High-Yield Savings Accounts Best Deals
Compare top Best Rate Savings Accounts and find the option that’s right for you.
- Up to 600$ welcome bonus
- Time deposit with up to 5,30% interest p.a.
- No account management fees
Best Rates for December 2023
Best Rates for December 2023
High Yield Saving
Member FDIC
APY
5.30%
- Up to $600 Welcome Bonus
MIN DEPOSIT
$5,000
High Yield Saving
Member FDIC
APY
5.10%
- Up to $600 Welcome Bonus
MIN DEPOSIT
$5,000
High Yield Saving
Member FDIC
APY
4.6%
- Up to $600 Welcome Bonus
MIN DEPOSIT
$5,000
High Yield Saving
Member FDIC
APY
4.45%
- Up to $600 Welcome Bonus
MIN DEPOSIT
$5,000
If you’re looking to earn more interest on your money than you would in a traditional savings account, a high-yield savings account may be a good place to start. With APYs significantly higher than the national average, high-yield savings accounts offer a secure alternative for earning more passive income on funds you want to keep accessible.
What Is a High-Yield Savings Account?
These kinds of accounts typically pay upwards of 10 times the annual percentage yield (APY) you would earn on keeping your money in a traditional savings account opened through a brick-and-mortar bank (See the National Deposit Rates on the FDIC’s National Rates and Rate Caps page for the most recent comparison).
Unlike some other financial products, the APY you earn on a high-yield savings account is variable and will fluctuate when the Fed updates its rates. Additionally, cash that you funnel into a high-yield savings account is not locked into that account for any length of time, so you can withdraw without penalties linked to the contribution date.
High-yield savings accounts are generally subject to the same sorts of limitations you may find in a traditional savings account, such as withdrawal frequency caps or minimum opening balances.
High-Yield Savings Account vs Traditional Savings Account Example:
Let’s say you have $5,000 in an emergency fund in a traditional savings account earning .2% interest, but you’re considering opening a high-yield savings account with 5.3% APY.
Assuming rates stay the same and you make no other contributions, at the end of a 12-month period, your $5,000 in the traditional account will have earned about $10. Rolling that into a high-yield savings account would garner closer to $265.
What Are High-Yield Savings Accounts Used For?
High-yield savings accounts are often used as a place to store money for short-term goals or for earning more interest on savings that you need to access quickly. For example, a high-yield savings account can be an ideal place for an emergency fund, because you can benefit from a healthy interest rate on money you don’t touch often, but you can still withdraw your assets without penalty within an average of 24-48 hours (subject to account policies on withdrawal limits).
High-yield savings accounts are not as commonly used for longer-term savings goals, since there are alternative financial instruments that can offer a better return. Check out our CDs page for more options for your longer-term savings goals.
What Are High-Yield Savings Accounts Used For?
When you open a high-yield savings account, you will be provided with the APY that your account is expected to earn over the course of a year. This rate is flexible and varies with the Fed rate, so your APY will change throughout the lifetime of your account and can change multiple times per year.
When the Fed increases its rate to potentially slow down an overheating economy, the APY on high-yield savings accounts also increases and makes saving more appealing. When the Fed drops its rate to encourage borrowing and stimulate economic growth, the rate on high-yield savings accounts follows.
Interest is typically compounded daily and added to your account on a monthly basis, meaning you won’t have to wait to see that boost in your savings until the end of the year. All future compounding will be inclusive of the added interest each period, and these compounding periods may vary by institution.
What Are the Limitations or Downsides of High-Yield Savings Accounts?
Similar Limitations to Traditional Savings Accounts
Like traditional savings accounts, high-yield accounts may be subject to opening balance requirements, minimum balances, monthly maintenance fees, and/or transfer frequency caps. These can vary widely by the institution you open an account with, so ensure that you are comfortable with the terms before opening your account.
Different Limitations from Traditional Savings Accounts
Because many traditional savings accounts are opened through the same bank that manages your checking account, transfers between savings and checking are usually instantaneous. If your high-yield savings account is opened through a different financial institution than your checking, it will generally take 24-48 hours for transfers to appear and there may be a nominal transfer fee imposed by your checking account’s bank.
Since most traditional savings accounts have such low APYs, they may never generate enough interest to report when filing taxes (the cap on tax-exempt interest is $10). It is much more likely that interest earnings on a high-yield savings account will exceed that cap, and will thus generate a 1099-INT to be included in your annual tax return. There are no automatic interest earning withholdings throughout the year, so you will be responsible for all taxes upon filing. Keep in mind that you will be earning enough interest income on your high-yield savings account to more than make up for the taxes, but it’s something to be aware of if you have substantial savings in your account.
Are High-Yield Savings Accounts Safe?
Most banks that offer high-yield savings accounts are insured by the FDIC. The standard insurance amount is $250,000 per depositor, per insured bank, for each ownership category. For example, if you had a high-yield savings account and a Roth IRA at the same bank, those are separate ownership categories and would qualify for two instances of the $250,000 insurance policy. If you had multiple high-yield savings accounts under the same bank, their aggregate must be below the insurance amount to maintain coverage. You can read more about this policy on the FDIC’s Insured Deposits brochure.
If you have concerns about your account’s APY, know that it will not drop below zero. Unlike stocks where your investment is not guaranteed, you cannot lose money by putting it into a high-yield savings account.
What Are the Requirements for Opening a High-Yield Savings Account?
Opening requirements for high-yield savings accounts vary by institution, but the personal information required is the same. Financial institutions will ask for:
Your name
Contact information (phone, email, address)
Social Security number
Age
If you are opening a joint account, you will need all of the same personal information from that additional owner. Note that you must be 18 or older to open an account on your own, but someone under 18 can be included in a joint savings account with a legal guardian.
Some opening requirements may include linking to the account that will fund the high-yield savings account and/or depositing a specified minimum amount of money.
What Should You Look For in a High-Yield Savings Account?
There are plenty of options for high-yield savings accounts, so make sure you’re opening the right one for you by considering the following:
FDIC insurance: This one will likely be a given, but check for it just in case and ensure the balance you deposit is within the $250,000 limit.
Initial deposit: Many financial institutions will allow you to open a high-yield savings account without any initial deposit. If this is something that appeals to you, look for one that has no deposit requirements.
Minimum balance: Some banks will advertise a higher APY that is only accessible if you maintain a certain average monthly balance; others will provide the same APY no matter what you have in your account.
Fees: Review all documentation around potential fees. Ones to look out for include but are not limited to minimum monthly balance, account maintenance, excessive transfers, and printed statement fees.
APY: This is likely what drew you to the account. Although this rate does change over time, some financial entities historically offer better APY than others.
Key Takeaways
High-yield savings accounts provide the opportunity to earn significantly more interest on your money than you would in a traditional savings account and they offer more rapid access to your funds than other interest-earning instruments like CDs or bonds. This makes them especially useful for shorter-term savings goals or for maintaining money that you need fast access to, but don’t necessarily expect to use frequently. View our latest high-yield savings account rates here.
