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By FinanceBuddy Staff Writer
A high-yield savings account, generally speaking, is a savings account which offers a comparatively high interest rate compared to a traditional savings account. This type of account is commonly offered by "online" or "branchless" banks such as ING Direct or HSBC Direct, and is becoming increasingly popular in recent times -- perhaps as a result of a general loss of confidence in other, more risky forms of investment, or perhaps simply due to increased consumer acceptance of Internet-based financial services in general. In addition to a relatively high interest rate, high-yield savings accounts typically have low to nonexistent minimum balance requirements and often carry no recurring service charges and require no initial opening payment other than a starting balance, which can usually be paid via credit card. In some cases such an account can be opened nearly instantly via the bank's Web site, with little or no physical paperwork involved. One disadvantage of some online-only high-yield savings accounts is that immediate access to the stored funds (e.g. via an ATM withdrawal) may not be available. In many cases, in order to withdraw savings in cash form, the customer must first transfer the funds to a traditional checking or savings account at another bank, then make the cash withdrawal from that bank. There is sometimes a delay of up to 5 business days before the funds can be withdrawn, which pose a problem if there is a need to withdraw the funds in a hurry. However, given that the purpose of such an account is to support long-term incremental savings, the relative difficulty of converting stored funds to cash is not a real problem for the typical consumer. A high-yield savings account provides an ideal combination of low risk, reasonably good returns and greater accessibility than, for example, traditional offerings such as a CD.