Make More with Your Savings: An Overview of High-Yield Savings Accounts 

When it comes to your money, you want to make sure that you are getting the most out of it. That’s why high-yield savings accounts can be a valuable financial tool.  

These accounts offer a higher yield on your deposits, which means that you can make more money with your money.  

In this guide, we will be discussing what high-yield savings accounts are, how they work, and some of the best options available online.  

What is a High-Yield Savings Account? 

A high-yield savings account is a type of savings account that offers a significantly higher interest rate than traditional savings accounts. This type of account is offered by online banks and credit unions and is known for its higher returns, making it a great option for those looking to grow their money with minimal risk.  

The advantages of high-yield savings accounts include easy access to your money, low or no monthly fees, and Federal Deposit Insurance Corp (FDIC) insurance for up to $250,000 per depositor, per insured bank. If the account is through a credit union, it will be insured by the National Credit Union Administration (NCUA).  

With a high-yield savings account, you will be able to watch your savings grow faster than with a traditional savings account.  

If you are looking for an effective way to save money, a high-yield savings account might be the right option for you. 

Traditional Savings Accounts vs. High-Yield Savings Accounts  

When it comes to saving money, choosing the right type of savings account can have an impact on how much you are ultimately able to save.  

Traditional savings accounts offer the benefit of being easy to open and manage but come with low-interest rates. For example, the current average interest rate for savings accounts is 0.37%. That means that if you have $10,000 in a savings account, you will only make about $30 on it in interest for the entire year. Many of the largest banks such as Bank of America and Chase offer a savings APY of only 0.01%.  

On the other hand, banks that offer high-yield savings accounts offer much higher interest rates that range from 3.5% to 5.0%. (In some cases, they can even be a little higher than 5.0%.) With a 3.5% APY, $10,000 in a high-yield savings account would earn about $350 per year.  

However, in some cases, high-yield savings accounts require higher minimum balances or have other limitations.  

It’s important to weigh the pros and cons carefully before deciding which type of savings account is right for you. 

Who is a High-Yield Savings Account for? 

A High-Yield Savings Account is an attractive option for individuals who want to earn higher interest rates on their savings while keeping their funds easily accessible.  

This type of account is best suited for savers who intend to hold their money for a longer period, but they don’t want the money locked down in an investment account where they will be penalized if they withdraw from the account before a specific period.  

This account would be ideal for someone who has a specific savings goal for a large purchase such as a house, a wedding, a car, or major home renovations.  

High-interest savings accounts may also be a good option for those who want to make money on their savings with a low-risk option when compared to higher-risk investments such as stocks, hedge funds, and cryptocurrency.  

It’s important to note some of the limitations to be aware of before opening a high-yield savings account:  

• Transfer and Withdrawal Limitations. Some banks may limit how often you are able to withdraw from your account and how often you are allowed to make transfers from the account. In 2020, the Federal Reserve paused the six-transfer limit per month, but this may be coming back.  
• Better Investments. If your goal is investing your money for the long term, there are financial products that produce higher returns such as investing in the stock market, which averages a 10% yield.  
• Fees. While there are plenty of banks that offer low fees on high-interest savings accounts, it’s important to be aware that some banks do include monthly fees, minimum requirements, and deposit requirements.  

You will want to look closely at such details before opening an account.  

Steps to Open a High-Yield Savings Account  

If you decide to open a high-yield savings account, here are the steps you can expect to follow: 

• Research. First, research various financial institutions to find the best option for your needs. We recommend looking for banks that have low or no fees along with high-interest rates. Some banks will have a minimum required balance in order to avoid monthly fees. Once you’ve found one that suits you, gather the necessary documents such as a valid government-issued ID and proof of address.  
• Apply. Then, fill out the application either online or in person at a branch location.  

• Review. Review the terms and conditions carefully to ensure that you understand the account’s interest rate, fees, and withdrawal restrictions.  
• Deposit Funds. Finally, fund your account with the initial deposit required to open the account.  

Please note that the exact process may vary depending on the bank. 

How to Maximize Your Interest with a High-Yield Savings Account  

To get the most out of your account, it’s important to familiarize yourself with the terms and conditions, including any fees or restrictions.  

To make sure you meet your savings goals, consider setting up automatic transfers to your high-yield savings account to make saving effortless.  

In addition, track your progress regularly to stay motivated and adjust your savings plan as needed.  

With careful planning, you can make the most of your high-yield savings account and watch your money grow.  

Bottom Line 

A high-yield savings account can be an excellent tool for anyone looking to save money and earn more interest than they are able with a traditional savings account. With a much higher interest rate than the average savings account, you can make sure that your money is working even harder for you.  

If you’ve decided that a high-yield savings account may be right for you, make sure to carefully research the various banks that offer them, and select the one that you believe matches your financial goals and budgeting practices the most. 

If you aren’t sure where to start, start by looking at one of the featured banks on this page. 

How We Rate Banks that Offer High-Interest Savings Accounts 

We identify banks that offer high-yield savings accounts. The banks are evaluated based on six factors that we believe are important for consumers: years in business, monthly service fees, the annual percentage yield (APY), customer service availability, the number of savings products offered, Better Business Bureau (BBB) Ratings, and the inclusion of a mobile application and how much functionality it has. Please find a full description of our ratings system here. Disclosure: We do receive advertising compensation from some partners, which influences what companies appear on our site and where they appear. For additional details please click here. 

Last Updated: 4/18/23

This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement.