It doesn’t matter if you’re working class or filthy rich – 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.
The average savings account pays 0.09 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 to savers nationwide.
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 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.
In addition, 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 Association, 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
|Bank||Top APY||Minimum to earn top yield|
|CIBC Bank USA||2.10%||$1,000|
|Salem Five Direct||2.05%||$100|
What to consider when choosing a high-yield savings account
Here are four important things to consider when searching for a high-yield savings account.
1. 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, tells you how much you’ll earn with compound interest over the course of a year. 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 consideration. If not, Bank Y might be the better choice.
Another component of the account’s APY is its compounding method. You can find accounts that compound on a daily, weekly, monthly, quarterly or even yearly basis.
It’s ideal to find a high-yield savings account that compounds daily. The more frequently your interest compounds, the faster your savings will grow.
You can use Bankrate’s compound interest calculator to calculate your potential earnings on any savings account.
2. 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.
3. 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.
4. 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, known for short 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.
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.
Comparing 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, with the Incredible Savings account offered by Incredible Bank, customers with balances up to $24,999.99 earn 1.21 percent APY. To earn the top rate (2.02 percent APY), you have to deposit at least $25,000.
Some savings accounts — like the ones available at MySavingsDirect and Northfield Bank — offer a top yield without requiring a high minimum deposit. Those kinds of accounts are ideal for savers in the process of building their emergency fund. Conversely, Customers Bank — which also offers the top savings account rate — requires a minimum deposit of $25,000.
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 assessment of the financial health of banks and credit unions throughout the country.
Best uses for a high-yield savings account
High-yield savings accounts have a wide range of uses, but one of the best 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:
1. 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.
2. 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 they head 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.
3. 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 high-yield savings account paying 2 percent interest. That’s with an initial $100 deposit.
4. 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 HVAC system 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 $33,391, according to The Knot’s 2017 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 $2,673 per month in a high-yield savings account paying 2 percent in order to save $33,391 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.
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 1.7 percent APY and one that pays 1.85 percent APY. If you’re depositing $700, the difference between the amount of interest you’d earn through either account is about a dollar. But if you’re depositing $50,000, you’d earn an extra $76 by picking the account with the higher yield.
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.
Compare: Best high-yield savings accounts
Northfield Bank: 2.25% APY, $0.01 minimum deposit
Northfield Bank is based in Staten Island, New York. In 1887, it was founded as the Northfield Building and Loan and Savings Association. Among banks offering traditional savings accounts, Northfield currently has the best high-yield savings account deal available to consumers nationwide. Its online Platinum Savings account pays 25 times more than average. It requires a low minimum deposit ($0.01) and all balances below $100,000 earn the top rate. Higher balances earn 0.90 percent APY.
Note that you’ll need to keep at least $2,500 in your account. If the average daily balance falls below $2,500, you’ll be charged an $8 fee.
MySavingsDirect: 2.25% APY, $1 minimum deposit
MySavingsDirect is an online division of Emigrant Bank, a New York-based institution founded in 1850. In addition to CDs, MySavingsDirect offers a traditional savings account that pays a top yield. There are no minimum balance or monthly maintenance fees.
If you’re looking for an account with bells and whistles, this one is probably not for you. You won’t have access to an app or features like account alerts. Transferring money into your linked primary checking account may also take two to four business days. That could be a problem if you need quick access to your savings.
Customers Bank: 2.25% APY, $25,000 minimum deposit
Customers Bank is based in Wyomissing, Pennsylvania. In addition to individuals and families, the bank serves small- and medium-sized businesses.
The bank’s Ascent Money Market Savings Account pays a high yield. The rate is currently guaranteed through June 30, 2019, so it’s not a teaser rate that could drop as soon as you open the account. There are no minimum balance fees.
Though you’ll earn the country’s top yield for traditional savings accounts by opening an Ascent Money Market Savings Account, you’ll have to deposit at least $25,000. Otherwise, you won’t earn any interest at all.
PurePoint Financial: 2.15% APY, $10,000 minimum deposit
PurePoint Financial is an online division of MUFG Union Bank, one of the largest banks in the world.
In addition to CDs, PurePoint Financial offers an online savings account paying 2.15 percent APY, one of the highest yields currently being offered nationwide. There are no monthly fees and the account can be managed from anywhere, including your computer, tablet and smartphone.
The only potential downside for customers interested in this savings product is the minimum deposit. Being required to fill an account with at least $10,000 could be a barrier for quite a few people since many Americans don’t even have an adequate cushion of emergency savings.
Citizens Access: 2.12% APY, $5,000 minimum deposit
Citizens Access is the new online-only division of Citizens Bank, a brick-and-mortar institution based in Providence, Rhode Island.
Right out of the gate, Citizens Access began offering customers competitive yields tied to savings accounts and CDs. With its savings account, there are no fees and signing up for an account takes just five minutes.
One downside is that the funds at Citizens Access aren’t exactly easily accessible. If you needed to use a portion of your online savings, it would take two to three business days for you to transfer funds to an external checking account.
Vio Bank: 2.11% APY, $100 minimum deposit
Vio Bank is a new online division of MidFirst Bank, a financial institution based in Oklahoma City with more than 600,000 customers.
The bank offers a high yield online savings account that pays more than most banks and doesn’t require account holders to pay any monthly fees. Interest is compounded daily, allowing balances to grow as quickly as possible. The minimum deposit ($100) is also relatively low.
While the bank offers a competitive yield, the mobile app isn’t available yet. That means you don’t have access to mobile check deposit or other features that may be available at other banks.
CIBC Bank USA: 2.10% APY, $1,000 minimum deposit
CIBC U.S. is headquartered in Chicago. It’s a subsidiary of the Canadian Imperial Bank of Commerce, which is based in Toronto.
The bank offers its Agility Online Savings Account, which pays a high yield and requires a reasonable minimum deposit of $1,000. The minimum balance to earn the top rate is $0.01. There are no monthly service fees, and customers have access to a mobile app.
If you open the account and close it within 90 days, you’ll get hit with a $25 fee. There’s also a $5 monthly dormant account fee. Overdraft and non-sufficient funds fees may apply to transactions made in person, at an ATM or electronically.
Bank7: 2.05% APY, $100 minimum deposit
Bank7 is a community bank based in Oklahoma. It has branch locations in Texas, Kansas and Oklahoma and more than 55,000 ATMs.
The bank’s high rate online savings account has a low minimum deposit and comes with an optional ATM card. Interest compounds daily and is paid out on a monthly basis. Transfers can be made out of the account through online banking, bill pay and Popmoney, a person-to-person payments service.
A monthly balance fee applies, but only if your daily balance falls below $100. If you want branch access, opening this account could be an issue since branches are only available in a few states.
Bank5 Connect: 2.05% APY, $100 minimum deposit
Bank5 Connect is a division of BankFive, a bank based in Fall River, Massachusetts. Bank5 Connect is also an online bank with no physical branch locations.
Besides offering savers a high yield with a low minimum balance requirement, the bank provides a free mobile app and online bill pay. The fees the bank charges are easy to avoid and only apply to incidents like cases where there are insufficient funds or garnishments. Overdraft transfers into another account are free.
At Bank5 Connect, you won’t earn any interest if you keep less than $100 in your account (which shouldn’t be a problem for most people). Other than that, you may consider choosing another bank if you want access to branch locations.
Salem Five Direct: 2.05% APY, $100 minimum deposit
Salem Five Direct is based in Salem, Massachusetts. It’s also an online-only division of Salem Five Cents Savings Bank.
The bank offers a high-yield online savings account with a low minimum deposit. There’s no minimum balance and there are no monthly fees. Mobile banking is available. In addition to deposit insurance through the Federal Deposit Insurance Corp., deposits above the $250,000 limit can be insured through a private industry-sponsored fund.
Watch out for charges like a paper statement fee that might be applied to your account. If you need to transfer money out of the account, be sure to give yourself time to deal with possible delays.
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.