Installment Savings Account is a relatively new product that is usually offered by local/regional banks. An Installment Savings Account is basically an agreement to make monthly payments to the bank for a specific amount of time. In return, the rates for Installment Savings Account is typically much higher offered by the banks.
Above is an example of yield/agreement of installment savings account. In order to receive 5.50% APY yield, you have to commit to 48 months. If you setup a $1,000 Installment Savings Account, you have to deposit $20.83 ($1,000 / 48 months) per month for 48 months.
Advantages of Installment Savings Account
- Extremely Attractive Yield
- Forces you to save money
- You are locked in at the rates. Rates can go against you especially for long term installment savings plan
Disadvantages of Installment Savings Account
- Penalties for Early Termination
- Missing money transfer loses all of the interest earned for the account