The Truth About High-Interest Savings Accounts

8 min read By Kevin Joshua Ng on November 5, 2020

In this pandemic when most of us are feeling some sort of a financial crunch, the importance of having emergency funds from savings comes into play. It’s not just smart to have savings anymore–it’s already a necessity given that most people have finally understood the value of having savings that one can lean back on during times of need.

However, what if we tell you that you can actually be smarter with your savings in a way that you could maximize its potential earnings over a period of time? Would this be interesting for you? The answer is most definitely yes.

You’re probably familiar with a deposit account whether it be a payroll account, checking account, or a separate savings account you keep for that extra money you haven’t spent. While these are certainly viable ways to keep your money safe, they don’t necessarily offer any enticement beyond that.

Enter the high-interest savings account, another way for you to keep and save your money while earning more than the usual. In this article, we’ll tell you everything you need to know about high-interest savings accounts and the honest truths behind what it means to open and maintain one.

What is a high-interest savings account?

According to Investopedia, a high-yield or high-interest savings account is a kind of deposit account offered by banks that typically has an annual interest rate of up to 10x or more of the average annual interest rate of a standard savings account.

This means your money has more of a potential to earn greater interest by the end of the year compared to the usual savings, checking, and even payroll accounts. This is a bank’s way to make sure they keep your business with them by offering better interest rates.

And with the introduction of online banks in the Philippines offering high-interest savings accounts almost exclusively, traditional banks have stepped up to open the same products to customers.

Read: 8 Best Savings Account With Free Life Insurance This 2020

What banks offer high-interest savings accounts?

Like we mentioned earlier, most online banks have already begun offering high-yield savings accounts to any potential depositor. These include:

1. CIMB UpSave Account

CIMB Bank UpSave account is a high-interest savings account that you can open online, anytime and anywhere without going into a branch, giving you immediate access to a savings account with one of the highest interest rates in the market at 3%. In comparison, the annual interest rate of a typical savings account is at 0.125% only.

There is no initial deposit required upon application and there is no maintaining balance required to sustain the account. CIMB also has an ongoing partnership with GCash for their GSave account that offers a way for depositors to save their money with additional access via the GCash app and an annual interest rate of 3.1%.

You can sign up and learn more about the UpSave account by downloading the CIMB Bank PH app.

2. ING Save Account

An ING Save Account is a 100% digital, high-interest savings account that lets you earn a 2.5% annual interest rate for an initial deposit of ₱20-M or lower, and a 1% annual interest rate for a deposit greater than ₱20-M. There is no minimum opening deposit nor a minimum maintaining balance as well.

To learn more about the ING Save Account, go to ing.com.ph or download their app.

3. BDO Optimum Savings Account

The BDO Optimum Savings Account is a high-interest savings account that gives you increasingly higher interest rates as you deposit additional money. This means that as you increase your available daily balance to certain requirements, your interest rates grow as well. With an initial deposit and maintaining balance of ₱30,000 (personal)/₱50,000 (business), you can enjoy up to 1.25% annual interest rate.

Additionally, you may withdraw from your account free of charge up to 3 times a month.

4. BPI Maxi Saver Account

With the BPI Maxi Saver Account, you can earn additional interest if you don’t make any withdrawals from it within a month. It encourages depositors to save and keep their money intact within their savings account.

An initial deposit and maintaining balance of ₱50,000 is required to open and earn interest on a BPI Maxi Saver Account. A starting annual interest rate of 0.125% will be offered then a bonus of 0.5% will be added if no withdrawal is made on the account within a month, which gives you a total of 0.625% annual interest rate.

A maximum of 0.75% annual interest rate can be achieved by maintaining a balance of ₱5-M and above.

5. Security Bank eSecure Online Savings Account

The Security Bank eSecure Online Savings Account is a high-interest savings account made available to existing Security Bank depositors that is designed to give you more from your savings.

An initial balance of ₱500 is needed to open an eSecure Online Savings Account and a minimum of ₱5,000 maintaining balance will start earning interest at 0.5%. Interest rates balloon up to 1.2% with a deposit of ₱5-M or greater.

What’s special about this high-interest savings account is you can have an option to open up to 10 eSecure Online Savings accounts at the same time. This way you can save and plan better for the future. It must also be noted that one withdrawal is allowed within a month to maintain a higher interest rate. If the withdrawal limit is exceeded, the annual interest rate will go down to 0.1%.

Now that you’re familiar with a high-interest savings account and the available options in the market, it’s time to dive deeper and learn more about what the real deal is with high-interest savings account.

Read: 2020 Update: Personal Loans In The Philippines With The Lowest Interest Rates

Things you need to know about high-interest savings accounts

Here are some facts about high-yield savings accounts to help you with your decision:

1. High-yield savings accounts have variable interest rates

High-interest savings accounts have annual interest rates that are subject to change. This means that an account you opened last week might not have the same annual interest rate this week. Rising rates, especially when the economy is doing well, can benefit you without you doing anything. But on the flip side, annual interest rate drops can occur too when the economy is in a bit of a pinch–much like it is now in this pandemic.

Despite this, having a high-interest savings account still blows traditional options out of the water. Their rates remain far above the national average of 0.125% annual interest rate for savings accounts. If you already have a high-interest savings account and you’re itching to switch for a higher rate because of the recent drops in annual interest rates, maybe reconsider, especially when you need to build up your deposit or let the money sit longer to enjoy better interest rates.

2. There’s more to high-interest rates than meet the eye

The annual high-interest rate is appealing, sure. But a high-interest account’s safety, ease of access, and lack of fees shouldn’t be overlooked.

Most high-interest savings accounts, especially online ones, don’t need a large amount of initial deposit and maintaining balance to open and earn interest. Most also don’t have monthly fees, which can save you money. Quick access to funds via online banking is also crucial, especially if you need cash on short notice during a crisis like this.

3. High-interest savings accounts is more accessible than time deposit accounts.

Like traditional savings accounts, high-yield options provide ways to transfer money online to and from accounts you own at other banks. Depending on the transfer channel you’ll use, transfers can be real-time (InstaPay) or take one whole day or a few days when transfers are done during the weekend (PesoNet). Some high-interest savings accounts can be accessed online, through ATMs with a debit card, or a passbook.

Since online banks tend to have high-interest savings accounts, chances are you’ll lose branch access in order to gain a top rate. But how often do you visit a branch, especially this year?

4. High-yield savings accounts may withhold deposits longer than other savings accounts.

Your deposit is usually available to be accessed right away once it’s active. However, it might be for your best interest to keep growing your funds or restrict frequent withdrawals in order to maximize the high annual interest rate. The name of the game here is compounding interest. The larger your deposit is, the larger your interest can become.

5. Earning interest from high-interest savings accounts is a viable investment.

It’s tempting to think so, but no. While contributing money to a high-interest savings account consistently and over time will likely raise your balance by the end of the year, there are other investment products that can make your funds grow at a much higher rate.

A high-interest savings account is still a savings account. So it’s an ideal place to store your money securely, for whatever purpose you have in the future. Furthermore, all savings accounts are insured by the PDIC too–up to ₱500,000–while most investment products are rarely insured when losses are incurred.

The thing is you have plenty of options to grow your money, it really just depends on what your goals are and when you want to achieve them. Are you saving up for an emergency fund good for three to six months of living expenses? Or are you growing your money now to prepare for retirement years into the future?

Your annual interest rate may waver, but your approach toward saving matters more. John Thompson, chief program officer at the national nonprofit Financial Health Network, says:

“To save with a plan … is one of the most critical behaviors for improving and sustaining financial health.”