Why does the interest rate banks pay on your deposits vary over time? There are actually several factors involved. Banks make money from two basic sources: service fees, and interest on loans. Of course, the interest the bank charges for loans has to be higher than the interest the bank pays on deposits, and so the interest rate the bank pays on deposits is influenced by how much the market will bear for loans.

There are several things to look out for when selecting the best high interest savings account. Here is a brief guide on some things you should consider:

1. Does the account pay high interest on the entire deposit amount? Some high interest accounts pay the stated high interest only on deposit amounts after a given minimum. For example, the first $5,000 may pay a smaller interest return, with the higher return being paid only on the amount over $5,000.
2. Is there a minimum deposit, and how much is it? Depending on the interest rate and type of account, there is probably a minimum deposit required, and you may have to come up with several thousand dollars initially to take advantage of the highest return.
3. Is there a minimum balance? You are also likely to have to keep a minimum balance in the account to earn the stated high interest rate. If you drop below the minimum, you will not only earn less interest, you may also have to pay monthly service fees that would otherwise be waived so long as you keep the minimum balance in the account.
4. Is there a minimum duration? Many of the highest-paying accounts are “term” accounts, which require you to maintain your deposit for a stated period of time. However, there are many accounts available today that pay high interest without this requirement, which means that you would have your cash available in an emergency should you require it. Term accounts may also allow you to withdraw cash prior to the stated term, but you are likely to have to pay a penalty for the privilege of doing so.
5. Look for promotional offers. Many banks offer special promotions today, giving you an extra half or even a full percent on your money under certain conditions. First-time customers are often offered this incentive. Your current bank may also offer existing customers special promotions for new deposits brought into the bank.
6. Check the fee structure before moving your money into the account. Most high interest accounts requiring high deposits offer very low or free fee structures. Find out ahead of time what the monthly fee is if any and what fees there are for accessing your money or transferring it between accounts.
7. Can you transfer your interest out monthly? You may want to use your high interest savings account to generate interest income every month. If this is the case, you should make sure that the bank will allow you to withdraw your interest monthly without penalty.
8. Is there an automatic rollover? For convenience, many high interest term accounts will automatically roll over for another term once the first term ends, unless you specify otherwise.