High-Yield Savings Account vs. Regular Savings Account: What’s the Difference?

Savings is an essential part of any financial plan. No matter how well you budget for daily expenses, life has a way of surprising you. A savings account is a safe place to build emergency fund To cover unexpected expenses like home repairs or large medical bills. It can also help you set aside money for short-term goals like a vacation or a new car.

The two main types of savings accounts are regular and High Yield Savings Account. Which is better for you? We’ve broken down the similarities and differences below to help you decide.

Start your search for a savings account by comparing savings rates and options here.

Similarities between high-yield and regular savings accounts

Both high-yield and regular savings accounts are covered by FDIC insurance, which protects your deposits up to $250,000 per account per bank. Bank failure. Compared to both accounts, you can easily access your money when needed Products like CDsWhich locks up your funds for a certain period of time and charges you if you need it before that period ends.

Most importantly, both regular and high-yield savings accounts earn compound interest. This means every period, you will earn interest on your balance and the interest you have earned till date. For example, say you have $1,000 in a savings account at 0.37% APY. If the interest is compounded monthly, you’ll earn $0.31 in the first month, bringing your balance to $1,000.31. Next month, you’ll earn interest on the new balance of $1,000.31, and so on. As your balance grows, so does your interest, allowing your earnings to snowball without you having to do anything.

Check the current savings rate here to find the best account for you.

Difference between high-yield and regular savings accounts

The main difference between high-yield and regular savings accounts is how much interest you can earn. But that’s not the only difference. Consider these factors when deciding which type of account to choose.

• Interest Rate: The average interest rate on a regular savings account is currently around 0.37%. By comparison, the average High yield savings account rates In the 3.5% to 4.5% range (or higher). What does that look like for your money? If you put $1,000 in savings and don’t make any additional deposits, you’ll earn $3.70 in interest after a year at a regular savings account rate of 0.37%. The same $1,000 in a high-yield savings account would earn $45.00 at 4.5% interest. And that’s only $1,000. yours Potential income grows rapidly based on How much do you save?.
• Physical Location: Most banks and credit unions offer regular savings accounts. On the other hand, high-yield savings accounts are usually offered by online banks and credit unions. These organizations don’t have brick-and-mortar locations, so you can’t talk to someone in person if you need help or have questions. If you are happy to do all your banking online then this will not be a problem for you. But if you prefer face-to-face interaction, a regular savings account may be a better choice.
• Fees: Because online banks don’t have the overhead of physical locations, they can pass those savings on to you in the form of lower fees You’ll likely pay less for things like maintenance and overdraft fees with a high-yield savings account than with a regular account.
• ATM Access: Some regular and high-yield savings accounts offer ATM cards so you can deposit and withdraw cash. ATMs are easy to find and use at a traditional bank; Doing this with an online bank can be more of a hassle. Since online banks have no physical locations, they partner with ATM networks to provide ATM access to customers It is up to you to find out where these ATMs are and you may have to pay a fee to use them If you need to deposit cash frequently, a regular savings account may be more convenient.

Start exploring your high-yield savings account options to see how much more you can earn

Bottom line

Which type of savings account is best for you depends on your needs. That said, a high-yield savings account is the clear winner for most people. You may not have the option of in-person service and accessing an ATM can be a little tricky, but the extra interest you’ll earn more than makes up for it. And Now is a great time to open a high-yield savings account. As with any financial product, consider your options carefully Find the best account for you.