When searching for the perfect high-yield savings account, it’s crucial to conduct thorough research on rates, terms, and account features. High-yield savings accounts serve as an excellent option for storing funds earmarked for significant future expenses or as a safety net for unexpected financial crises. However, choosing the wrong account could result in earning no interest after factoring in inflation and fees, potentially leading to losses.
In this guide, you will discover highlighted savings and cash management account options from our partners, along with tips on identifying the highest savings account rates nationwide.
To avoid settling for an account with a substandard interest rate, it is essential to refer to our daily ranking of the top high-yield savings accounts and select the one that aligns best with your requirements. Below is a step-by-step roadmap on how to achieve this.
Key Takeaways
- High-yield savings accounts can offer interest rates 10 to 12 times higher than the national average.
- You might earn significantly more by opening a savings account at a different institution than your primary bank.
- Online-only banks often provide the most competitive high-yield savings account rates due to lower operational costs from physical branches.
- The process of opening a high-yield savings account online typically takes around 10 minutes.
- While interest rate is a critical factor, fees, account requirements, and features offered by the institution are also crucial considerations.
Investopedia / Jake Shi
1. Shop for the Top Rates
The internet provides access to hundreds of bank and credit union options. To outpace inflation, moving funds to a high-yield savings account outside your primary bank might be necessary. There are no restrictions on the number of checking or savings accounts you can hold at various banks.
Check the interest earned in a savings account at your current bank or credit union. Subsequently, compare this with the leading national high-yield savings account rates.
Many of the most attractive rates come from online banks as they don’t carry the expenses of physical branches, resulting in offering some of the country’s most competitive deposit rates. It’s worth noting that several traditional banks now provide online banking with competitive rates.
Ensure to scrutinize the fine print regarding rates concerning:
- Rate: Is the rate promotional and limited to a specific period?
- Compounding: How frequently is interest added to your balance?
- Minimum requirements: Is there a minimum balance needed to earn the high-yield APY?
- Maximum requirements: Are high-yield rates applicable only to a specified amount?
By keeping your savings in a separate institution where accessibility requires an additional step, you could resist the temptation to withdraw funds and expedite your savings objectives.
2. Choose the Institution Best for You
After identifying rates from top-paying savings account institutions, the next step is to select the most suitable option for you. If your current bank offers a competitive savings rate, consider opening a new account with them for seamless account management.
However, exploring new institutions can often lead to higher earnings, with national rates often exceeding the average rate by 10 to 12 times.
If considering a credit union with appealing rates, ensure you meet eligibility requirements. Many top savings accounts accept nationwide members, though some might entail a membership fee.
Evaluate any associated fees with the account. Common banking charges consist of:
- Inactivity fees
- Account closing fees
- Paper statement fees
Research the institution by reviewing complaints in the Consumer Financial Protection Bureau’s Consumer Complaint Database regarding high-yield savings accounts; however, instances of complaints are minimal. Ensuring the institution is insured by the FDIC or NCUA can protect up to $250,000 of deposits.
3. Complete the Account Application
Once you’ve chosen the high-yield savings account institution, proceed with the application process, often done online and taking approximately 10 minutes.
Essential information to provide includes:
- Full name
- Address
- Telephone number
- Email address
- Identification number like Social Security Number (SSN) or Taxpayer Identification Number (TIN)
- Driver’s license, passport, or government-issued ID
Decide whether to open an individual or joint account and provide the necessary details if opting for a joint account.
While you may visit a branch for in-person account opening, online account setup tends to be quicker and more convenient, even with local banks.
Ensure to provide your Social Security Number for tax purposes, as interest earnings on your savings account are taxable income.
4. Fund Your New Account
Some institutions require an immediate electronic transfer from an external account to fund the minimum initial deposit; others allow account setup before depositing funds.
Options to fund a new account include:
- Transfer from another bank
- Mail a check
- Mobile check deposit
Funding from an existing bank typically requires providing routing and account numbers. Alternatively, the online application may request your bank’s login details for instant verification.
If not, the new account may send trial deposits for account verification before completion.
5. Enroll in Online Banking and Download the App
Upon opening your account, enroll in online banking, which could be immediate or delayed pending account setup communication.
Securely note your login credentials, set up the bank’s app on your mobile device, and enter your details for account interactions.
6. Establish Beneficiaries
If not part of the initial process, log in to designate beneficiaries who would inherit your account balance if necessary.
Naming primary and secondary beneficiaries helps ensure a streamlined inheritance process.
Customize beneficiary selection according to your preferences and circumstances.
7. Turn On Alerts and E-Statements
Opt into account alert options for notifications on significant account transactions and consider electing electronic statements to enhance security.
Evaluate the preference for e-statements, which might be mandatory at online-only banks or come with a fee for opting for paper statements.
8. Link Additional Transfer Accounts
Linking external accounts to your new savings account can streamline fund transfers, especially when dealing with multiple banking institutions or family accounts.
Initiate the process of linking other accounts promptly to simplify future transfer needs.
9. Follow Your Account’s Rules
Understand the account’s terms to avoid penalties that could diminish expected interest returns.
Some accounts might entail specific actions to avoid monthly fees, such as maintaining a minimum balance or setting up direct deposits.
Stay informed about the account requirements to maximize benefits and prevent unnecessary charges.
What Is a High-Yield Savings Account?
A high-yield savings account offers significantly higher interest rates compared to standard savings accounts. These competitive rates are typically facilitated by online banks with lower operational overhead. Although brick-and-mortar banks also provide high-yield accounts, online options are more prevalent.
How Does a High-Yield Savings Account Work?
High-yield savings accounts generate interest on deposited funds but may lack conventional banking features; thus, maintaining a separate checking account may be necessary. These accounts commonly operate without ATM cards, relying on electronic or mobile transfers for transactions.
Who Should Open a High-Yield Savings Account?
A high-yield savings account suits individuals who are comfortable with associated guidelines and restrictions. It’s ideal for those willing to hold accounts at multiple financial institutions and have the flexibility to leave funds untouched to accumulate interest, making it suitable for emergency funds or saving for significant expenses.
The account can benefit individuals looking to build savings, grow funds steadily, and who don’t require immediate access to the money.
Is a High-Yield Savings Account Worth the Cost?
High-yield savings accounts typically have minimal costs if users adhere to minimum balance requirements and operational guidelines. These accounts often offer higher interest rates than traditional savings accounts while being federally insured.
Bottom Line
High-yield savings accounts serve as effective tools for saving towards future goals or emergencies, providing interest rates considerably higher than the national average. Typically, individuals can earn more through accounts at different institutions, with online banks offering the most competitive rates. Online account opening is swift, taking about 10 minutes, but careful attention to potential fees is essential to preserve the advantages of higher interest payments.