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The Fed's adjustments to the federal funds rate is the main factor that impacts high-yield savings account rates. At the moment, numerous online banks offer high-yield savings account rates of 3.63% or higher. This rate is significantly higher than the 0.46% national average our research has identified and higher than the rate that most traditional banks offer on conventional savings accounts. 



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What is a high-yield savings account?

High-yield savings accounts are very similar to conventional savings accounts, except for the very important difference that they offer greater interest rates, thereby letting your money grow faster. Generally speaking, federally insured savings accounts that offer rates much higher than the national average of !AvgRateSavingAccounts! are classified as high-yield savings accounts. Due to the current inflationary environment and high Fed Funds rates, numerous online banks offer accounts with an APY of 3.63% or higher. Here are some important factors to consider when opening an account:


  • Determine how the funds will be utilized


  • Determine when you'll need to access the funds to avoid any potential fees


  • In general, high-yield savings accounts are thought to be safe places to keep your money as long as the bank is FDIC-insured or the credit union is NCUA-insured. 


How to select the best high-yield savings account

Choosing the best high-yield savings account isn’t always a straightforward decision. When shopping around for the best account, here the the most important factor to consider:


  • APY - Both traditional and online banks as well as credit unions offer high-yield savings accounts. The highest APYs are typically offered by online banks. It is important to shop around and find the best bank with the highest rate for your individual situation.


  • Compounding Frequency - The more frequently interest is compounded, the faster your money can grow.


  • Fees - As with any financial product, account fees can chip away at your account, so it is important to understand what fees may be assessed and why.


  • Account Minimums - Some banks also require minimum account opening balances and ongoing minimum balances to qualify for the highest interest rates available, so be sure to read the fine print.


Who should open a high-yield savings account?

Most people who have extra money to set aside or have financial goals would certainly benefit from having the highest interest-rate savings account possible. A high-yield savings account should be part of a larger and more diversified portfolio that includes accounts for short-term and long-term needs. This type of account can be used for short-term needs but works better over a longer period so that the compounding effect of interest can have time to work its magic. The following individuals would benefit from this type of account:


  • Future retirees who need an extra boost for their money before retirement


  • Individuals with disposable income who already have 3-6 months' worth of expenses saved in a conventional savings account and have free cash flow to save for other financial goals.


  • Parents and future college students who need a safer place to save money for future educational expenses.


  • Future homeowners in need of a safe place to save for a down payment and have their money grow at a faster pace.



Pros and cons of having a high-yield savings account

High-yield savings accounts at FDIC-insured or NCUA-insured up to $250,000 per depositor, bank, and ownership type, making them relatively safe places to park your money.Some banks may require a minimum balance and assess fees against the account if the minimum is not met. There are also other fees such as overdraft fees, account closure fees, out-of-network ATM fees, wire fees, etc., which may eat away at both your interest and principal.
Funds accounts are liquid and you may usually access your funds at any time.Interest rates can fluctuate over time depending on the Federal Reserve policies and inflationary pressures on the economy.
High-yield savings accounts yield a higher than traditional interest over time, which accumulates and allows your money to grow more quickly.
Many financial institutions offer ATM card access to your savings across national ATM networks.


Is it possible to lose money in a high-yield savings account?

As long as your bank is FDIC insured or your credit union is NCUA insured and your account falls within the limits of up to $250,000 per depositor, per account ownership type, and per financial institution, there isn’t much to worry about as bank failures are rare.


In an inflationary environment such as the one we find ourselves in now, interest rates offered even in high-yield savings accounts may not be high enough to keep up with the inflation rate. Your account balance may remain the same or continue to rise, but the buying power of each dollar will decrease over time.


Terms to know


Annual Percentage Yield (APY): The total interest you receive on money in an account over the course of a year is expressed as an APY. The interest rate on an account is only one component of the APY, which also considers how frequently your interest compounds. The annual percentage yield (APY) of an account provides a more precise estimate of how much money it will earn in a year.


Minimum Required Balance: The smallest amount of money you must deposit or keep in a savings account to avoid a monthly maintenance fee.


Interest: Interest is the money you earn from depositing your cash with a bank. When you deposit money with a bank, the bank borrows it from you, since it will lend a portion of it to clients or other banks, and the money they pay you is the interest.


Compound Interest: Compound interest is the interest you earn on interest you have already been paid.  This may be demonstrated using simple math: if you have $100 and it generates 5% interest every year, you will have $105 at the end of the first year. You'll have $110.25 by the end of the second year, because you earned interest on the $105, and so on and so forth.


Alternatives to high-yield savings accounts


  • Money market accounts


    A money market account is a type of interest-bearing account available at banks and credit unions. They are similar to savings accounts; however, one significant difference is that certain money market accounts also provide some checking account functions.


  • Checking accounts


    A checking account is a form of deposit account that can be opened at a physical bank, an internet bank, or a credit union. Checking accounts allows you to deposit funds and then withdraw from them to pay bills or make purchases. They are also known as transactional accounts. The money in your checking account is money that you intend to use in the short term to meet your daily expenses.


  • Certificates of Deposit (CDs)


    Banks and credit unions both offer a type of savings account known as a certificate of deposit, or CD. Generally speaking, you commit to leaving your money in the CD for a predetermined period without taking any withdrawals. Early withdrawals may incur penalties, depending on the type of CD.


Frequently Asked Questions

What is a high-interest savings account?
How do you calculate interest on a high-yield savings account?
Which high-yield savings account is the best?
How often do high-yield savings accounts pay interest?
Is it necessary for me to pay taxes on my high-yield savings account?
How frequently do savings account interest rates change?
Why do internet banks pay higher interest rates?
Is it safe to put my money in a high-yield savings account?
Should I have multiple high-yield savings accounts?




Our editorial staff continually updates the information contained on our website. Our editorial staff has analyzed virtually all of the banks and credit unions that it follows, and it does weekly rate analysis for more than 250 prominent banks and credit unions. These institutions were chosen because they provide competitive APYs, low fees, and other factors we find important. These banks and credit unions often provide accounts that are available nationally. All of these banks are FDIC-insured, and all of these credit unions are NCUA-insured. Choosing an FDIC-insured bank or an NCUA-backed credit union assures that your money is protected as long as it stays within insurance limits and requirements.


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