You put money in a high yield savings account and let it sit. Interest is just a bonus

Https://www.reddit.com/r/personalfinance/wiki/commontopics

First of all, it holds your money safe. The account is FDIC protected in most American banks. NCUA for Credit Unions.

The interest the bank pays is your cut of the interest they charge when they lend out your money.

Back when I was a kid, my savings account paid 5%. I have some accounts that pay over 1% today.

Lets say on October 1, you put 1000 dollars in a savings account paying 1%.

• on October 31, your 1000 earned 83 cents.
• on November 30, your 1000.83 earned another .83
• on December 31, your 1001.66 earned another .83
• on January 31, your 1002.49 earned 84 cents

In other words, the interest compounds.

obviously it compounds faster if you can ear higher rates of interest.

A lot of people talk about HYSA -- High Yield Savings accounts.

I have a high yield checking account -- the account earns 3%, but only on the first 10k in the account, and only if I meet some other provisions.

bankrate.com lists several companies paying over 2.5% in interest for deposits there.

Because the bank interest rate for saving is so low, many people open a seperate online savings account (check out Ally, CapitalOne360, DiscoverBank, or Marcus, among others.) Then you link the two accounts and can transfer money back and forth. Current these accounts are running at or just under 3% interest.

Damn, okay that actually makes sense. Would applying for any of these affect/check my credit report?

I kinda figured so :/ I just was never sure if it was worth it or not

I mean it’s better than nothing but you won’t get rich that way

Do any of these check or affect my credit score? My credit wasn't fantastic last I checked and I'm trying to work on it. I purchased a car 2 weeks ago so I know it's dropped. I'm getting very picky about doing things without knowing how it will affect my credit.

I've had issues with identity theft in the past so a lot of companies deny my application because of the issues with verification so I try to apply for something, it checks my credit, hurts my credit and in the end, hits me with a, "Yeah, sorry bucko. Not this time."

I thought that bank accounts use a different score to check you out...but if you have identity theft issues, it might be hard to prove your identity online, true.

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Right, that's a fair point

I don't know how it works, that's why I was hoping Reddit could help. 🥲😂

Savings accounts are mostly a place to stick money that you need to be both safe and available in the near term (or at least that you might need in the near term.) The interest is minor, but you may as well.

Now if you don't mind some extra complexity you can use other cashlike assets such as government savings bonds (I bonds), CDs, or Treasury bills (not an exhaustive list, just some examples) to earn higher interest. The catch is cash like assets will compromise some degree of safe and readily available and by doing so earn a premium vs saving accounts.

My opinion is that tiering your cash/cash like assets makes sense. I like to keep my deductibles covered / a major car repair, and the rest in I bonds and T Bills. But not everyone will agree with me on that. A lot of people want it all in straight cash as a savings account.

There isn't exactly a right answer. My answer will earn you some extra interest, but nothing life changing. It also comes with extra moving parts in comparison.