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Tired of your savings sitting stale in a regular savings account, barely earning any interest? It may be time to level up your finances and open a high-yield savings account.
While most people use savings accounts to store their money, not all accounts are created equal. High-yield savings accounts offer a game-changing advantage: higher interest rates.
With these accounts, your savings can grow at an accelerated pace. This helps you reach your goals faster, whether it’s saving for a dream vacation or a down payment on a home.
Here are six key things to know about high-yield savings accounts.
1. High-yield accounts earn a lot more than your average savings account
You could earn almost 10 times more interest on your money with a high-yield savings account.
The national average interest rate is just 0.58% (as of September 2023). Large brick-and-mortar banks offer even lower interest rates on savings, ranging from 0.01% to 0.10%.
High-yield accounts, on the other hand, can earn over 5%.
Why do high-yield accounts have higher rates? For one, online banks offer them, and often have lower overhead costs. This allows them to pass on the savings to their customers through higher interest rates.
“[Keeping] money in a savings account is no longer a drag on your portfolio, with the top online savings accounts currently beating inflation and delivering the best returns in more than 15 years,” says Greg McBride, chief financial analyst at Bankrate.
It’s vital for your savings to outpace inflation. If the interest on your savings is lower than inflation, your money effectively loses value over time. High-yield accounts can help combat inflation by offering rates that are often higher than inflation.
2. The interest rate on a high-yield account isn’t fixed
High-yield interest rates aren’t fixed. They can change over time due to economic and monetary policy fluctuations. For example, high-yield interest rates often change when the Federal Reserve changes interest rates.
The rate you initially receive on your high-yield account may change in the future. But despite this, high-yield rates are still higher than most traditional savings accounts.
3. High-yield accounts are easy to manage
High-yield accounts are super simple to open and maintain.
Because online banks often offer these accounts, you won’t be able to visit an in-person branch for help. But you can easily access and manage your account from the comfort of your home or on the go, as long as you have service.
Most online banks offer robust platforms that allow you to check your balance, review transactions, and make transfers.
You can easily deposit money into your account through transfers, direct deposits, or mobile check deposits. You can withdraw funds by initiating a transfer to your linked accounts.
4. High-yield accounts come with features like ATM access, automatic transfers, and bill payment
There’s a wide range of high-yield accounts out there. Interest rates especially can vary across different banks.
Some high-yield accounts have features such as bill payments, automatic transfers, and ATM access. Others may charge fees, including monthly maintenance fees, overdraft fees, or ATM fees.
Don’t assume you’ll find identical features from one high-yield savings account to the next. Consider your financial situation and goals as you explore different accounts. Shop around and compare multiple options to find the best deal.
5. Some high-yield accounts have a minimum balance requirement, others don’t
Some high-yield accounts require you to maintain a minimum balance to earn the highest interest rate or avoid monthly maintenance fees. The minimum balance can vary between accounts, from $1 to thousands of dollars.
Choose an account with a minimum balance if you can earn more on your savings or if the account offers a specific feature you want. But many top high-yield savings accounts have no fees and minimum balance requirements. Even when these accounts do have minimums, many of them are very manageable, around $100.
6. High-yield savings accounts are secure
Many worry high-yield savings accounts are risky, but they’re just as safe as accounts at the biggest banks in the country.
Still, it’s understandable to be hesitant about opening a savings account at a bank you have never heard of. According to Bankrate data, 30% of people haven’t opened an online bank account because they’re worried about the security of their money.
A few facts can help you put those concerns to rest. First, most online bank accounts are FDIC insured. This means that even if the bank were to fail, your deposits would be protected up to the insured limit. Many online banks also have robust security measures to protect customer accounts against fraud.
That being said, choosing a high-yield savings account from a reputable financial institution is important.
Bottom line
If you already have a savings account, the hassle of opening a new one might seem like too much work.
But moving your money to a high-yield savings account is worth the energy. Your balance will be just as safe, and more importantly, it will be bigger, thanks to the higher interest rates available from today’s high-yield accounts.
Opinions expressed are author’s alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.