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High-Yield Savings Account vs. Regular Savings Account: Which is Better?

Both high-yield savings accounts and regular savings accounts have unique advantages.

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Savings accounts are great places to put money away for an emergency fund or short-term goals like a wedding or vacation. There are mainly two types of savings accounts High Yield Savings Account and traditional savings accounts.

Both types are FDIC-insured, meaning your deposits are protected up to $250,000 per account per bank. Both allow you to access your money for free, Compared to a product like a CD, which penalizes you for withdrawing funds before the expiry date. Both types of accounts earn compound interest. Their interest rates vary based on the federal funds rate, so when Inflation is risingYour money grows faster.

The biggest difference is that high-yield savings accounts offer — you guessed it — higher yields The average interest rate on conventional savings accounts is currently 0.33%, while the average interest rate on high-yield accounts is 3.5% to 4.5% or more. It is about 11 to 14 times higher.

With such a stark contrast, you might think Choosing a high-yield savings account is a no-brainer. But not necessarily. Find out how to determine which product is best for you below.

If you think you could benefit from a high-yield account, start exploring your options to see how much more you can earn.

When a high yield savings account is better

For many people, a high-yield savings account is the better choice. Here are three times when this might be a good option for you:

  • When you want a higher interest rate: The difference in interest rates between traditional and high-yield savings accounts can really add up over time. For example, let’s say you have $1,000 in savings. At current interest rates, you’d earn just $3.30 per year with a regular savings account. In contrast, a high-yield savings account will earn $35.57 to $45.94. The more you have in your account, the bigger the difference.
  • When you’re happy to do all your banking online: a lot Best High Yield Savings Account Offer online banks, which often do not have physical branches If that doesn’t bother you, a high-yield savings account is a potential winner.
  • When you want to save on fees: Because online banks don’t have the overhead of brick-and-mortar locations, they can pass these savings on to customers. As a result, many pay lower fees than traditional banks, such as monthly maintenance and overdraft fees.

Check current savings rates here to find the best high-yield savings account for you.

When a regular savings account is better

Although they don’t earn as much interest, regular savings accounts have advantages. Here’s when they might be your best option:

  • When you prefer to do your banking in person: Some people prefer to talk to someone face-to-face when they have questions or need help. If that’s important to you, you’re better off with a regular savings account.
  • When you want easy ATM access: Some online banks offer ATM cards. You need to see which ATMs are in their partner network and you may have to pay a fee to use them Although not all traditional savings accounts offer ATM cards, you won’t be charged for using an in-network ATM, and in-network ATMs are easy to locate.
  • When you need to deposit cash often: If an online bank does not participate in the ATM network, you will need to deposit your cash into a conventional bank account and transfer it to your online account. It can take longer and cost more.
  • When you want multiple financial products with the same bank: Many online banks do not offer products such as checking accounts, credit cards, auto loans or mortgages. If you prefer the convenience of doing most of your financial business with one institution, a regular savings account may be better for you.

Bottom line

In many cases, a high-yield savings account is better than a regular account. One of the main benefits of having a savings account is earning interest, and you’ll earn considerably more with a high-yield account. That said, there are situations where a regular savings account might be better for you. As with any financial product, consider your personal needs and compare your options to find the best deal out there.

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