What Is a High-Yield Savings Account?

A high-yield savings account is a type of savings account that can pay up to 15 times the national average of a standard savings account. The competition on savings rates has skyrocketed, creating a new category of high-yield savings accounts.

What Makes a Highꦍ-Yield Saving Account Different?

A high-yield savings account differs in a few ways, but there's one thing it has in common with traditional savings accounts that is important for all to know. Traditional savings accounts and their high-yield counterparts are insured by the 澳洲幸ᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚ运5官方开奖结果体彩网:Federal Deposit Insurance Corp. (FDI♍C) and the 澳洲幸运5官方开奖结果体彩网:National 𒅌Credit Union Association (NCUA). When you open an account at a bank or credit union, all of your accounts combined are insured for up to $250,000.

Many brokerages offer 澳洲幸运5官方开奖结果体彩网:cash management accounts (CMAs), which function similarly to high-yield savings accounts. The CMA usually offers a ℱlower rate, but they do offer bill payment and ATM debit cards.

Interest Rates

The difference in interest between high-yield savings account rat♍es and the🦄 national average is significant.

For instance, if you're holding $5,000 in a conventional savings account, and the national average rate is 0.46% 澳洲幸运5官方开奖结果体彩网:annual percentage yield (APY), you would earn $23.05 over a year. If yoꦺu instead put that same $5,000 in an account earning 4.50%, you'd earn $229 in interest.

The same can be said of 澳洲幸运5官方开奖结果体彩网:high-yield checking accounts. However, checking accounts of this nature u𒐪sually require you to hold a significant balance and use a debit card frequently.

Online Access

Some of the best savings interest rates are found at online banks, where the institution doesn't have to pay brick-and-mortar overhead. So, to earn significantly more interest with your savings, you may need to hold your savings account at one institution and your checking account at another.

Today's availability and execution speeds of electronic transfers between institutions make moving money between a checking account and a savings account relatively simple, even at different banks.

Additional Services

Unlike traditional 澳洲幸运5官方开奖结果体彩网:brick-and-mortar institutions that offer a one-stop shop for all your banking needs, banks offering high-yield savings accounts typically limit their features or offer few or no other products. Many don't offer checking accounts, and few provide ATM cards. Gen🙈erally, you can make electronic bank transfers or mobile check deposits for withdrawals and deposits.

How to Use a High-Yield Savings Account

A high-yield savings account will likely comprise only a part of your overall financial portfolio. Con🐽sider how you'll best use the account with oth☂er accounts to fit your broader investment strategy.

Emergency Savings

Determine how much cash to set aside according to your goals and budget. For instance, if your savings account is serving as an emergency fund, consider depositing at least three to six months' worth of living expenses and keeping it there until you need it.

Goal-Oriented Savings

The strategy may differ if you use a high-yield account to save up for a large purchase, such as a house, a car, or a vacation. In that case, you may want to use a high-paying savings account to help you protect your principal while applying interest earnings to your saving꧅s goal.

Having multiple savings accounts may help you more easily progress toward goals and keep your funds organized toward specific goals. Many banks allow you to 澳洲幸运5官方开奖结果体彩网:open multiple savings accounts and even give them persona💙lized nicknames like "Car Fund," "Hawaii Vacation," or som꧟ething else.

Earning Interest

You may want to open a high-yield savings account to keep cash. Most checking accounts don't pay any interest, and those generally offer meager interest rates, so moving extra funds into savings when you don't need them can provide a higher monthly interest payment.

However, a savings account's interest rate is variable. It can go up and down. If the Federal Reserve lowers the fed funds rate, you might not earn the same interest rate as last month. If you want a stable, fixed interest rate (in exchange for not touching it for a set period of time), consider 澳洲幸运5官方开奖结果体彩网:opening a certificate༒ of deposit (CD). Regardless of the account, remember that your 澳洲幸运5官方开奖结果体彩网:interest earnings will be taxed each year.

What To Look for in a High-Yღield Savings Account

Whether you're shopping for a high-yield account at a new bank or opening one at your current bank, compare options across the marketplace. Differences in interest rates and fees can add up over time, especially if you're keeping a relatively large balance in savings. Here's what to look for and compare.

1. Interest Rate

How much interest does the account currently pay? Is it a standard rate or an introductory promotional rate? Savin𓆉gs account rates are🐻 variable and can be changed at any time. However, some accounts will specify that the currently advertised rate is only available for an initial period of time.

2. Required Initial Deposit

How much money is required to open the account? Do you want to deposit the minimum deposit re🌺quirement? Some accounts have minimum or maximum initial balance thresholds for earning the promoted rate.

3. Minimum Balance Required

How much money are you required to keep in the ac🔯count? Falling below th𓆏e minimum deposit requirement can result in fees, which offset the interest rate earnings.

4. Fees

Does the b𝓰ank or credit union ch🔴arge any fees on this account? If so, how can you avoid them (maybe you always keep your balance above the minimum threshold)?

5. Links to Other 🐲Banks and/or Brokerage Accounts

Will the bank allow you to create links between your high-yield savings account and deposit accounts at other banks or 澳洲幸运5官方开奖结果体彩网:brokerage firms? Are there rest🀅rictions on linking multiple accounts, or is there a waiting period for new accounts?

6. Accessing Your Money

What additional options, if any, are available for withdrawing funds? Can you withdraw funds from savings using an A☂TM card?

7. Deposit Options

If you want to 澳洲幸运5官方开奖结果体彩网:deposit checks into the account, does the bank have a smartphone app that offers mobile check deposits? Otherwise, can you mail checks by snail mail or deposit checks at aℱ fee-free ATM?

8. Compounding Method

Banks can 澳洲幸运5官方开奖结果体彩网:compound interest daily, monthly, quarterly, semiannually, or annually. More frequent compounding will theoretically increase yo🍷ur take-home yield. If y🌺ou compare accounts by APY instead of annual interest rate, the compounding factor will already have been considered.

How to Open a High-Yield Savings Account

If your bank offers a competitive, high-yield savings account, it should be easy to open a new a🧜ccount. It will likely be possible with little need to enter personal information because you will already be verified with the institution.

If you're opening a savings account at a new institution, the process will be more involved but should still be simple. Almost all high-yield savings accounts can be opened online. You will likely need to complete an electronic application with key personal information. Have your driver's license, 澳洲幸运5官方开奖结果体彩网:Social Security number, and primary bank account information o🎉n hand to transfer funds for your initial deposit.

Frequently Asked Questions (FAQs)

The Bottom Line 

A high-yield savings account can be an ideal place to keep money you are not using in the short term but that you want fairly easy access to. It offers higher returns than a traditional savings account and is low risk because your deposits are federally insured up to $250,000. Consider the pros and cons of high-yield savings accounts compared to your other options, such as investment accounts. Then, compare the terms of different accounts to 澳洲幸运5官方开奖结果体彩网:find a high-yield savings account that best suits you🧸r goals and personalꦗ situation.