, and some may not be as high as other ways to save, like investments.
What Should You Use a Savings Account for?
Savings accounts are a safe place to put money so that you can get to it when you need it. In the financial world, this is called “high liquidity.” Because of these features, a savings account is perfect for short-term financial needs and goals like:
- Saving three to six months’ worth of living costs for emergencies.
- Saving for a medium to large-sized purchase in less than a year.
Share Certificates: Pros and Cons
Pros
Your money can grow quicker than many other types of accounts. Share certificates are low-risk investments that are guaranteed to grow.
Cons
Your money is held in the share certificate account until the certificate matures. While there are several options and maturity lengths, most are over 12 months. There may be fees associated with an early withdrawal from the share certificate.
Conclusion
The highest interest-bearing share certificate accounts function similarly to the more common savings accounts. However, the interest rates are typically substantially greater. When you put money into share certificate accounts with the greatest interest rates, that money will earn interest at the account terms established by the credit union.
