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What Is a High-Yield Savings Account?


In a world where Americans are saving less and less, it helps to have something to motivate you to sock away some money for an emergency fund and a high-yield savings account can do that. As the name implies, these options pay you interest rates that rank well above those of traditional savings accounts. Plus, the best savings accounts don’t require you to pay monthly fees or even keep a minimum balance. Some also provide very easy access to your funds via an ATM debit card. If you’re looking to put your finances in a better position, a financial advisor can help create a budget.

Understanding What a High-Yield Savings Account Is

Simply put, high-yield savings accounts are savings vehicles that earn much higher interest rates than those tied to their traditional counterparts. Even today, it’s not uncommon for a major bank to pay an interest rate as low as 0.01% on a savings account. High-yield savings accounts can commonly collect interest rates in the range of 0.5% to 4.75%.

To put that into perspective, let’s say you deposit $10,000 into a savings account paying an interest rate of 0.01%. If the account compounds interest monthly, you would have earned $1 after one year. Everything else constant, a high-yield savings account that pays an interest rate of 1% would have earned you $100.46 in the same time frame.

And if you factor in inflation, an interest rate of 0.01% can actually make you lose money in the long run. That’s because if inflation rises at a higher rate than the interest the bank is paying you, your money may be able to buy less when you take it out after a few years. But beyond the larger return, high-yield savings accounts can also offer even more benefits.

What Are the Benefits of a High-Yield Savings Account?

Some banks require you to make large deposits to open high-yield savings accounts. Moving forward, you may also have to maintain large balances to avoid hefty fees, earn interest or even keep your account open.

Thankfully, in the age of the internet, it’s easy to compare savings accounts to find the ones with the highest rates and the best terms. In fact, many online banks are offering the best rates and conditions on their high-yield savings accounts in order to compete with their brick-and-mortar counterparts.

For instance, some of the most popular online banks offer savings accounts with annual percentage yields (APYs) can climb well above 1.00% and they require very little in return. Several allow you to open one with any amount you’d like. From there, you don’t even need to keep a minimum balance or pay monthly service fees.

Some banks also link your savings accounts to debit cards. You can use these cards to make unlimited withdrawals at any ATM. Plus, many banks work with large ATM networks like AllPoint. This means you can access your money fee-free at thousands of ATMs across the country. In some cases, banks will even reimburse fees for using non-network ATMs.

Disadvantages of High-Yield Savings Accounts

There’s something called Regulation D that you need to watch out for. This isn’t really a disadvantage on the part of the bank or the account but instead it’s just a government regulation that could bite you. In fact, it governs all savings and money market accounts.

This rule limits certain transactions and withdrawals to six per monthly statement cycle. The following transactions count toward those six:

  • Transfers to other accounts even with the same bank
  • Automatic transfers like those set to pay bills or fund another account periodically
  • ACH withdrawals
  • Point of Sale (POS) transactions made with a debit card
  • Transfers processed by phone
  • Transfers made via check or debit card

However, you can make unlimited withdrawals via ATMs and from tellers at physical branches. Anyone wanting to open a savings account will need to weigh this requirement with their intentions of using the account.

Who Should Get a High-Yield Savings Account?

what is a high yield savings account

Anyone looking to open a rainy day or emergency fund that provides a higher-than-average interest rate and high liquidity should consider a high-yield savings account. A high-yield savings account can be a good fit for anyone that is looking to save money without risking it or not having any access to those funds. You can earn money with a savings account, conservatively, while maintaining the liquidity you may need.

However, there are alternatives to a high-yield savings accounts that some may find to fit their needs a bit better.

Alternatives to High-Yield Savings Accounts

Generally, there are two types of alternatives to high-yield savings accounts that operate similarly in terms of providing a place to save money while earning conservatively. Both are offered at many banks or credit unions and they are:

  • Money market accounts: A money market account provides a place to save while also giving some features of a checking account, such as the ability to write checks and access debt card transactions. Many high-yield savings accounts will offer better rates, but a money market account may provide more flexibility in accessing your money.
  • Certificates of deposit (CD): If you’re comfortable with locking up your money for a set period of time in exchange for an even higher interest rate, you can consider certificate of deposit account with the best CD rates. These accounts can provide better rates than most savings accounts but your money is typically locked up for a specific period of time.

Regardless of where you save, it’s important to consider the effort required on your part as well as the return you’re able to make on your money. Your personal situation will likely determine which account might be best for you.

What Are the Best High-Yield Savings Accounts?

We analyzed more than 100 of the best savings accounts available. Our research focused on interest rates, fees, liquidity and more. The best high-yield savings accounts typically provide an APY between 0.5% and 4.75%. While savings accounts can fluctuate throughout the year in APY and overall features, we’ve provided five of the most consistently great options below, in no particular order.

American Express® High Yield Savings Account

Most financial institutions that run physical branches offer dismal interest rates on their savings accounts. American Express doesn’t fit into either category, as it boasts a 4.35% APY (effective as of 12/14/23). In recent years, the American Express® High Yield Savings Account has offered APYs between 0.40% and 4.35%. These rates demolish the national average. Plus, Amex compounds interest daily and pays it monthly. While the bank has no monthly fees, you do need a minimum of $1 to earn an APY. And you can open an account with an amount of your choice.

Barclays Online Savings Account

The Online Savings Account from Barclays is very similar to its American Express counterpart, as its APYs in recent years have fallen somewhere between 0.40% and 4.35%. It also requires no monthly fees or minimum opening balance. However, you can manage it only online and over the phone. So it may be a better option for the more tech-savvy. But American Express also has a highly rated mobile banking app. So it may just come down to preference but both are solid options.

Synchrony High Yield Savings Account

Those who are looking for superior liquidity may be interested in the Synchrony High Yield Savings Account. This online-only entity links the account with a debit card that you can use at ATMs to make unlimited withdrawals. On top of that, in recent years, the account has still managed to earn high APYs in the range of 0.5% to 4.75%.

In addition, you can open one with just a penny and you don’t have to worry about monthly fees or minimum balances. Overall, it’s one of the best online high-yield savings accounts we’ve examined.

Ally Bank Online Savings Account

The Ally Bank Online Savings account is very similar to that of Synchrony. In recent years, Ally has offered APYs in the neighborhood of 0.5% to 4.25%. Ally Bank also charges no fees and offers a free checking account. This can make transferring funds much easier and more automated.

Vio Bank High-Yield Online Savings Account

A new player in the game, Vio Bank emerged as the online entity of MidFirst Bank. And to beat the competition, it currently offers a High-Yield Online Savings Account with great APYs. In fact, the account has boasted an APY from 0.50% to 1.10% over the last year. These rates surpass not only every savings account on our list but also most of the ones we’ve ever analyzed.

Bottom Line

High-yield savings accounts can earn you an interest rate superior to that of a traditional savings account. And these days, it’s easy to shop around to find one with the best terms and rates. Online banks are a great place to start. Many allow you to open one with any amount. Some also charge no monthly fees and require no minimum balance for you to keep. Altogether, this makes it easy for you to keep all of your money growing along with the motivation to save more.

Tips for Growing Your Savings

  • Saving is crucial to financial wellness, though it’s a challenge for many, especially when you consider debt and retirement planning. A financial advisor can help you create a financial plan for the future. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Surf the web to find the best savings accounts with the best rates and conditions that appeal to you. Banks are constantly competing for your service, so they aim to make better products. But with so many options to choose from, it can be a challenge. To narrow your search, we published a study on the best banks in the U.S.

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