If you don't already have a high-yield savings account, why not? By not taking advantage of saving rates, which are currently very high, you're leaving money on the table. Easy money. Setting up a high-yield savings account is simple and straightforward, making it an obvious place to save your cash. You'll earn interest on your money over time, with zero effort on your part.
Currently, savings rates on high-yield accounts are notably high, although they have dropped over the last several months. Saving rates initially began rising in March 2022, when the Fed started hiking interest rates in an attempt to combat high inflation. But as inflation began to slow, the central bank paused its rate-hiking campaign. As the pause extended for months and the central bank indicated it was likely to start cutting rates sometime later in 2024, rates on savings accounts began to slip.
At its latest meeting in June, the Federal Reserve decided once again to hold the federal funds rate steady. This seventh consecutive pause in rate hikes means the federal funds rate, a key bank lending rate, will remain at a target range of 5.25% to 5.5%, the highest its been in 23 years. Earlier this year, three interest rate cuts were projected by year-end, but due to higher-than-expected inflation, officials now estimate just one quarter-point cut for the year. This means savings rates should remain elevated for a longer period of time than previously expected.
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Some of the top-earning savings accounts are still offering rates over 5%, significantly higher than the national average for traditional savings accounts.
High-yield savings accounts
Here are some of the top earning high-yield savings accounts available today:
Poppy Bank
APY: 5.50%
Minimum opening deposit: $1,000
My Banking Direct
APY: 5.55%
Minimum opening deposit: $500
Brio Direct
APY: 5.30%
Minimum opening deposit: $5,000
Ivy Bank
APY: 5.30%
Minimum opening deposit: $2,500
Forbright Bank
APY: 5.30%
Minimum opening deposit: $250
TAB Bank
APY: 5.27%
Minimum opening deposit: $0
UFB Direct
APY: 5.25%
Minimum opening deposit: $0
Newtek Bank
APY: 5.25%
Minimum opening deposit: $0
Evergreen Bank Group
APY: 5.25%
Minimum opening deposit: $100
Jenius Bank
APY: 5.25%
Minimum opening deposit: $0
Upgrade
APY: 5.21%
Minimum opening deposit: $1,000
Popular Direct
APY: 5.05%
Minimum opening deposit: $100
Essentially, high-yield savings accounts are the same as traditional savings accounts with one key difference — high-yield savings accounts pay a higher-than-average APY on deposits, meaning you'll be able to accrue more cash over time. And they're great options if you're looking for a risk-free way to maximize your savings.
Most high-yield savings accounts are federally insured, keeping your savings secure if your bank or credit union fails. If you open an account through a bank, the FDIC will protect up to $250,000 in individual deposit accounts and up to $250,000 for each person’s share of joint accounts. For accounts opened with a credit union, the NCUA will protect up to $250,000 per credit union member (whether in an individual or a joint account.
Unlike CDs in which your cash is locked away for a fixed period of time, high-yield savings accounts let you easily access the funds in your account. For this reason, they're good options for short-term savings goals or emergency funds. Plus, sometimes these accounts offer a savings account bonus, putting more money in your pocket.
Another way to browse rates on high-yield savings accounts is by using our tool, in partnership with Bankrate, below.
Pros and cons of high-yield savings accounts
As with all savings vehicles, there are both pros and cons associated with high-yield savings accounts. It's important to compare all aspects of an account before opening it.
Pros
- Higher APYs: Since high-yield savings accounts have higher APYs than traditional savings accounts, you’ll accrue more interest over time. Plus, interest in these accounts is compounded daily.
- Safety: Many high-yield accounts are FDIC or NCUA insured, meaning that if something were to happen to the bank (or credit union) your account is with, your money will still be safe.
- Accessibility: While there are sometimes limitations to the number of free withdrawals you can make from a savings account, your money is still readily accessible whenever needed.
Cons
- Harder to access than traditional savings accounts: If you have a savings account that's with a different bank than your checking account, you may have to wait a few days for funds to transfer from one to the other. Plus, you won’t be able to easily view account details for both accounts in one place.
- Not suited for long-term goals: If you’re looking to save for long-term goals, like retirement, other investments, like stocks, are usually a better choice for your money. The rate of inflation can be higher than what you accrue in interest.
- Variable interest rates: Since interest rates are variable, the APY on the account can decrease from the rate it was when you opened the account.
- Minimum deposit requirements and fees: Many high-yield savings accounts charge a monthly fee and/or require a minimum deposit to earn the advertised APY.
- Online banks: Since most high-yield accounts are offered by online banks, you likely won’t have branch access, so contacting customer service can be more challenging.
Bottom line
Opening a high-yield savings account should be a no-brainer. If you don't have one yet, you're leaving money on the table. High-yield savings accounts offer higher rates than traditional savings accounts, meaning your cash will accrue more interest by simply sitting in a high-yield account than it would in a standard account. And there's no risk, either.
The downside? Since rates on high-yield savings accounts fluctuate with the market, rates will drop further this year when the Fed finally cuts interest rates. Until then, make sure you're taking advantage of the best rates while you still can.
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