It doesn’t matter if you’re working class or very wealthy — everyone needs an emergency fund. And there’s no better place to park the money you’re saving than in a high-interest savings account.
High-yield savings accounts are used for emergency funds and storing savings for future events. They pay a yield that’s higher than average, allowing savers to reach their financial goals faster. CDs are deposit accounts that tend to pay higher yields than traditional savings and money market accounts.
The average savings account pays 0.10 percent APY. Many of the country’s biggest banks pay less than that.
If you’re sick of earning less than 1 percent APY, consider making a change. Compare rates among today’s best high-interest savings accounts. They have the highest yields available and are widely available accounts.
Summary of best high-yield online savings accounts
- Vio Bank - 1.04% APY
- Citibank -
1.10%
Rate as of 07/31/2020. This rate is updated periodically and may become temporarily out of date.
APY
- CIBC Bank - 1.05% APY
- Ally Bank - 1.00% APY
- American Express National Bank - 1.00% APY
- Capital One -
1.00%
Rate as of 07/31/2020. This rate is updated periodically and may become temporarily out of date.
APY
- Comenity Direct -
1.00%
Rate as of 07/31/2020. This rate is updated periodically and may become temporarily out of date.
APY
- Live Oak Bank - 1.00% APY, $0 minimum opening deposit
- PNC Bank - 1.00% APY
- Salem Five Direct - 1.00% APY, $100 minimum opening deposit
- Citizens Access - 1.00% APY
- Marcus by Goldman Sachs - 1.05% APY
Note: The APYs (Annual Percentage Yield) shown are as of July 31, 2020. Bankrate’s editorial team updates this information regularly, typically biweekly. APYs may have changed since they were last updated. The APYs for some products may vary by region.
What is a high-yield savings account?
High-yield savings accounts are a type of deposit account that can be found at both online and brick-and-mortar institutions. These financial tools typically pay a higher interest rate than traditional savings accounts and almost always offer better returns than traditional checking accounts.
But it’s not just higher interest rates that set high-yield savings accounts apart from other savings products.
Here are just a couple of the biggest financial benefits of high-yield savings accounts:
- Higher APYs: High-yield savings accounts generally offer significantly higher interest rates than traditional savings products. That means you can earn more on your money and meet your savings goals faster.
- No or low fees: High-yield savings accounts tend to come with no monthly fees and low fees for things like having non-sufficient funds. That’s especially so with high-yield savings accounts found at online banks.
Are high-yield savings accounts safe?
Like traditional savings products, safety is a mainstay of high-yield savings accounts.
Insured up to $250,000 at banks by the Federal Deposit Insurance Corp., and at credit unions by the National Credit Union Share Insurance Fund (per depositor, per institution, per ownership category), high-yield savings accounts offer a safe place to stash cash while earning interest.
That makes high-yield savings accounts a good place to keep funds for emergencies, large expenses and short-term savings goals.
Keep in mind that online banks typically offer higher rates and better benefits on these types of accounts than national brick-and-mortar banks. Online banks don’t have the costs associated with brick-and-mortar institutions and can pass those savings on to customers in the form of higher yields.
Best high-yield savings accounts in August 2020
1. Vio Bank – 1.04% APY, $100 minimum opening deposit
Vio Bank, established in 2018, is the national online division of MidFirst Bank. MidFirst Bank has been an FDIC-insured bank since 1934 and was established in 1911. Vio Bank offers both a High-Yield Online Savings account and CDs.
Vio Bank’s High-Yield Online Savings account has one of the top yields around, and all balances receive this APY.
2. Citibank –
1.10%
Rate as of 07/31/2020. This rate is updated periodically and may become temporarily out of date.
APY (only available in certain states/markets), $0 minimum opening deposit
The Citi Accelerate Savings account has a competitive APY in select markets. It’s not available in some larger states, such as California and New York. The savings account doesn’t require a minimum balance to open the account.
There is a $4.50 monthly service fee if your savings account isn’t linked to a Citi checking account. You can avoid this fee by keeping an average monthly balance of at least $500 in your savings account, if it’s not linked to a Citi checking account.
There is a $10 monthly service fee if you have a checking and savings account linked and don’t meet the requirements to have the fee waived.
3. CIBC Bank – 1.05% APY, $1,000 minimum opening deposit
CIBC Bank USA, formerly The PrivateBank and Trust Company, was founded in 1991 and is based in Chicago. It was rebranded as CIBC Bank USA.
The Agility Savings Account requires $1,000 to open the account. But once the account is opened you don’t have to worry about maintenance fees or going below a certain balance. All balances $0.01 to $1,000,000 earn this APY. The account balance can’t exceed $1,000,000.
4. Ally Bank – 1.00% APY, $0 minimum opening deposit
Ally Bank started in 2004 and is headquartered in Sandy, Utah. In 2009, GMAC Bank was transformed into Ally Bank.
Around 8.5 million people are Ally customers, according to its website. This includes banking, auto loans, investing and other financial services.
Ally Bank also offers a checking account, a money market account, term CDs, a no-penalty CD and two terms of a Raise Your Rate CD.
American Express is well-known for its credit cards and it’s also one of the leaders in the online banking space. But it also offers a competitive yield on some of its CDs and its savings account.
It also doesn’t require a minimum balance, so it may be a good fit for new and experienced savers.
6. Capital One - 1.00% APY, $0 minimum opening deposit
Capital One has both a brick-and-mortar presence and is an online bank. It offers nine competitive terms of regular CDs.
Capital One’s 360 Performance Savings account and its CDs don’t have minimum balance requirements. Capital One is based in McLean, Virginia.
7. Comenity Direct -
1.00%
Rate as of 07/31/2020. This rate is updated periodically and may become temporarily out of date.
APY, $100 minimum opening deposit
Comenity Direct launched in April 2019. It's an online-only bank that offers a high-yield savings account and CDs. Since it launched, Comenity Direct has offered a competitive yield on its savings account. The bank offers five terms of CDs. Comenity Direct is a brand of Comenity Capital Bank.
Unlike the Comenity Direct CDs, which have a $1,500 minimum requirement, the high-yield savings account only requires $100 to open an account.
8. Live Oak Bank – 1.00% APY, $0 minimum opening deposit
Live Oak Bank has been around since 2008. Live Oak Bank, which has its headquarters in Wilmington, North Carolina, offers a savings account and seven terms of CDs.
The online savings account, which is a personal account, offers a competitive yield and doesn't have any monthly maintenance fees. There’s no minimum amount required to open this savings account.
9. PNC Bank – 1.00% APY, $0 minimum opening deposit
PNC Bank has approximately 2,300 branches and 9,100 ATMs. Its corporate headquarters is located in Pittsburgh.
PNC Bank has been around for more than 160 years. PNC has branches across the mid-Atlantic, Midwest and Southeast.
The PNC High Yield Savings account is available in eligible markets. The account doesn’t require a minimum balance, so it’s an option if you’re just starting to save. The account also doesn’t have a monthly maintenance fee.
You’ll want to keep your PNC High Yield savings account open for at least 180 days. Closing it before this will result in a $25 fee.
10. Salem Five Direct – 1.00% APY, $100 minimum opening deposit
Salem Five Direct is an online division of Salem Five. Salem Five was founded in 1855 in Salem, Massachusetts.
Salem Five Direct customers with the eOne Savings account earn a competitive yield on all balances up to $1,000,000.
Salem Five Direct customers can conduct a transaction at a Salem Five branch, but it will cost you $9.95. Residents of all 50 states can open a Salem Five Direct account.
11. Citizens Access - 1.00% APY, $5,000 minimum opening deposit
Citizens Access launched in July 2018. It made its debut with a savings account and CDs. And then in November 2019 it added an 11-month liquid CD and stopped offering the six and 18-month CDs.
The bank offers a competitive yield on its CDs and savings account. All of its products require a $5,000 minimum deposit.
Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA. Marcus offers a variety of CDs, three no-penalty CD terms and a savings account. Marcus also offers lending options with its debt consolidation loans, home improvement loans and personal loans.
Marcus by Goldman Sachs offers competitive yields on its savings accounts and CDs. Savings products from Marcus are provided through Goldman Sachs Bank USA. Marcus made its debut in October 2016 with just unsecured personal loans before it began offering a savings account and CDs under the Marcus by Goldman Sachs brand in November 2017.
What to consider when choosing a high-yield savings account
Here are a few important things to consider when searching for a high-yield savings account.
Annual percentage yield
One of the most important considerations when choosing a high-yield savings account is the annual percentage yield.
Annual percentage yield, or APY, includes the effect of compounding. It’s the interest earned on your initial deposit in addition to the interest earned on top of other interest earnings
And in the case of APYs, higher is always better. But it’s important to weigh the APY against the requirements to earn the yield.
For example, Bank X pays a slightly higher APY than Bank Y, but Bank X has a higher minimum deposit requirement and minimum balance requirement than Bank Y. If you can meet the requirements of Bank X, it’s worth considering. If not, Bank Y might be the better choice.
You can use Bankrate’s compound interest calculator to calculate your potential earnings on any savings account.
How often rates change
Besides the APY, you’ll also need to consider a bank or credit union’s tendency to adjust interest rates. Unlike CDs, which lock in a rate for a period of time, savings account yields tend to be variable. That means they could change at any time.
A bank may lower or raise an APY for various reasons. Your savings account rate could increase if a bank is trying to attract more deposits by offering a temporary promotional rate. Or broader economic factors — like the three Federal Reserve interest rate cuts in 2019, and the two emergency rate cuts from the Fed due to coronavirus in March — have caused banks and credit unions to lower their rates. Some savers have seen their yields slide in recent months as the Fed has lowered its benchmark rate.
Beware the bait and switch, since savings APYs are usually variable. Consider how often a bank offers teaser rates that may fluctuate and determine what your potential earnings could look like after a year. For more peace of mind, consider a CD or look for savings accounts with a rate guarantee for six months to one year.
Minimum deposit required
The minimum deposit required, sometimes called an opening deposit, can be a big factor when deciding on which high-yield savings account to choose.
Minimum deposit amounts vary widely across banks — some require nothing to open an account, while some require a deposit of $10,000 or more.
Consider your budget and decide how much you can realistically invest when comparing high-yield savings products. If you’re trying to hit a particular goal, ask yourself how much you’re willing to save and over what period of time.
The more you invest and the better the interest rate, the faster compound interest will help you hit your goal. But if you can’t swing a particular minimum amount, it’s best to go with an account that requires less of an upfront financial commitment.
Accounts requiring a higher minimum deposit may offer a higher yield, but that’s not always the case. Make sure to check minimum deposit requirements at all institutions you’re considering before opening an account. Many of the best high-yield savings accounts require a minimum opening deposit of $100 or less.
Minimum balance required
Not only do some high-yield savings accounts require a minimum deposit to open an account, they may also require a minimum balance to earn the annual percentage yield or avoid fees.
One common fee banks charge for not maintaining a minimum balance in the account is called a “monthly maintenance fee.” But often, as long as you maintain the minimum balance, the bank will waive the fee.
Like minimum deposit amounts, minimum balance requirements can range from $0 to well over $10,000.
What’s important to consider when weighing the minimum balance requirements of various high-yield savings accounts is how often you’ll need to access the money, and whether you’ll be able to maintain the balance in order to earn the annual percentage yield.
Withdrawal options
Before opening any type of savings account, it’s important to consider how often you’ll need to access the money.
Because of Regulation D, also known as “Reg D,” savers can make only six transactions per month from savings accounts. That includes online transfers to different accounts, transfers over the phone, automatic transfers, overdrafts and check or debit transfers. These rules apply to money market accounts as well. But withdrawals or transfers made at an ATM or in-person at a bank don’t count toward this limit.
However, banks all have their own options and rules for withdrawing and transferring funds. So, it’s crucial to dive into the details of an account before signing up.
Best uses for a high-yield savings account
High-yield savings accounts have a wide range of uses, but one of the best ones is to save up for big-ticket items. That’s because savings accounts with a decent yield offer accelerated growth of your money.
Here are some of the best uses for a high-yield savings account:
Down payment on your first or second home
Traditional conforming loans typically require a down payment of at least 5 percent. That moves up to 20 percent to avoid private mortgage insurance.
FHA loans require a down payment of at least 3.5 percent.
Here’s how much you’d need to save for a down payment on a $200,000 home:
- 20 percent down: $40,000.
- 5 percent down: $10,000.
- 3.5 percent down: $7,000.
Saving that amount of money can take some time. But a high-yield savings account can help you hit your goal faster.
Here’s a general estimate of how long it would take to save up a 20 percent, 5 percent and 3.5 percent down payment on a $200,000 home, assuming you put away $1,000 per month into a high-yield savings account paying a 2 percent APY.
- 20 percent: Three years.
- 5 percent: Nine months.
- 3.5 percent: Six months.
Last-minute college savings
When saving for a child’s education, it’s best to start early and save often. College savings plans like the 529 can be a great solution, mainly because money grows tax-free in a 529. It also isn’t taxed when the money is taken out to pay for college.
But college tuition costs can sneak up fast, and a high-yield savings account can be a solid alternative in last-minute situations when saving is essential.
In order to successfully use a high-yield savings account for college tuition, you’ll need to set a savings goal and calculate the monthly investment needed to hit that goal.
For example, let’s say you need $50,000 for college tuition and your child is in seventh grade. If you open a savings account with 2 percent interest, you’d need to deposit around $639 per month in order to hit your goal by the time he or she heads off to college. That’s with an initial deposit of $1,000.
You can use Bankrate’s savings goal calculator to create a timeline for your savings goals.
Big family vacation
Family vacations can be an exciting adventure, but they can also be tough on the wallet. Fortunately, a high-yield savings account can help out.
In order to properly use a high-yield savings account to pack away money for a family getaway, you’ll need to first decide how much you want to spend and when you’d like to go.
Then consider making a budget for travel, lodging, food and miscellaneous items.
How fast could a high-yield savings account help you get to your goal?
If you’re planning to spend $2,000 on a getaway in 12 months, you would need to save around $157 per month in a high-yield savings account paying 2 percent interest. That’s with an initial $100 deposit.
Other savvy uses for a high-yield savings account
High-yield savings accounts aren’t only for major expenses.
In fact, one of the best purposes a high-yield savings account can serve is as a place for your emergency fund. This is a fund that typically covers three to six months of living expenses in case of things like an unexpected layoff or replacing a failing air conditioning unit during a hot summer.
High-yield savings accounts can also be useful for expenses with a short timeline, like a wedding. The national average cost of a wedding is $33,931, according to The Knot’s 2018 Real Wedding Study. And that doesn’t include the honeymoon.
A high-yield savings account can help you save for the big day.
If you have a year to save, you’d need to save around $2,718 per month in a high-yield savings account paying 2 percent in order to save $33,931 for the wedding. That’s with an initial deposit of $1,000.
Here are a few other potential uses for high-yield savings accounts:
- Saving to buy a vehicle.
- Saving to buy things like furniture.
- Saving for estimated taxes as a self-employed individual.
High-yield savings accounts FAQs
Finding the best high-interest savings accounts
Some banks offer tiered interest rates. To earn the highest yield, you may have to keep a large amount of money in your account. For example, Customers Bank offers a high yield, but you have to deposit at least $25,000 to take advantage of it.
Some savings accounts offer a competitive yield without requiring a high minimum deposit. Those kinds of accounts are ideal for savers in the process of building their emergency fund.
Calculate how much you stand to make with all of these offers using our simple savings calculator. Consider other factors before choosing a new bank, including fees, digital capabilities and branch and ATM access. And take a look at Bankrate’s expert reviews of popular banks with high-yield savings accounts.
Are high-yield savings accounts FDIC insured?
Your bank deposits in your high-yield savings account are protected by federal banking regulations. If your money in a high-yield savings account is parked at a Federal Deposit Insurance Corporation-insured bank, your money is safe. If your bank fails, you’ll get your money plus accrued interest back. The coverage is automatic. In the past, the FDIC says it has paid insurance within a few days after a bank closed.
There are limits, however. The FDIC covers up to $250,000 per depositor, per ownership category, per FDIC-insured institution. You don’t want to exceed the limits. For example, if you have $25,000 in a savings account and $250,000 in a CD at the same bank, that leaves $25,000 of deposits in that ownership category uninsured. You put your funds at risk if you exceed the FDIC-insured limit.
Double-check that the bank account you’re considering is FDIC-insured. You can use the FDIC’s BankFind tool to locate FDIC-insured institutions. After confirming that the bank you want to work with is insured, you’ll be able to breathe easily as you watch your funds grow.
Accessibility of high-yield savings
In choosing your high-yield savings account, think about how you’ll want to interact with the banking institution. Are you comfortable banking completely online, or would you like some in-person service options as well?
Most high-yield savings accounts are offered by online banks. That means you’ll likely have to give up access to a physical branch in order to earn the highest annual percentage yield, or APY. But you’ll still have access to your savings whenever you need it. Bank branches have limited business hours that restrict when you can interact with a banker. Online, you can manage your savings account 24/7. Most banks offer call center support, too.
There are exceptions to these general rules. For example, Capital One offers an attractive rate on its high-yield savings account as well as operates some physical branches that you could visit. PNC Bank, for another, offers a high-yield savings account in certain states in addition to operating a robust branch network.
How to open a high-yield savings account
Whether you want to build your emergency fund or save for a vacation or something else, a high-yield savings account can help you reach your goals. Opening a high-yield savings account is relatively simple, too. Here’s what you’ll need to do:
1. Shop around- High-yield savings accounts are offered by online banks, traditional banks with physical locations, and credit unions. The most important part of the process is to shop around to find the best high-yield savings account with the features you want (like a well-reviewed mobile app or no-fee account).
You’ll likely find higher APY offerings at online institutions because they don’t have as much overhead to support and pass the savings along to savers.
As you consider your options, think beyond APY, too. Compare the rates, fees and services offered to find the right fit for you.
2. Fill out an application- Once you’ve chosen a high-yield savings account, you’ll need to fill out an application. It might sound like an inconvenience. But it should only take a few minutes. The bank or credit union will likely ask for personal information, including your driver’s license number, Social Security number, mailing address, and date of birth.
In many cases, you’ll be able to fill out the application online.
3. Fund your account- Once you’ve been approved, it’s time to fund your account. You have a few options. You can fund your account by linking a checking account to your new savings account and transfer money from checking to savings. Some banks will also allow you to snap a picture of a check and make a mobile deposit to your new account. Depending on the bank, you might also be able to fund your new savings account with cash, through a wire transfer or by mailing in a check.
You’ll want to make sure you deposit enough money into the account to meet the minimum deposit requirement. The bank could charge you a maintenance fee or slap you with a lower than expected interest rate until you meet the minimum balance required.
Do the math before picking a savings account
Paying attention to interest rates is key when you’re comparing savings accounts. But you should also use a calculator to crunch some numbers.
Let’s say you’re deciding between a savings account that pays 1.5 percent APY and one that pays 1.75 percent APY. If you’re depositing $700, the difference between the amount of interest you’d earn through either account is about $1.75. But if you’re depositing $50,000, you’d earn around an extra $123.25 by picking the account with the higher yield. This assumes that the savings APY would stay the same for a year. Since savings APYs are usually variable, that’s unlikely to happen in this current rate environment.
If you’re looking for a secure account that pays more interest, take a look at the best high-yield CDs. Like savings accounts, they’re insured by the federal government and offer a guaranteed rate of return.
Best high-yield online savings accounts for 2020
The takeaway
Overall, high-yield savings accounts can be used for a range of purposes. From your emergency fund to saving up for a down payment, high-yield savings accounts can play a major part in your broader financial plan. If you’re looking for an account that can help you save while still offering easy access to your money, a high-yield savings account is worth consideration.
You can use Bankrate’s savings rate table to compare the best savings accounts.
Learn more:
High-yield savings accounts in August 2020
