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What is a high yield savings account?

Holding savings in 10-year-old jars
If you want to earn extra interest on the money you save, it may be worth pursuing a high-yield savings account.

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If you’re looking for a safe place to stash extra money for an emergency or more exciting goals like a vacation or wedding, a high-yield savings account may be right for you.

A High Yield Savings Account An interest-earning account typically offered by online banks and credit unions offers a substantially higher interest rate than you would a traditional savings account, so you can earn more than an average savings account and still have access to your money.

If you’re interested in pursuing a high-yield savings account, start by exploring your rates here to see how much more you could earn, or use the table below to explore your local offers.

What is a high yield savings account?

A High Yield Savings Account Functions like any other savings account – albeit with a much higher interest rate. When you deposit money in a savings account, the bank pays you compound interest to keep your money parked there. When you earn interest over a term, the bank deposits that money into your account. Then in subsequent periods, your account earns interest on your new account balance and the growth snowballs over time. The interest rate compounded on your account earnings over a year is expressed as the annual percentage yield, or APY.

Here’s a breakdown of the amount of interest you can earn with a high-yield savings account versus a standard savings account:

  • $1,000 balance: $3.30 after one year with a regular savings account at 0.33% APY/$35.00 after one year with a high-yield savings account at 3.50% APY
  • $5,000 balance: $16.50 after one year with a regular savings account at 0.33% APY/$175.00 after one year with a high-yield savings account at 3.50% APY
  • $10,000 balance: $33 after one year with a regular savings account with 0.33% APY/$350.00 after one year with a high-yield savings account with 3.50% APY
  • $25,000 balance: $82.50 after one year with a regular savings account at 0.33% APY/$875.00 after one year with a high-yield savings account at 3.50% APY

Remember, savings accounts have variable interest rates that fluctuate all the time. Generally, your account’s APY can increase when the Federal Reserve raises interest rates and decrease when the Fed lowers them. That’s why the Federal Reserve has raised the federal funds rate several times over the past year A good time to open a high-yield savings account. Lenders are available to help you get started today.

What is the difference between a traditional savings account and a high-yield savings account?

The main difference between high-yield savings accounts and regular savings accounts is that high-yield savings accounts can earn you more money. Currently, the national average interest rate for savings accounts is 0.35% APY, according to Federal Deposit Insurance Corporation (FDIC). In contrast, a competitive high-yield savings account can pay 3.50% APY or more.

How to Choose a High-Yield Savings Account

While there are a few essential factors to consider Choosing the Best High-Yield Savings Accountincluding:

  • Interest Rate: While the average traditional savings account interest is 0.33%, some brick-and-mortar banks are offering even lower APRs. You may be able to find high-yield savings account offers online with interest rates of 3.50% or more.
  • Fees: Most banks charge a fee when you withdraw more than six times from your savings account. As long as you don’t do anything unusual, like withdraw more money than you have in your account, you won’t pay any fees.
  • Minimum Balance: Depending on the bank, you may earn a specified APY only by meeting a certain minimum balance threshold, or you may earn the same APY regardless of your balance.
  • Compounding Frequency: Banks can compound daily, weekly, semi-annually or annually. In theory, the more frequently the interest compounds, the faster your money will grow.
  • Access: Any savings account you’re considering should be able to link to an external account for free so you can deposit funds easily.
  • Safe: FDIC-insured banks protect your savings account funds up to the legal limit, currently $250,000 worth of protection per account holder.

Types of High-Yield Savings Accounts to Consider

A high-yield savings account isn’t the only place to park your money for higher returns than traditional savings accounts. Other options you can consider include:

  • Money Market Account: If you like high-yield savings accounts but you want to give your account more flexibility, a money market account might make sense. Money market accounts work like high-yield savings accounts, but they allow you to write checks, which most savings accounts prohibit. Also, money market accounts invest your funds in low-risk securities, which can pay higher interest rates than standard savings accounts while remaining relatively safe.
  • Certificate of Deposit (CD): CD Your deposit may offer a high-interest rate, but you must keep your money in the CD for a certain period of time. If you withdraw money early, you will have to pay a penalty.
  • Cash Management Account (CMA): Cash Management also has APYs that are typically higher than what most brick-and-mortar banks pay with their savings accounts. Typically, these accounts combine features like checking, savings, and investment accounts into one product.
  • Investment account: Investing in the stock market can provide a significantly higher return on your investment than a high-yield savings account. However, investment accounts are much more risky, and you can lose money if the price of your stock investment falls.

As you compare high-yield savings accounts and other account options, think about Which option best meets your financial needs and goals?. You can now explore your high-yield options here or through the table below.

Advantages and Disadvantages of High-Yield Savings Accounts

As with any financial product, it’s important to weigh the pros and cons before making your decision.


  • High-yield savings accounts have higher interest rates than traditional savings accounts.
  • You can access money in your high-yield savings account when you need it.
  • Online banks have lower minimum deposit requirements when you open your account.
  • Many high-yield savings accounts come with no monthly fees or other additional costs.


  • With variable interest rates, your APY can change at any time, so you may not keep your initial APY for long.
  • Many online banks that offer high-yield savings accounts don’t have a physical branch office where you can deposit funds in person.
  • While it’s easy to transfer money between your online savings account and other bank accounts, the process can take up to a few business days to complete.
  • You can typically withdraw or transfer money from your account up to six times per month before risking penalty fees or having your account closed.

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