Here’s Why Humphrey Yang Is ‘Shocked’ at How Many People Are Missing Out on Free Money Through This Account

You might think that most people wouldn’t turn down free money, if the opportunity presented itself. If you could collect an extra $300, $400, or more each year with zero work required, that seems like an easy call.

Former certified financial planner Humphrey Yang recently pointed out that lots of people have this exact opportunity, and they turn it down. How exactly are so many missing out on free money? It’s all about the type of bank account you use to park your cash.

If you don’t have a high-yield savings account, you’re missing out

Yang says people lose out on free money by not using high-yield savings accounts. These work the same way as any other savings account, but they have much higher interest rates.

To give you an idea of how big the difference is, the average savings account currently offers a 0.39% annual percentage yield (APY), according to the FDIC. That means for every $10,000 you have in your account, you’d earn about $39 per year.

Many of the most popular high-yield savings accounts offer between a 4.00% and 4.50% APY. For every $10,000 you have, you’d earn about $400 to $450 per year.

Given the difference in interest rates, you may figure that high-yield accounts have some sort of catch or drawback compared to regular savings accounts. Fortunately, that’s not the case. Your money is just as safe. Just like other bank accounts, high-yield savings accounts have FDIC insurance. That kicks in if the bank fails, and it covers up to $250,000 per eligible account.

This type of account also isn’t going to cost you money. Most high-yield accounts don’t charge any monthly maintenance fees, and many have no minimum balance requirements, either.

The key difference is that high-yield accounts are typically offered through online banks. Because they don’t have the overhead costs of brick-and-mortar banks, online banks can pay higher interest rates.

How to set up a high-yield savings account

If you have your money in an average savings account with a low APY right now, switching to a high-yield account is well worth it. It’s easy, and you’ll start earning much more back on your savings.

Here’s how to do it:

1. Compare account options. The APY is the first thing to look at, since that determines how much interest you earn. However, it’s not the only important factor. Other items to check out include minimum deposit requirements, monthly fees (most don’t have these), and customer service ratings.
2. Fill out an application for the account you want. You can do this online by choosing the “Open Account” option. The application will ask you for some personal information, including your name, address, date of birth, and Social Security number. Applications usually don’t take longer than 10 to 15 minutes.
3. Fund the account. Once your new account is open, you can deposit money. The most common deposit methods are ACH transfers from another bank account, wire transfers, and check deposits via the bank’s mobile app.

After that, just make your new account your default option going forward. Move all your savings there so you can maximize your interest. You’ll need to manage this type of account online, but if you need to get cash, you can transfer money to a checking account.