What Is a High-Yield Savings Account? How It Works and When to Use One
What a high-yield savings account is, how its rates work, how it compares with regular savings, money market accounts and CDs, and what to check first.
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Savings Accounts
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Why a separate savings account matters
Keeping savings in a separate account from your checking makes it less likely you will spend it by accident, and lets you earn interest on money you do not need day to day. It is the natural home for an emergency fund and short-term goals.
How to compare savings accounts
- APY: the annual percentage yield, which includes compounding. See what is APY?
- Fees: monthly maintenance fees can erase interest earnings.
- Minimums: some accounts require a minimum balance to open or to earn the advertised rate.
- Access: transfer speed, ATM access and withdrawal limits.
- Insurance: confirm FDIC or NCUA coverage.
Traditional vs. high-yield savings
Traditional savings accounts at large branch-based banks often pay a very low rate. High-yield savings accounts, commonly offered by online banks, typically pay considerably more with the same federal deposit insurance. The trade-off is usually fewer branches and transfers that take a business day or two.
How to open a savings account
Have your government ID, Social Security number and a funding source ready. Most online banks let you open an account in about ten minutes and link your checking account for transfers. Once it is open, set up an automatic transfer on payday.
Compare options on our high-yield savings accounts comparison, and see how your savings could grow with the compound interest calculator.
Frequently asked questions
How do I open a savings account?
Choose a federally insured bank or credit union, apply online or in a branch with your ID and Social Security number, and fund the account by transfer, check or cash. Online accounts can usually be opened in minutes.
Are savings account interest rates fixed?
No. Most savings account rates are variable and can change at any time, often following broader interest rate movements. CDs offer fixed rates for a set term.
Is there a limit on savings withdrawals?
The Federal Reserve removed the six-per-month limit from Regulation D in 2020, but many banks still set their own limits or fees for frequent withdrawals. Check your account terms.
Part of our Banking & Savings hub and our complete personal finance guide. Read our editorial standards.
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