A New Type of Savings Account with Higher Rates

How come some of the best ideas arrive at the worst time? Disciplined savings programs, called installment savings accounts, could have saved the day for many Americans who have now lost meaningful savings they had designated for college, a vacation, a wedding, or another family event. Instead, we are just now hearing about these nifty savings programs. A shift in investing philosophy towards more savings-oriented investments may even make these new bank products popular in the future. Many savers realize that they need the pressure of making a monthly payment to a savings account to help them not blow their savings at the local mall or elsewhere. Adding to the appeal of an installment savings account is the fact that the interest rates on installment savings accounts can be better than the rates paid on CDs, money market accounts, savings accounts, or checking accounts. If you have a need to save, you should look at these accounts.

An installment savings account is an agreement with a bank to make installment payments to a bank to build to a preset principal amount. In fact you actually sign a contract when you open an installment savings account to make these periodic payments. The benefits are simple: disciplined savings and good rates. Take a look at an example. One of the installment savings accounts offered today by Hanmi Bank is a 3-year, $25,000 savings account. If you entered into a contract for this savings plan, you would earn a very solid 5.13% APY on your invested funds while making the regular monthly payments of $642.36 for 36 months. After three years your savings plan with Hanmi Bank would be over and you would have a $25,000 account balance available to use at your discretion. Similar to a certificate of deposit, penalties can be applied to the early withdrawal of funds prior to the maturity date of the installment savings account.

Hanmi Bank also offers terms of 2-years at 4.86% APY and 1-year at 4.34% APY on their installment savings accounts. Other banks across the country are also starting to promote their installment savings programs with interest rates higher than what they offer on their basic savings accounts. Don’t forget that savvy investors actually earn even more than the stated APY on the installment savings account if they factor in the interest earned on the funds that is waiting to be invested monthly. Check back with MoneyRates.com for the latest rate deals on this relatively new bank product.