There’s some comfort in knowing that your money is in the bank down the street. But in the era of Federal Reserve rate increases and brick-and-mortar banks offering yields that are much lower than yields at many online banks, this comfort may be costing you money. Generally, Federal Deposit Insurance Corp. (FDIC) online banks offer savings accounts with much higher annual percentage yields (APYs) than brick-and-mortar banks.

Leaving money on the table

Let’s say you have saved $10,000. That’s a great accomplishment, but if it’s earning the national average of 0.22 percent APY, you’re not getting the best return on your savings. Some of the most popular big banks pay even less at 0.01 percent.

There are many opportunities to earn a much better APY of around 3.30 percent APY or higher.

An account earning 0.22 percent APY earns about $22 of interest in a year. In a high-yield savings account or money market account paying 3.30 percent APY, you’d earn around slightly more than $330 in a year. And if you continue to add to your balance, you’ll earn more from compounding interest over time.

These calculations assume that the APY will stay the same for a year — which is unlikely to happen — and that you’re not withdrawing or adding any money.

Let’s say your balance isn’t quite as high as $10,000. Plenty of banks offer high-yield savings accounts paying up to around 4.35 percent APY with minimum balance requirements as low as $0. And while the earnings won’t differ as much on low balances, you can continue adding to your balance over time to maximize the higher yield.

With Bankrate’s compound interest calculator, you can see approximately how much interest you’re missing if you have a low-APY account.

Where is the best place to put your savings?

There are several great options for high-interest savings accounts. Here are a few examples. Rates are accurate as of Jan. 23, 2023.

Bank APY Minimum balance to open account Monthly fee
LendingClub 4.00% $100 None
Comenity Direct Bread Financial (formerly Comenity Direct) 4.00% $100 None
Ally Bank 3.30% $0 None
Marcus by Goldman Sachs 3.30% $0 None
American Express Bank 3.30% $0 None

Your high-yield savings account is a great place for short-term savings goals and your emergency fund.

Even though the Federal Reserve released an interim final rule deleting restrictions on certain transfers or withdrawals per statement cycle in April 2020, most banks still have these restrictions. So a checking account is still a better option for money you’ll use to pay bills and other expenses.

You can have multiple savings accounts if you’d like to have separate places to store money for different goals. Or consider tools like Ally Bank’s buckets feature that lets you allocate money in your savings account to specific goals, such as a wedding fund and a home down payment fund.

Should you let your money sit in savings?

Experts recommend keeping your emergency fund in a high-yield savings account as well as money for short-term goals such as a home down payment or vacation. Short-term financial goals should be things you plan to accomplish within three years. Beyond that, the money may be better off in an account where it can have the chance to earn a higher return, such as a brokerage account.

High-yield savings accounts are great for emergency funds and short-term savings goals because the money is FDIC-insured — as long as you follow the FDIC’s rules and guidelines — and you can still earn a decent return on your money. Before you choose a savings account, confirm that it is FDIC-insured so you know your money is safe.