If your goal is to lead a healthy financial life in 2023, you may want to consider a high-interest savings account.
Nobody wants to feel the stress of knowing that they are only a pay cheque or two away from financial disaster because they lack money to fall back on when life happens. Unforeseen incidents that can make life take a sharp turn may include job loss, disability, a car breakdown, illness, and other types of financial emergencies.
Not only does setting money aside for the rainy day provide a financial buffer for life’s uncertainties, but it also maximises your income, especially if you decide to go for a high-interest savings account.
What is a high-interest savings account?
A high-interest savings account is a special deposit account designed to help you save for special projects or emergency funding.
A high-interest savings account allows you to maximise interest earned on your savings with tiered interest rates. What this means is that you enjoy higher interest rates on a larger savings balance. The interest earned per annum accrues daily and is payable monthly.
What to look for in a savings account
High-interest savings accounts, like other types of savings’ accounts, are relatively straightforward. You deposit cash into an account, and as that cash accumulates, you earn interest, higher than what others may offer.
In Nigeria, the average Annual Percent Yield, APY, for a high-interest savings account is 3%. In August 2022, the Central Bank of Nigeria raised the minimum interest rate on Naira savings deposits from 0.15 per cent to 4.2 per cent.
The features of a high-yield savings account vary and so do the rules around minimum balances, account fees, deposits, withdrawals and rate tiers.
Some of the important factors to familiarise yourself with before choosing a high-yield savings account include.
Interest rate and APY
Savings accounts earn interest. But even so, the interest earned could vary from bank to bank. The national average is typically around 3% APY or lower for regular savings accounts. Before opening that high-interest savings account, be sure of what the bank or online platform is offering. Visit nairaCompare to compare Provider offerings and select the one that suits you.
Most financial institutions do not require some kind of initial deposit to create an account but sometimes, others do. Find out which category the bank you have chosen falls into.
Minimum balance requirements
Many savings accounts have balance requirements, which is the lowest amount of money you must have in the account, typically assessed daily. If you drop below that amount, you may trigger fees. Look for an account that won’t punish you for dropping below a minimum.
Common fees include low balance fees, annual or monthly maintenance fees, dormancy fees, and ATM fees among others. Sometimes these fees are waived if you meet certain requirements such as maintaining a minimum balance. Look for an account that doesn’t make you jump through hoops.
Some savings accounts offer a higher interest rate when you meet certain qualifications, such as maintaining a high balance or signing up for a direct deposit or automatic transfers. Find an account that has a low threshold to earn interest.
Accessibility and ease of use
Another important feature of any high-interest savings account is how accessible it is. You don’t need to have all your banking in one place and an online account could be the most convenient.
Check the process surrounding the savings account’s deposits, transfers, and withdrawals. Also see if the account includes online banking, mobile banking, preferably an app that allows mobile deposits, and ATM access.
How do high-yield savings accounts work?
With high-yield savings accounts, compound interest allows your savings to grow quickly. With simple interest, you only earn interest on your principal, which is the balance you have in your savings. Compound interest on the other hand pays you interest on both your principal and the interest it earns.
How often your interest is compounded depends on the savings account. Some compound daily, while others compound monthly. The more your interest compounds, the greater your return.
With a high-yield savings account, you can withdraw or transfer money out of your account up to six times per month without having to pay a penalty fee or risk having your account closed.
Online banks mostly offer high interest but don’t have the overhead costs that traditional banks have to account for. As a result, they offer a higher APY, but it could come with starting deposits, minimum balance requirements and monthly fees, so be sure to read carefully.
Best high-interest savings accounts in Nigeria
There are multiple benefits that come with opening a high-interest savings account in Nigeria. However, you’ll first need to know where to look before you tap into those opportunities.
Some of the best high-interest savings accounts available include.
Heritage Bank – HB Plus Hybrid Account
Heritage Bank’s HB Plus Hybrid Account offers interest on your savings as you enjoy the features of a current account.
Some of the features of this account include an opening balance of N10,000, a minimum balance of N10,00, a monthly charge of N100 if the balance falls below N10,000, a 1% bonus on the normal interest rate, access to a non-clearing chequebook, debit and prepaid cards among others.
Keystone Bank – High-Interest Savings Account (HISA)
High-Interest Savings Account (HISA) by Keystone Bank gives you the benefit of owning a joint account with someone you trust. You can then save towards a goal while you get a high-interest rate.
HISA’s account balances are between N250,000 to N999,999 for a month yield 1.75% interest, balances between N1,000,000 and N4,999,999 attract an interest of 2% while balances from N5,000,000 and above are valued at 2.5% interest.
If the customer’s balance is below the minimum operating balance, interest will be paid at the rate of the generic savings account.
Polaris Bank – Polaris Wise
This is a 3-in-1 high-yield savings account that combines the features of a savings, current and fixed deposit account. It encourages you to save more to earn more. Minimum opening and operating balance of N10,000
Interest forfeiture applies on balances below N100,000 or if the withdrawal limit exceeds the maximum of 3 times monthly.
Sterling Bank – Sterling Recurring Deposit Account (SRDA)
Sterling Recurring Deposit Account (SRDA) is an investment account designed for individuals who want to save towards a specific financial target. Its tenor ranges from six months to five years with an interest rate of 2% to 5% per annum, as well as a minimum monthly deposit of N5,000. Premature termination before the end of the tenor attracts a 50% charge of accrued interest.
Unity Bank – High Yield Interest Deposit Account
The High Yield Deposit Account by Unity Bank is a unique tenured product targeted at commercial entities, high-end SMEs as well as upper Retail Segments. The product is a high-interest-bearing term deposit account that would run for 60 days and above. For amounts between N500,000 and N1 million, the tenor would be 90 days while N1m and above can enjoy a 60-, 90- or 180-day tenor.
Balances in the account attract a 4.5% interest element, net of withholding tax. It also has a penalty for early liquidation. In such cases, the Investment would earn only 3%.
Wema Bank – Wema Treasure Account (WTA)
The Wema Treasure Account is a hybrid savings account that operates with some flexibility of a Current Account with minimal restrictions. It allows third-party transactions and accruing interest on account balances.
With a minimum opening and operating balance of N5,000, this account attracts an interest rate of 2.325%. It also allows the lodgement of cheques and dividend warrants into accounts.
Providus Bank – Affluent Savings Account
Affluent Savings Account, a product of Providus Bank is open to individuals whose income is between N3,000,000 and N15,000,000. The account demands a minimum opening balance of N150,000 with attractive interest rates.
Fidelity Bank High Yield Savings Account (HYSA Account)
The Fidelity High Yield Savings Account offers you a great investment opportunity to make your money grow in the long term. With the Fidelity High Yield Savings Account, you can open an account with any amount. It also has a minimum Operating balance of N5,000 and a tiered interest rate based on a threshold from 4.95% p.a to 6.95% p.a.
Are you looking to earn more? Then a high interest savings account is the perfect solution for you! Check out our extensive list of Providers, compare rates and open up a high interest savings account today!