If you don't already have a high-yield savings account, why not? If you're still keeping your spare cash in a low or no-interest bank account you're leaving money on the table... Easy money. Setting up a high-yield savings account is simple, making it an obvious place to store your cash. You'll earn interest on your money over time, with zero effort on your part.
Savings rates on high-yield accounts have been inching down over the last several months, falling even further after December's Fed meeting. The good news is the Fed didn't cut rates at its latest meeting, giving savers some breathing room for now.
| Account | APY | Min. opening deposit |
|---|---|---|
| Newtek Bank | 4.55% | $0 |
| BrioDirect | 4.55% | $5,000 |
| Poppy Bank | 4.50% | $0 |
| Jenius Bank | 4.50% | $0 |
| Popular Direct | 4.50% | $100 |
| My Banking Direct | 4.45% | $500 |
| Bread Savings | 4.40% | $100 |
| Western Alliance Bank | 4.30% | $500 |
| Evergreen Bank Group | 4.25% | $100 |
| Forbright Bank | 4.25% | $250 |
| Ivy Bank | 4.25% | $2,500 |
| Flagstar Bank | 4.20% | $25,000 |
| RBMax | 4.15% | $10 |
| Upgrade | 4.14% | $1,000 |
| Laurel Road | 4.00% | $0 |
Rates on high-yield savings accounts are always changing, so a good way to check the most up-to-date rates is by using our savings tool, below, created in partnership with Bankrate.
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What are high-yield savings accounts?
Essentially, high-yield savings accounts are the same as traditional savings accounts with one key difference — high-yield savings accounts pay a higher-than-average APY on deposits, meaning you'll be able to accrue more cash over time. And they're great options if you're looking for a risk-free way to maximize your savings.
Most high-yield savings accounts are federally insured, keeping your savings secure if your bank or credit union fails. If you open an account through a bank, the FDIC will protect up to $250,000 in individual deposit accounts and up to $250,000 for each person’s share of joint accounts. For accounts opened with a credit union, the NCUA will protect up to $250,000 per credit union member (whether in an individual or a joint account.
Unlike CDs in which your cash is locked away for a fixed period, high-yield savings accounts let you easily access the funds in your account. For this reason, they're good options for short-term savings goals or emergency funds. Plus, sometimes these accounts offer a savings account bonus, putting more money in your pocket.
Ways to use high-yield savings accounts
These accounts allow you to set savings goals for short or longer term purchases. Whether you want to save for a dream vacation, a retirement party, or even have some money set aside to start your business in retirement, high-yield savings accounts can help you reach your goals quicker.
Pros and cons of high-yield savings accounts
As with all savings products, there are pros and cons associated with high-yield savings accounts. It's important to compare all aspects of an account to make sure it meets your needs before opening it.
Pros:
- Higher APYs: Since high-yield savings accounts have higher APYs than traditional savings accounts, you’ll accrue more interest over time. Plus, interest in these accounts is compounded daily.
- Safety: Many high-yield accounts are FDIC or NCUA insured, meaning that if something were to happen to the bank (or credit union) your account is with, your money will still be safe.
- Accessibility: While there are sometimes limitations to the number of free withdrawals you can make from a savings account, your money is still readily accessible whenever needed.
Cons:
- Harder to access than traditional savings accounts: If you have a savings account that's with a different bank than your checking account, you may have to wait a few days for funds to transfer from one to the other. Plus, you won’t be able to easily view account details for both accounts in one place.
- Not suited for long-term goals: If you’re looking to save for long-term goals, like retirement, other investments, like stocks, are usually a better choice for your money. The rate of inflation can be higher than what you accrue in interest.
- Variable interest rates: Since interest rates are variable, the APY on the account can decrease from the rate it was when you opened the account.
- Minimum deposit requirements and fees: Many high-yield savings accounts charge a monthly fee and/or require a minimum deposit to earn the advertised APY.
- Online banks: Since most high-yield accounts are offered by online banks, you likely won’t have branch access, so contacting customer service might be more challenging.
Bottom line
Opening a high-yield savings account should be a no-brainer. If you don't have one yet, you're leaving money on the table. High-yield savings accounts offer higher rates than traditional savings accounts, meaning your cash will accrue more interest by simply sitting in a high-yield account than it would in a standard account. And there's no risk, either.
The downside? Since rates on high-yield savings accounts fluctuate with the market, rates could drop over the next year. So take advantage of the best rates while you still can.
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