Best high-yield savings accounts in September 2022

Bankrate’s guide to high-yield savings accounts

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 0.13 percent annual percentage yield (APY). Many of the country's biggest banks pay less than that.

Some online banks offer better deals than traditional banks — with yields that are up to seven times higher than the national average.

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What is a high-yield savings account?

High-yield savings accounts typically pay a much higher annual percentage yield (APY) than traditional savings accounts, providing savers the ability to earn more on their savings while still enjoying the security of a federally insured account.

Some banks offer introductory rates on high-yield savings accounts that may only be available for a limited time. In the current low-rate environment, however, those accounts may be hard to find. Most high-yield savings accounts have a variable APY, which means the yield is subject to change. Consumers looking for a fixed yield should consider a certificate of deposit, and a no-penalty CD might be a good option for those looking for both a fixed APY and access to their money without incurring a penalty.

How do high-yield savings accounts work?

High-yield savings accounts help you earn a higher yield than a typical savings account. The national average savings account annual percentage yield APY is 0.13 percent. But that’s just the average. There are savings accounts earning even less yield than that — some of which are offered by the large brick-and-mortar banks.

Once you put money in a high-yield savings account, it earns interest. Then the interest, which is typically credited on a monthly or quarterly basis, begins to earn interest. That’s compound interest and it’s how your money starts to really grow over time.

High-yield savings account yields are usually variable, meaning banks may increase or decrease rates as they choose. Rates had been on a downward trend until early 2022 when some banks began raising APYs.

High-yield savings terms to know

• APY: Annual percentage yield is the real rate of return that you’ll earn on a savings account or other deposit product. It factors in the interest rate as well as compounding interest and is the best way to compare savings yields on an apples-to-apples basis.
• Compound interest: In simple terms, this means you’re earning interest on your interest. Instead of only earning interest on your principal amount, you’ll earn interest on your principal as well as the previous interest earned on your principal, allowing you to grow your total savings faster.
• Monthly service charge/maintenance fee: This is a monthly fee charged by a bank, usually for going below a certain balance in the account.
• Regulation D: This Federal Reserve rule is used to limit the number of withdrawals and transfers you can make from a savings account during a monthly statement cycle. Some banks still have restrictions on withdrawals and transfers, even though the Fed removed these limits in 2020.

Considerations for choosing a high-yield savings account

Here are a few important things to consider when searching for a high-yield savings account. Also take a look at Bankrate’s expert reviews of popular banks that offer high-interest savings accounts when choosing which account is right for you.

Annual percentage yield (APY)

One of the most important considerations when choosing a high-yield savings account is the APY.

APY incorporates the effect of compounding: the interest earned on your initial deposit in addition to the interest earned on top of other interest earnings. When it comes to APYs, higher is usually better, but it’s important to weigh the APY against the requirements to earn the yield.

You can use Bankrate’s compound interest calculator to calculate your potential earnings on any savings account.

Minimum deposit required

Minimum deposit amounts vary by bank — some require nothing to open an account, while others require $10,000 or more. Decide how much you can realistically invest when comparing high-yield savings products. If you’re trying to hit a particular goal, consider how much you’re willing to save and over what period of time.

Accounts requiring a higher minimum deposit might not offer the best yields, so it pays to check minimum deposit requirements at all institutions you’re considering before opening an account. Online banks, for example, often require no minimum opening deposit or no minimum balance, and some also charge no monthly maintenance fees. 

Minimum balance required

Not only do some high-yield savings accounts require a minimum deposit to open an account, they may also have a minimum balance required to earn the APY offered or avoid fees.

What’s important to consider when weighing the minimum balance requirements of various high-interest savings accounts is how often you’ll need to access the money, and whether you’ll be able to maintain the balance to earn the APY.

How often rates change

Banks and credit unions have a tendency to adjust interest rates. Unlike CDs, which lock in a rate for a period of time, savings account yields tend to be variable, which means they could change at any time.

A bank may lower or raise savings account APYs for various reasons. It may raise its rate as part of a promotion to attract more deposits, or it may adjust rates in response to broader economic factors, such as changes to monetary policy by the Federal Reserve.

Since savings rates 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.

Withdrawal options

The number of withdrawals that can be made from savings and money market accounts is governed by Regulation D, which limits transactions to six a month. Included are online transfers to different accounts, transfers over the phone, automatic transfers, overdrafts and check or debit transfers. Withdrawals or transfers made at an ATM or in-person at a bank don’t count toward the limit.

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 FDIC, and at credit unions by the National Credit Union Share Insurance Fund (NCUSIF), high-yield savings accounts offer a safe place to stash cash for emergencies, large expenses and short-term savings goals while earning interest.

Check your accounts regularly for any unauthorized withdrawals or transactions and notify the bank immediately of any discrepancies.

Why are most high-yield savings accounts online?

The best high-interest savings accounts are usually found online. The best online banks tend to offer the most competitive yields on their accounts. One reason why these banks can pay more is that they have fewer expenses since they don’t operate branches.

But these online banks also need a way to get your attention. Often, a high yield is the way to do that. Many online banks also don’t charge a monthly service fee for their accounts and some of them don’t have minimum balance or minimum opening deposit requirements either.

Is a high-yield savings account right for you?

Low yields are part of the current savings-rate environment, but some return is better than none, and rates may soon be on the rise. For these reasons, moving money sitting in a noninterest bearing account to a high-yield savings account could be a smart move. Earning a competitive APY will help the account balance grow over time (assuming no withdrawals are made) and help it better keep up with long-term inflation.

How to open a high-yield savings account

Whether it’s building an emergency fund or saving for a vacation or other big expense, a high-interest savings account can help you reach your goals. Opening a high-yield savings account is relatively simple, too. Here’s how:

1. Shop around: High-yield savings accounts are offered by online banks, traditional banks that operate branches and credit unions. Online banks typically offer the highest rates because they don’t have the overhead associated with maintaining branches and can pass the savings, in the form of higher rates, along to customers. Along with APY, compare the fees and services to find the right fit for your finances. 

2. Fill out an application: Once you’ve chosen a high-interest savings account, you’ll need to fill out an application, whether online or in person. 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. 

3. Fund your account: After the application is approved, it’s time to fund the account, which can be done by linking a checking account to the new savings account and transferring funds. Depending on the bank, the new savings account can also be funded with cash, through a wire transfer or by mailing a check. Some banks also permit mobile deposits. 

Deposit enough money to meet the account’s minimum deposit requirement, otherwise you may be assessed a maintenance fee or earn a lower than expected interest rate, until the minimum is met.

What to do if you are unable to open a high-yield savings account

First, ask your bank why you weren’t able to open a high-yield savings account. Depending on the answer, you might want to go to ChexSystems’ website and request a report to see whether your banking history is the reason why.

ChexSystems is a national specialty consumer reporting agency that keeps track of some of your banking history. Your check cashing history, any suspected fraud activity and closed accounts are some of the things that may appear on a ChexSystems report.

Best uses for a high-yield savings account

High-yield savings accounts can be used for any savings goal, such as:

Saving for a large purchase

Traditional mortgages for purchasing a primary or secondary home typically require a down payment of at least 5-20 percent to avoid private mortgage insurance. FHA loans require a down payment of at least 3.5 percent. Here’s how much money is needed 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 may take some time, but a high-interest savings account can help move toward the 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 have a high-yield savings account paying a 0.6 percent APY:

• 20 percent: Three years. (Initial deposit of $1,000 and then contribute $1,076.36 each month.)
• 5 percent: One year. (Initial deposit of $1,000 and then $749.50 every month for a year.)
• 3.5 percent: Six months. (Initial deposit of $1,000 and then about $999 every month.)

Buying a car also will likely require a down payment, should you be looking to finance the purchase. Saving up and paying for a car with cash is a better choice, if you have the means, since it will save you interest payments and financing fees.

Planning an event or vacation

Saving now can pay off for those who have big plans, such as getting married. The average wedding cost couples $34,000, according to The Knot’s 2021 Real Wedding study. 

A high-yield savings account is a convenient way to save money for your wedding because it’s liquid, safe — if it’s in a FDIC-insured account and within guidelines and limits — and can offer a competitive yield. 

With an initial deposit of $1,000 and five years to save, you’d need to set aside about $504 monthly in a high-yield savings account paying 1 percent APY to reach about $32,000 to spend on a wedding.

Family vacations can be an exciting adventure but also tough on the wallet. A high-interest savings account can help out, if you know when you’d want to go and how much you can spend; setting a budget for travel, lodging, food and miscellaneous items can help. If you’re planning to spend $2,000 on a getaway in a year, you would need to save about $159 a month in a high-yield savings account paying 0.60 percent APY, with an initial $100 deposit.

Saving for your future

When saving for a child’s education, it’s best to start early and save often. College savings plans like a 529 plan are a good solution, because money grows tax free. 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.

To successfully use a high-interest 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 an initial deposit of $1,000 yielding 0.6 percent APY, you’d need to deposit an additional $806 a month to hit your goal by the time your child heads off to college. Bankrate’s savings goal calculator can help you create a timeline for your savings goals.