A liquid savings account can provide easy access to your money for emergencies or other short-term financial goals — and a high-yield savings account can give you the added benefit of a rate that’s far above the national average. Such a yield can translate to hundreds more in interest per year for some balances.
In addition to choosing a high-yield savings account based on its competitive annual percentage yield (APY), you’ll want to prioritize offerings such as federal deposit insurance and convenience — while avoiding monthly fees that can eat away at your balance.
Key takeaways
- High-yield savings accounts offer higher interest rates than traditional accounts, which helps you grow your money faster.
- Look for accounts with competitive APYs, FDIC insurance, accessibility, and low fees.
- Maximize your savings growth by setting up automatic transfers to your account.
Look for above-average APYs
Expressed as a percentage, APY refers to how much interest a bank account earns in one year. It incorporates the effect of compound interest, which means you’re earning interest on both your principal and any interest that’s already been earned.
The primary advantage of high-yield savings accounts is the opportunity to earn a significantly higher APY on your funds. While the average savings account pays below 0.50% APY, according to the Federal Deposit Insurance Corporation (FDIC), the best high-yield accounts offer rates above 4.50%. For a $10,000 balance, that’s the difference between earning $50 versus $450 in interest per year.
Look for accounts with the highest available rates, which are often from online banks. These banks have lower overhead costs than traditional brick-and-mortar banks, which allows them to pass the savings on to customers in the form of higher yields.
See Bankrate’s picks for top picks for high-yield savings accounts.
Keep in mind that some banks offer tiered or promotional rates that depend on your balance or require you to meet certain conditions, like maintaining a minimum balance or making a minimum number of debit card transactions per month.
Make sure the account has FDIC insurance
Going with a federally-insured bank or credit union is a must when you’re choosing a savings account.
Choose a high-yield savings account from a bank insured by the FDIC or a credit union insured by the National Credit Union Administration (NCUA). These federal agencies protect your deposits up to $250,000 per depositor, per institution, in the event of a bank failure.
Find an account that’s convenient
Consider how easily you can access your account and your money. Most high-yield savings accounts are offered by online banks, which provide 24/7 access to your account via their website or mobile banking app.
Look into how easy it is to:
- Transfer money between accounts
- Set up automatic transfers from checking to savings accounts
- Deposit checks remotely
- Set up separate categories or buckets for different savings goals
- Pay friends and family through platforms such as Zelle
- Access customer service through a live-chat feature
- Withdraw cash via an ATM (ideally with rebates for out-of-network fees)
When considering a bank, check how well its app is rated on Google Play or the App Store. You’ll be able to access user reviews as well as screenshots of what the app looks like, once installed.
Read more: 8 banks that reimburse ATM fees
If you prefer in-person banking, consider opening your high-yield account at a bank with physical branches or choose an online bank that partners with a national ATM network.
Look for low or no fees
Pay close attention to account fees, which can quickly eat into your interest earnings. Many high-yield savings accounts have no monthly maintenance fees and low or no minimum balance requirements. Others may waive fees if you maintain a certain balance or link a checking account. Here’s a list of the most common banking fees you’ll run into.
Also, note any minimum opening deposit requirements. Some accounts have no minimum, while others ask for $50, $100 or more to get started. If an account requires an amount you’re not comfortable with, cross it off your list and continue looking elsewhere.
Understand withdrawal limits
Federal Regulation D limits savings account holders to six “convenient” withdrawals or transfers per month, including online transfers, checks, and debit card transactions.
This limit was suspended in 2020 due to the COVID-19 pandemic, though some banks still restrict the number of withdrawals on these accounts. Some banks may charge an excess withdrawal fee or convert your account to a checking account if you exceed a certain number of monthly transactions.
That’s why it’s important to double-check any restrictions on any account you’re considering, especially if you plan to make frequent withdrawals.
In addition to withdrawal limits, think about how easily you can access your funds when needed. Some high-yield savings accounts come with ATM cards for cash withdrawals, while others require you to transfer funds to a linked checking account first.
Also, be aware of any transfer limitations or processing times. Some banks may limit the amount you can transfer in a single transaction or per day, or they may take several days to process transfers between institutions. If quick access to your savings is a priority, look for banks with higher transfer limits and faster processing times.
Bottom line
Once you’ve chosen your high-yield savings account, follow these tips to make the most of your account:
- Set up automatic transfers from your checking account to build your savings consistently over time.
- Name your account based on your goal (e.g., “Emergency Fund” or “Vacation”) to stay motivated.
- Consider opening multiple accounts for different goals to track your progress easily.
- Resist the urge to tap your savings unnecessarily; let your money grow uninterrupted to reap the most benefit from compound interest.
- Review your account regularly to ensure you’re earning a competitive rate.
With a little research and planning, a high-yield savings account can be a valuable addition to your financial toolkit – one that helps you earn more, save faster and reach your goals.
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