Do savings accounts earn interests?
Yes, savings accounts generally pay compound interest, which accrues on both the original principal and the accumulated interest on that principal. That means that you earn interest on your deposits and on the interest you have earned – you earn interest on interest.
Here’s how it works: Savings accounts, which are typically used to stash away money for large purchases or unexpected expenses, allow you to deposit funds that earn interest from a bank. When you deposit money into a savings account, the bank sometimes uses that money to give out loans, which is why it pays you interest in return.
An APY*, or annual percentage yield, is the percentage rate of interest paid on a savings account in one year. Many banks offer such interest on a frequent basis, including quarterly, monthly, weekly or even daily. On a quarterly basis, for example, you would be paid 1/4th of the APY. However, the more frequent the compounding periods, the better your returns could be.
Note: Please check with your bank, as this example may not apply to your individual circumstance.
*All APYs are subject to change.
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