For the past few decades, most banks’ savings accounts provided uninspiring interest rates. However, fierce competition among banks and rising interest rates have produced a vast selection of high-yield savings accounts for customers. With exponentially annual percentage yields (APY) than typical savings accounts, high-yield savings accounts can help you accumulate substantial interest payments and easily access your money. Here are the details and a review of top high-yield savings accounts.
A financial advisor can help you create a financial plan for your savings goals and pick a high-yield savings account.
What Is a High-Yield Savings Account?
A high-yield savings account pays accountholders more interest than conventional savings accounts. For example, lenders might offer savings accounts with a 0.01% interest rate. That rate provides a very slight return. For example, a balance of $20,000 would only return you $2 in interest after one year. On the other hand, high-yield savings accounts might provide 2% interest, which would provide an annual return of $400 for the same balance. As a result, a high-yield savings account is highly profitable compared to typical savings accounts.
Banks offer high-yield savings accounts to draw business from their competitors. Although the Federal Reserve influences interest rates, it doesn’t control savings account rates. This situation allows banks to set competitive high-yield savings rates and attract new customers.
How to Pick a High-Yield Savings Account
Dozens of banks advertise high-yield savings accounts, and picking one can be confusing. The following criteria can help narrow down your choices:
Determine your banking needs. Banks offer much more than high-yield savings accounts. As a result, it’s wise to choose a bank based on your whole financial situation. The following factors can help you decide which bank fits your situation best:
Depending on your needs regarding the above, the bank offering the highest interest rate might not be suitable for you. For example, if you like banks with brick-and-mortar locations, taking a slightly lower annual percentage yield (APY) is likely worth the choice that fits your preferences.
Compare fees. All banks have fees in one form or another. Some charge ATM, overdraft, monthly account, and financial advisor fees. Banks don’t always make plain all the ways they charge customers, so it’s a good idea to ask for a complete rundown of fees so you’re not caught off guard later.
In addition, perusing a bank’s fee schedule can inform you about how to avoid some fees. For example, a checking or savings account might only incur maintenance fees if you have too low of a balance. Plus, some banks reimburse specific amounts of ATM fees or only charge for out-of-network machines.
Check out interest rates. Generally, the higher the APY, the more return you’ll receive on your savings account balance. Therefore, it’s wise to compare interest rates among banks. One crucial detail to pay attention to is compounding: the more frequently your interest compounds, the more money you make. As a result, an account that compounds your interest daily will pay more than one that compounds monthly. For example, the American Express High Yield Savings Account compounds daily, making it a more profitable choice than an account with a similar rate that compounds less often.
Accessibility. A favorable interest rate helps build wealth, but your money does little good if you can’t get it when you need it. Most banks limit customers’ monthly withdrawals on savings accounts, so understanding the specifics of your account is vital. For example, the ability to withdraw your money with a debit card can be helpful. In addition, being able to transfer money from your savings to your checking account can increase accessibility. Lastly, look for a bank or financial institution with a mobile app so you can access your finances from your phone.
Best High-Yield Saving Accounts
After reviewing dozens of high-yield savings accounts, the following are best for customers. We prioritized interest rates, accessibility, and fees among financial institutions. The best high-yield savings accounts generally return between 0.5% and 3%. That said, savings accounts can change throughout the year, meaning a favorable bank account might have lower rates in the coming months. In no particular order, here are five reliably great options:
American Express High Yield Savings Account
Most financial institutions with brick-and-mortar locations offer uncompetitive interest rates. However, American Express is the exception, with a 4.30% APY. In the last few years, the American Express High Yield Savings Account has offered APYs between 0.40% and 4.30%, soaring above the national average. Also, Amex compounds interest daily and has no monthly fees or minimum balance requirements.
Barclays Online Savings Account
Barclays’ savings account has consistently offered an APY from 0.40% and 4.35%. Plus, it has no monthly fees or minimum opening balance. However, the institution has no physical locations, so customers who prefer banking through an app and over the phone might like it more.
Synchrony High Yield Savings Account
If accessibility is most important to you, the Synchrony High Yield Savings Account fits the ticket. Another purely online bank, Synchrony links the account with a debit card that can make as many monthly ATM withdrawals as you wish. Plus, the account has an encouraging track record with APYs between 0.5% to 4.75%. As a bonus, there are no account minimums or fees.
Ally Bank Online Savings Account
The Ally Bank Online Savings is another online-only option. For the last several years, Ally has offered interest rates ranging from 0.5% to 4.25%. In addition, customers receive free checking and won’t have to worry about fees for either account. As a result, transferring money is a snap.
Vio Bank High-Yield Online Savings Account
MidFirst Bank recently launched its online version, Vio Bank. It entices customers with a High Yield Online Savings Account offering an APY from 0.5% to 1.10%. Its consistently high rates have been tough for the competition to beat.
Customers prioritizing high interest rates, low fees, and accessibility should find a bank account that fits their financial needs. Whether you like banking in person or online, a high-yield savings account can provide a return that combats inflation and improves your financial health. Comparing rates, services, and fees is essential for finding the best high-yield savings account for you.
Tips for Finding the Best High-Yield Savings Accounts
Photo credit: ©iStock.com/fizkes, ©iStock.com/FG Trade, ©iStock.com/FG Trade