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High interest savings accounts are very similar to normal savings accounts and mainly differ on two key points: they pay a higher interest rate to the saver and they have various restrictions that limits costs to the bank, or ensures that certain amounts of capital remain in the bank. These restrictions often come in the form of minimum account balances that the saver must exceed in order to receive a higher interest rate, or withdrawal restrictions with limit the number of transactions or the amounts of withdrawals that can be made.
Like any savings account, a high yield savings account pays the saver with interest the bank gains from lending. The difference with a high yield savings account is that through restrictions, automation and streamlining, banks are able to offer you a higher interest rate due to economies of scale. Essentially, banks are willing to accept a smaller difference between the saver's interest rate and the interest rate of their borrowers because they can attract, process and retain capital in mass quantities.
Like any savings account, a high yield savings account pays the saver with interest the bank gains from lending. The difference with a high yield savings account is that through restrictions, automation and streamlining, banks are able to offer you a higher interest rate due to economies of scale. Essentially, banks are willing to accept a smaller difference between the saver's interest rate and the interest rate of their borrowers because they can attract, process and retain capital in mass quantities.
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