How to Choose a High Yield Savings Account
There are many places to invest your money for long-term growth . What about short-term savings? Can’t you also make some money from this?
A high-yield savings account functions like a traditional savings account but offers significantly higher interest rates. Specifically, the average interest rate on savings accounts is currently 0.41%, according to the FDIC . Compared to these meager returns on a traditional savings account, high-yield alternatives can earn more than 4.50% annual returns, turning a potential annual gain of $50 on $10,000 into $450 or more.
These accounts are typically offered by online banks and financial institutions with lower overhead costs, allowing them to pass on those savings to customers at better rates. So: With so many high-yield savings accounts to choose from, how do you choose?
What to Look for When Choosing a High Yield Savings Account
While maximizing your returns will be your top priority, there are other features to consider when choosing a high-yield savings account.
Annual Percentage Yield (APY)
APY represents your actual earnings after compounding. This aspect is without a doubt your top priority. Even small differences in APY can have a significant impact on your earnings over time. Currently, the most competitive high yield accounts offer interest rates between 4.50% and 5.25%.
Remuneration structure
While many accounts don’t have a minimum deposit to open an account (remember, they want you to sign up), some charge a monthly fee if your balance is below a certain threshold. For example, Citi Accelerate Savings charges $4.50 per month unless you keep a minimum of $500 in your account. Look for accounts with:
-
No monthly maintenance fee
-
No minimum balance requirements
-
Free transfers between linked accounts
-
Reasonable excess withdrawal fees (if any)
Access to your money
Since you’re likely keeping short-term savings in one of these accounts, you want to be sure that you’ll be able to access your money when you want to withdraw it to pay for your next family vacation or the new brakes your car needs this year. Consider how you will need to use these tools:
-
Do you need access to an ATM?
-
Is deposit available via mobile check?
-
How many monthly transactions are allowed without penalty?
-
How quickly can you transfer funds to your main checking account?
Insurance protection
Make sure your deposits are federally insured. FDIC insurance for banks reaches $250,000 per depositor; NCUA insurance for credit unions has the same coverage limits. Most financial institutions are transparent about this by noting their FDIC status on their home page or in the list of account features. Many banks list “FDIC Member” next to their name.
User Experience
Read some reviews and ratings of the mobile app, customer service, and account opening process.
Minimum deposit requirements
While many accounts don’t have a minimum deposit to open an account (remember, they want you to sign up), some charge a monthly fee if your balance is below a certain threshold. And yet, some accounts require significant initial deposits or minimum balances to earn the advertised APY. Choose an account that suits your financial situation.
Some of the Best High Yield Savings Accounts Right Now
Let’s take a look at how you can choose between some of the most competitive accounts on the market right now. I’ve broken down some of the most popular options by their APY, as well as factors that help minimize fees and provide easy access.
Note. Rates are subject to change depending on market conditions and the policies of the Federal Reserve.
SoFi Check and Savings
-
APY: 3.80% (for direct deposit)
-
Minimum balance: $0
-
Monthly/overdraft fee: No
-
Other things to consider: a combination of checking and savings account; no access to the branch, cash deposit fee
Capital One 360 Productivity Savings
-
Minimum balance: $0
-
Monthly/overdraft fee: No
-
What else should be taken into account: high user rating, no minimum deposits for opening; no cash deposits at many partner ATMs
KIT Bank Platinum Savings
-
APY: 4.10% (balance over $5,000)
-
Minimum balance: $0
-
Monthly/overdraft fee: No
-
Other things to consider: no free ATM network, but discounts on ATM fees; high minimum initial deposit
EverBank Productivity Savings
-
Minimum balance: $0
-
Monthly/overdraft fee: No
-
What else to consider: no minimum deposit to open; limited access to branches.
Some more tips on how to maximize your savings
Once you choose the right account for you, you can start practicing additional strategies to really hack your savings.
Chasing prices versus convenience
While chasing the highest rates can maximize profits, consider the difficulties associated with opening new accounts frequently. Sometimes it makes sense to agree to a slightly lower rate (within 0.25%) from a more convenient or full-fledged establishment.
Increasing your savings
Consider dividing your funds between high-yield savings accounts and certificates of deposit (CDs) to create a “ladder” that balances liquidity and higher yield. You can play around with this ladder calculator on the CD to see if it’s worth it to you.
Special offers
Many banks offer promotional rates or cash bonuses for new customers. They can sometimes provide better short-term value than a slightly higher standard APY.
Bottom line
Once you feel like you’ve settled on a high-yield savings account option, don’t chase the rates. Don’t switch savings accounts from 4.1% APY to 4.3% APY. The whole idea of a savings account is to let your money work for you, rather than giving up movement to keep up with interest rates. And as rates fluctuate, you may find that your interest rate increases without your input.
By prioritizing the factors that matter most to your financial goals—whether that’s maximizing profits, minimizing fees, or ensuring easy access—you can choose an account that makes your money work for you. Remember that while rates may change depending on market conditions, the habit of keeping extra money in a high-yield account rather than a traditional low-interest option is a smart move.