A holiday savings account is a deposit account kept at a financial institution that guarantees your principal, pays interest, and ultimately helps you save towards a holiday or other specific event. If you want to save money and earn a competitive annual percentage yield (APY), we've identified several different holiday savings accounts that are currently offering yields of about 6.00%, which might be an ideal place for you to stash your hard-earned cash for an upcoming holiday or vacation. While savings account rates at large traditional banks typically stay close to zero, some online banks offer rates higher than the average rate of 1.45% our research has identified. We've done the heavy lifting and sifted through the thousands of banks around the country to bring you the savings accounts offering some of the best features and highest APYs for July 2025.
What is a holiday savings account?
Holiday savings accounts are bank accounts that allow consumers to save money for special occasions. These accounts are typically set up with automatic payments from a primary checking account to the holiday savings account. The money remains in the account and can earn an APY as high as 6.00% but the average is closer to 0.46%, until a specified date—usually towards the end of the year, at which time the bank releases the funds.
How to open a holiday savings account?
The first step in opening a holiday savings account is finding one. We've scoured through hundreds of banks to find the best holiday savings accounts in the country. Important factors to consider:
Opening deposit requirement
Automatic transfers
Monthly service charges
Early withdrawal penalty
Funds availability date
Once you find the bank you want to work with, opening a holiday savings account is as straightforward as opening any other type of savings account.
Is a savings account safe?
Generally speaking, yes. 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 your money is insured in case of a bank failure, which is rare.
Pros and cons of having a holiday savings account
| Savings accounts are safe and typically fall under FDIC insurance at a bank or NCUA insurance at a credit union. | The interest earned is taxable. |
| Much like a CD, the funds must remain in the account and force people to save towards a specific goal. | Holiday savings accounts only allow the funds to be withdrawn penalty-free once a year. |
| Savings account are interest-bearing accounts. | Interest rates can vary and are variable. |
Alternatives to holiday 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 many money market accounts also provide some checking-writing features. They also tend to offer higher yields than conventional savings accounts.
Certificates of Deposit (CDs): Banks and credit unions both offer a type of deposit 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. Rates offered CDs tend to be significantly higher than conventional savings account, making them an attractive option for people with idle cash.
High-yield Savings Accounts: A high-yield savings account is a form of savings account that pays a much greater interest rate than other types of savings accounts. Rates of 3.95% and higher are now available from online banks. This is the one type of account that offers yields similar or higher than an 18-month CD, with the drawback being that yields are variable and can fluctuate.
Frequently Asked Questions
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 annual percentage yield or APY for short. The interest rate on an account is only one component of the APY, which also considers how frequently your interest compounds. The APY of an account provides a more precise estimate of how much money it will earn in a year. For example, The best savings account we've identified from our research is 6.23%, which is a very good rate to help your money grow faster.
Minimum Required Balance: The smallest amount of money you must deposit or keep in a savings account to avoid a monthly maintenance fee.
Minimum Opening Deposit: Depending on the bank, a minimum amount may be required to be deposited into a savings account just to open the account. Most online banks with lower overhead expenses do not require this but traditional banks might.
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.
Methodology
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.