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These great online savings accounts offer high interest rates with FDIC insurance coverage. Check out our shortlist of standout offers, from our partners, and start earning interest today.
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Terms explained
Certificate of Deposit (CD)
A type of savings account in which a lump-sum deposit accrues interest at a fixed rate for a fixed term, usually with an early withdrawal penalty.
Checking
The core bank account used for financial transactions. Account holders use it to deposit money and withdraw funds as needed.
Savings
A deposit account issued by banks and credit unions used to deposit money and earn a small amount of interest. Typically insured for up to $250,000 per account owner.
Money Market Account (MMA)
Similar to a savings account but with the added feature of checking-writing privileges and debit card to access cash, with some limitations.
Annual Percentage Yield (APY)
A CD’s interest rate that represents the return from the compounded interest you’ll earn in 12 months on your deposit. The higher the APY, the faster your money grows.
Estimated earnings
An estimated calculation usually associated with determining how much you’ll receive from an interest-bearing account.
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Experts believe interest rates are the highest they’re likely to be for a while and may begin falling later this year. So, consider switching to or opening a high-yield savings account now while rates last, especially if your savings account earns interest that’s 3% or less.
What is a high-yield savings account?
A high-yield savings account, or HYSA, is a type of savings account that offers interest rates at least 10 times higher than the national average. Most HYSAs are found at online-only banks. Since online banks don’t have the overhead costs of maintaining physical branches, they pass some of these savings down to customers in the form of lower fees and better APYs on savings, certificates of deposit and money market accounts.
With the highest rates continuing to hover above 5% APY, transferring some or all of your savings to a high-yield savings account could definitely pay off.
While many high-yield savings accounts offer high APYs on your full balance, some banks cap the amount of money you can earn at this rate. For instance, Digital Federal Credit Union offers an impressive 6.17% APY on its high-yield savings account — but only on balances up to $1,000. Any balances over that receive a paltry 0.15% APY.
And, in some cases, banks might require a higher minimum deposit to be eligible for the higher APY.
How to open a high-yield savings account
You can typically open a high-yield savings account online in a matter of minutes. While the steps may vary by bank, here’s what the process generally looks like.
- Compare your options: Before opening an account, review different banks, features, rates and requirements to make sure you’re choosing the right fit for your financial situation.
- Apply: You’ll likely apply online, but you may be able to apply in person if your bank has physical branches. You’ll typically need to provide your Social Security number, physical address and contact information for your application. If you don’t have an SSN, some banks may allow you to open an account with an Individual Taxpayer Identification Number, or ITIN. Some banks may also require you to link your account and routing numbers from another account or financial institution to transfer your funds.
- Make a deposit: Depending on the bank, you may need to make a minimum deposit when opening the account. If not, you can transfer money when you’re ready. Most banks allow bank transfers, automated clearing house transfers and mobile check deposits.
Alternatives to high-yield savings accounts
In general, there are three savings account options if you’re looking for an alternative to high-yield savings accounts.
Traditional savings account: A traditional savings account is typically offered by a brick-and-mortar bank or local credit union. You won’t earn much interest compared with high-yield savings accounts, but you will have ATM access to make cash deposits and withdrawals. Some of these accounts are limited to six monthly withdrawals, although ATM withdrawals may be excluded from that restriction.
Money market account: A money market account combines features of a checking and savings account. This account usually requires a higher balance to earn interest and keep your account in good standing. And you may only be able to make a limited number of withdrawals per month. However, many money market accounts come with checking account features, such as a debit card, ATM access and check writing privileges.
Certificates of deposit: A certificate of deposit, or CD, offers a fixed interest rate for a set period, known as the term. If you withdraw your money before the term ends, you’ll pay an early withdrawal penalty, which is usually a few weeks or months of interest, depending on the bank. And CDs only allow a one-time deposit. Most CDs have terms from three months to five years.
Reasons to open a high-yield savings account today
Whether you want to open a savings account for a short-term financial goal or to build an emergency fund, a high-yield savings account can help you reach your goals sooner. Even after rates fall this year, high-yield savings accounts will continue to offer significantly better APYs than traditional ones. So don’t let anticipated rate drops stop you from making the switch. This week’s Consumer Price Index release has also paused some talk of rates going down relatively soon. The price of goods rose 3.1% in January, as the US struggles to shake off inflation for good.
Here’s what makes HYSAs stand out:
- High rates: HYSAs often have APYs 10 times higher (or more) than the national FDIC average.
- Low or no fees: Monthly maintenance fees can eat into your savings. Many online banks can charge low or no fees thanks to their lower operating costs.
- Liquidity: You can access money in your HYSA anytime without penalty (as long as you mind any withdrawal limits). CDs, another popular savings product, charge a penalty if you take out funds before the term is up.
- Accessibility: If you open an HYSA at an online bank, you’ll enjoy 24/7 account access through its mobile app. You may also have lots of customer service options, including by phone, online chat and secure messaging.
- Low risk: HYSAs are protected by federal deposit insurance if they’re held at an FDIC-insured bank or NCUA-insured credit union. That means your money is safe up to $250,000 per account holder, per account type.
If you’re earning less than 1% with your current savings account — some big banks offer as little as 0.01% APY — you don’t have to close your existing account to enjoy higher rates. You can open a new account from an online bank in minutes and set up recurring transfers or direct deposits to start funding it.
Factors to consider when comparing savings accounts
High-yield savings accounts usually have higher APYs than traditional savings accounts. But you should consider more than just the APY before opening a HYSA. Keep these factors in mind when comparing savings accounts:
- Minimum deposit requirements: Some HYSAs require a minimum amount to open an account — typically, from $25 to $100. Others don’t require anything. How much you have to deposit initially can help you narrow down your options.
- Fees: Monthly maintenance and other fees can eat into your balance. Avoid unnecessary charges by looking for a bank with low or no fees.
- Accessibility: If in-person banking is important to you, look for a bank with physical branches. If you’re comfortable managing your money digitally, look for an online bank with a user-friendly app with all the features you need.
- Withdrawal limits: Some banks charge an excess withdrawal fee if you make more than six monthly withdrawals. If you think you may need to make more, consider a bank without this limit.
- Federal deposit insurance: Look for a bank that belongs to the Federal Deposit Insurance Corporation or a credit union that belongs to the National Credit Union Administration. Accounts at these institutions are protected up to $250,000 per account holder, per category in the event of bank failure
- Customer service: You want a bank that’s responsive and offers convenient support options if you ever need assistance with your account. Read online customer reviews to see what current customers say about their experiences. You can also contact customer service to get a feel for what it would be like to work with the bank.
What a high-yield savings account is best for
A high-yield savings account is a great place to park money dedicated to short-term savings goals. Here are a few ways you might use a HYSA:
- Emergency fund: Your emergency fund provides an extra layer of security against unexpected expenses, and it should always be in a high-yield savings account, Soledad said. You’ll have access to the money when you need it, and you can make regular contributions over time to prepare for an unforeseen event, such as a layoff or medical bill. You should keep your emergency fund separate from any other savings goals and only pull funds from this account to cover essentials such as housing costs, bills, medical care or an unexpected expense.
- Sinking fund: A sinking fund is a way to set aside savings for a short-term goal, such as holiday gifts or a concert. It’s money you save for a specific upcoming expense, Soledad said. You can open separate high-yield savings accounts or use a bank such as Ally that offers savings buckets to help organize and separate savings goals within one account. You may set up automatic transfers or contribute occasionally to reach your goal. That way, when it’s time for your purchase, you’ll have the money you need without overspending or taking on debt.
- Money you haven’t earmarked yet: If you’re unsure about how you want to use some funds, you may keep the money in a high-yield savings account to earn interest while you decide. When you’re ready, you can move the funds to the right account or goal — whether you choose to invest, start a new sinking fund or spend the money.