Key takeout
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High-yield savings accounts pay significantly more interest than traditional savings accounts. Currently, it is up to 10 times the national average.
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These accounts are usually provided by online banks and credit unions. Most high-income savings accounts do not have monthly fees and either have a low minimum balance requirement or no minimum balance requirement.
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Your money is FDIC insurance up to $250,000, making your high-yield savings account both secure and profitable.
A high-yield savings account is basically the same as a standard savings account, but you will pay a much higher yield on your money. The national average yield for savings accounts is 0.59%. However, you can find a high-yield savings account that pays 4% or more. This is almost 10 times the average.
This makes a high-yield savings account an essential tool for building emergency funds, saving short-term goals, and maximizing cash growth potential.
How do high-yield savings accounts work?
A high-yield savings account behaves exactly the same as a traditional savings account, and one important difference is the interest rate. Your money earns compound interest. This means you earn interest not only on your initial deposit, but also on previously earned interest.
For example, if you deposit $10,000 in a high-yie savings account with a 4.5% APY, you will earn around $450 in interest over a year. The same amount in a traditional savings account that pays 0.59% APY will only make around $59. That’s almost a $400 difference.
Why do high-yield savings accounts pay more?
High-yield savings accounts can offer higher rates as they are usually offered by online banks and credit unions that have lower operating costs than traditional brick and mortar stores. Without the costs of maintaining physical branches, these financial institutions can pass these savings to their customers through higher interest rates.
Additionally, these banks use competitive rates to attract new customers and deposits, creating a competitive environment that benefits the savers.
Keep your rate changes up to date with Bankrate’s weekly rate analysis and savings rate forecasts.
What to look for in a high-yield savings account
When comparing high-yield savings accounts, we focus on these key factors.
Annual yield (APY)
APY is your main consideration. It represents the total amount of interest earned in a year, including compound interest. Currently, competitive high yield savings accounts offer APYs of around 4% or more.
About tips: Use Bankrate’s compound interest calculator to see the exact amounts you can earn at different APY rates over time.
Pricing and Account Requirements
Find an account at:
- There is no monthly maintenance fee: Many high-income savings accounts do not charge monthly fees
- No low or minimum balance requirements: Best accounts require between $0 and $100 to open
- There are no excessive transaction fees: Federal regulations limit savings withdrawals, but avoid accounts that punish normal use. Here is a summary of all the fees you may encounter in a bank account.
Looking for a paid bank account? Below are the best bank rate picks for free checking accounts.
FDIC Insurance Protection
Make sure your selected bank has FDIC insurance and protects deposits up to $250,000 per depositor, per ownership category. This federal support means your money is safe even if the bank fails.
Access and convenience
You also need to consider your banking habits and how often you need to access your money:
- Mobile app quality and online banking features
- ATM Access: Some online banks will refund ATM fees
- Transfer speed: How quickly can I move my money to a checking account?
- Customer Service Availability and quality
Best High Yield Savings Account
A high-yield savings account can be a safe place to gain interest in money while making it easy to access for emergencies and other expenses.
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Pros and cons of high profit savings accounts
Strong Points
- Large profits in favorable profits: Maximize your money’s growth potential while maintaining easy access to your funds.
- Deposits are covered by federal insurance up to $250,000, and a savings account is as secure as traditional savings accounts.
- Unlike a deposit certificate (CD), you can access your money at any time without penalty.
- A high-yield savings account is ideal for storing emergency funds and provides both growth and accessibility.
- Most accounts require minimal business deposits and no monthly fees.
Cons
- APY may fluctuate with market conditions and changes in Federal Reserve policies.
- Most high-income savings accounts are provided by online banks with little or no physical branches.
- While it’s better than traditional savings, these accounts typically do not support long-term inflation or matching investment returns.
- Federal regulations limit certain types of withdrawals to six per month.
High-yield savings accounts and other saving options
High Yield Savings vs Money Market Account
Money market accounts often offer similar fees to high-yield savings accounts, but may include check writing privileges and debit cards. However, you usually need a higher minimum balance.
High Yield Savings vs CD
Certificates of deposit can offer higher rates on longer terms, but close the money. Choose CDs for funds you won’t need for months or years, and choose high income savings for accessible emergency funds.
High income savings and investment accounts
Investment accounts offer higher long-term growth potential, but include market risk. High-yield savings accounts offer guaranteed returns through FDIC protection.
How to open a high-yield savings account
To open a savings account, you need to provide information about yourself. This usually includes your name, email address, home address, phone number, and Social Security number.
To open a savings account, whether it’s a traditional bank like Chase or Bank of America, or an online-only bank like Ally Bank or Marcus by Goldman Sachs, you’ll want to first find the right institution. (Please note that online-only banks typically pay higher fees than traditional banks with brick and mortar locations.)
Once you find the right account, go to the relevant bank website and find the link that takes you to the online application. To submit your application, you will need information about yourself and some documents, including your Social Security Number and government-issued ID.
Conclusion
A high-yield savings account is one of the easiest ways to make your money stiffer for you. With current rates of 10 times more than traditional savings accounts, these accounts offer a risk-free way to drive savings growth while maintaining full access to funds.
The key is to prioritize competitive APY, low rates and strong customer service. Whether you’re building emergency funds, saving for large purchases, or simply looking for better returns on cash, a high-yield savings account should be the basis for your financial strategy.