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 to savers nationwide.
Note: The APYs (Annual Percentage Yield) shown are as of Feb. 4, 2020. The rates for some products may vary by region.
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:
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.
Here are a few important things to consider when searching for a high-yield savings account.
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.
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 recent Federal Reserve interest rate cuts could lead a bank or credit union to lower their rates. Savers in fact have seen their yields slide in recent months as the Fed has lowered its benchmark rate.
“Savings rates have fallen, but not to the same extent as the Federal Reserve interest rate cuts,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “While the Fed has cut rates three times for a total of 75 basis points, the top-yielding online savings accounts are down about 50 basis points.”
Beware the bait and switch. 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.
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.
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.
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.
BrioDirect is Sterling National Bank’s online brand. All BrioDirect savings deposit products are provided by Sterling National Bank, which was founded in 1888.
BrioDirect offers one of the highest APYs on its savings account. In addition to its savings account, BrioDirect also offers a checking account and 13 different terms of CDs.
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, according to the FDIC. 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.
Customers Bank’s High-Yield Savings account launched on March 11, 2019.
The account has a $25,000 minimum requirement to earn its top APY. Balances below $25,000 don’t earn interest.
Customers Bank has its headquarters in Phoenixville, Pennsylvania.
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.
UFB Direct is an online bank that offers a money market account and savings account. UFB Direct is a division of Axos Bank. It’s listed as a deposit accepting website under Axos Bank’s FDIC certificate.
The UFB High Yield Savings account offers a competitive yield on balances $10,000 and higher.
Comenity Direct is an online-only bank that offers high-yield savings products and CDs. It’s a division of Comenity Capital Bank.
Comenity Direct only requires a $100 minimum balance to open a High-Yield Savings account and you earn interest on balances up to $10 million.
All Popular Direct deposit accounts are opened through Popular Bank.
The Popular Direct Ultimate Savings account requires a $5,000 minimum deposit. If your balance goes below $500 on any day during the statement period, it will cost you a $4 monthly service fee.
Also, there’s a $25 early account closing fee if you close the Popular Direct Ultimate Savings account within 180 days. There's also a $5 dormancy fee if you haven’t had any account activity for 12 months.
The Citi Accelerate Savings account has a competitive APY in select markets. 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.
A qualifying direct deposit or a bill payment per statement cycle are a couple of ways to waive the monthly fee on your savings account. This is if the saving account is linked to 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.
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.
HSBC Direct products are offered in the U.S. by HSBC Bank USA, N.A.
HSBC Direct offers a savings account, a checking account and CDs. The HSBC Direct Savings account only requires $1 to open and there’s no monthly maintenance fee.
Your initial deposit needs to be new money, which are deposits and investments not previously held by any members of the HSBC Group in the U.S.
Bank5 Connect is a division of BankFive. The High-Interest Savings account at Bank5 Connect only requires $10 to open the account and $100 to earn interest.
The High-Interest Savings account doesn’t have any maintenance fees. There is a $1 fee per statement if you receive paper statements through the mail. Signing up for eStatements avoids this fee.
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.
CIBC’s Agility Savings account offers a competitive yield. You need to deposit at least $1,000 to open the account and the minimum balance to earn the APY is $0.01.
There is a $25 fee if you close your account within 90 days of opening it and a dormant account fee of $5 per month.
Citizens Access launched in July 2018. It made its debut with a savings account and CDs. In November 2019, it added an 11-month liquid CD and stopped offering the six and 18-month CDs.
Citizens Access requires a $5,000 minimum balance on its savings account and all of its CDs.
The Citizens Access online savings account has consistently offered a competitive yield on its savings account since it launched.
If you go below $5,000 in the savings account, you’ll only earn 0.25 percent APY.
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.
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:
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:
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.
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 head offs 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.
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.
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:
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 2 percent APY and one that pays 2.15 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.
|Bank||Top APY||Top APY vs. national average||Minimum opening balance||Minimum to earn APY|
|BrioDirect||2.05%||20.5 x higher||$25||$0.01|
|Vio Bank||1.95%||19.5 x higher||$100||$0.01|
|Customers Bank||1.95%||19.5 x higher||$25,000||$25,000|
|Salem Five Direct||1.91%||19.1 x higher||$100||$0.01|
|UFB Direct||1.90%||19 x higher||$0||$10,000|
|Comenity Direct||1.90%||19 x higher||$100||$0.01|
|Popular Direct||1.90%||19 x higher||$5,000||$0.01*|
|Citibank||1.85%||18.5 x higher||$0||$0.01**|
|Live Oak Bank||1.85%||18.5 x higher||$0||$0.01|
|HSBC Direct||1.85%||18.5 x higher||$1||$0.01|
|Bank5 Connect||1.85%||18.5 x higher||$10||$100|
|CIBC Bank||1.85%||18.5 x higher||$1,000||$0.01|
|Citizens Access||1.85%||18.5 x higher||$5,000||$5,000|
*$4 fee if your balance on any day during the statement period goes below $500. **$4.50 fee if you don't maintain an average monthly balance of $500 or more in a savings account not linked to checking.
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.