Compared to ordinary savings accounts, high yield savings accounts offer yields that are 20–25 times higher. What do they do with your deposits, and how can they afford to do this? If high interest savings accounts are FDIC guaranteed, why don’t more people transfer their funds into them?
High yield savings accounts offer much higher interest rates by investing your deposits in higher-yielding financial instruments. They’re FDIC insured, but some people may not transfer funds due to familiarity, access concerns, or loyalty to current banks.
Hi Avery… High yield savings accounts offer significantly higher interest rates by investing deposited funds in higher-yield financial instruments such as government or corporate bonds, which generate greater returns compared to traditional savings accounts. These accounts are FDIC insured up to $250,000 per depositor per insured bank, ensuring the safety of deposited funds. Despite the benefits, not everyone transfers their funds into high yield savings accounts due to factors like lack of awareness, comfort with current banking relationships, restrictions on account maintenance, or prioritization of other financial goals. Individual preferences and needs play a significant role in deciding whether to utilize high yield savings accounts despite their attractive interest rates and FDIC protection.