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Best High-yield Savings Accounts

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With interest rates on savings accounts rising in 2023, high-yield savings accounts are becoming more attractive than ever for individuals looking to earn decent interest on their cash deposits. High-yield savings accounts typically pay significantly higher interest rates than traditional savings accounts to help your money grow faster.

In this post, we will discuss some of the key benefits and features of high-yield savings accounts. I’ll also review and compare the best high-yield savings accounts currently available based on interest rates, fees, minimum balance requirements, and other account features. We aim to provide actionable information to help you decide where to open a high-yield savings account to maximize your interest earnings.

What Are High-Yield Savings Accounts?

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High-yield savings accounts are special deposit accounts offered by banks and credit unions that pay higher interest rates than traditional savings accounts. Typically high-yield savings accounts offer an interest rate around at least 3-4 times higher compared to the average savings account rate. The national average rate for savings accounts currently stands at around 0.13%. Meanwhile, high-yield savings accounts typically offer rates of at least 0.50% APY and higher as of early 2023.

Benefits of High-Yield Savings

So why do high-yield savings accounts offer higher interest rates? There are several notable advantages these types of accounts provide over traditional savings:

Higher Interest Rates

The most obvious benefit is the higher interest rate earned on your balance. This extra interest can add up over time, especially on larger deposit balances.

Compounding Interest

Most high-yield savings accounts calculate interest on a compounded basis, helping your money grow exponentially faster over time through the “miracle” of compound interest.

FDIC Insured

High-yield savings accounts offered by FDIC member banks provide up to $250,000 of deposit insurance per individual account, ensuring your money stays protected.

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Easy Access to Funds

Just like regular savings accounts, most high-yield savings accounts allow easy withdrawals and deposits without any limitations on frequency or dollar amounts.

No Minimum Balance

Many high-yield savings accounts come with no minimum balance to open the account or earn interest, allowing anyone to benefit.

When To Use a High-Yield Savings Account

Here are some of the best uses for a high-yield savings account:

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Emergency Fund: The liquidity and FDIC insurance coverage make high-yield savings a great place to store an emergency fund containing 3-6+ months of living expenses.

Short-term Savings Goals: Saving up for a vacation, vehicle, home down payment, or any other financial goal due within 5 years. The easy access to funds comes in handy for planned spending needs.

Park Cash Instead of Checking: Idle cash can earn over 30 times more interest in a high-yield savings account rather than a basic checking account. Moving money not immediately needed into the high yield savings maximizes earning potential.

Comparing the Best High-Yield Savings Accounts

When evaluating high-yield savings accounts, the most important factors I considered were:

APY

The Annual Percentage Yield reflects the actual annual interest rate paid on the account, taking compounding frequency into account.

Fees

High-yield savings accounts should not charge any regular maintenance fees. Some may charge excess transaction fees.

FIDC Insurance

Accounts should carry federal insurance up to $250,000 per individual depositor by the FDIC or NCUA.

Minimums

No minimum balance requirements ideally, but definitely under $500.

Accessibility

Easy online and mobile access along with capacity for convenient withdrawals.

Taking these factors into account, below are the best high-yield savings accounts available:

#1 Best High-Yield Savings Account: Chime Savings

APY: 4.00%
Minimum Deposit: None
Monthly Fees: None

Chime’s Savings Account stands at the top with a 4.00% APY with no minimum balance or monthly fees. You’ll earn 4x the national average while enjoying fee-free access to your money. Direct deposit is required to open the account and earn a high yield.

Unique Feature: Early direct deposit lets you access payroll deposits 2 days earlier.

#2 Best High-Yield Savings Account: Bask Bank Interest Savings

APY: 3.75%
Minimum Deposit: $0
Monthly Fees: None

Bask Bank offers an excellent 3.75% APY on all balance tiers with no minimum balance or monthly service fee. You’ll enjoy unlimited fee-free transactions too. The account can only be opened online initially.

Unique Feature: Access to free overdraft protection transfers from savings.

#3 Best High Yield Savings Account: MySavingsDirect Savings

APY: 3.75%
Minimum Deposit: $1
Monthly Fees: None

MySavingsDirect ties Bask Bank with a 3.75% interest rate across all balances. No minimum opening deposit or monthly fee makes this account easily accessible. MySavingsDirect limits certain withdrawals to just 6 per month to earn the highest yield, with excess usage incurring a $5 fee.

Unique Feature: Link savings to a MySavingsDirect checking account for easy transfers between accounts.

#4 Best High Yield Savings Account: CIBC Agility Account

APY: 3.75%
Minimum Deposit: $0
Monthly Fees: None

CIBC Agility Accounts offer an exceptional 3.75% APY on all balances. The account provides complete fee-free usage, no balance minimums, and a mobile check deposit. Interest compounds daily to help savings grow even faster. You’ll need to open initially in person though at select branches.

Unique Feature: Unlimited fee-free usage checks all the boxes for convenient access.

#5 Best High Yield Savings Account: Quontic High Yield Savings

APY: 3.01%
Minimum Deposit: $0
Monthly Fees: None

While just under the 3.75% tier, Quontic Bank still offers a strong 3.01% APY across all balances. There are no minimum balance fees or monthly service fees. You get unlimited monthly transactions and 24/7 account access too.

Unique Feature: 150+ free ATMs nationwide for convenient cash access needs.

Factors Impacting High Yield Savings Interest Rates

While high-yield savings accounts pay materially higher interest than typical savings accounts, the actual interest rates fluctuate over time along with the overall interest rate environment. Here are some key factors that influence the rise and fall of high-yield savings APYs:

Federal Reserve Rate Policy: Just like rates across lending such as mortgages and credit cards, savings rates tend to track the federal funds rate set by the nation’s central bank. Rate hikes by the Fed typically translate to higher yield savings rates.

Bank Competition: Banks also adjust savings rates to attract more depositors and compete against rival banks when their rates start to exceed their offerings. This competition can prompt banks to raise savings rates independently of what the Fed does.

Economic Growth: During more sluggish economic periods, banks will reduce savings rates as loan demand decreases. When the economy strengthens, the rate rises as financial institutions attract more deposits to fund lending activity.

So as the Federal Reserve continues on its current rate hiking path in 2023 and likely into 2024, expectations align for high-yield savings rates to continue trending upward this year. Just don’t expect the pace of rate increases to rise as quickly as mortgage rates and credit cards that carry more risk for banks.

Maximizing Your High-Yield Savings Returns

Once you’ve opened a high-yield savings account, here are some tips to maximize the interest you earn:

Bulk Up Opening Deposits: To take advantage of most of the compound growth, start with bigger upfront deposits instead of smaller monthly contributions.

Automate Ongoing Contributions: Setting up direct deposits or automatic monthly transfers makes growing your high-yield savings balances seamless over time.

Shop Rates Annually: Don’t get too comfortable if your rate starts to lag current offers. Switching banks once a year may be needed to stay competitive.

Track Interest Closely: Monitor your actual interest paid each month to ensure your APY stays aligned with expectations. Log any rate changes and watch for fee increases.

Manage Access Frequency: Limit withdrawals and other transactions to what is truly needed so any usage fees don’t eat into your interest.

Hold Off Until Necessary: Give your deposits more time to accumulate growth by avoiding withdrawals until truly essential for your situation.

Claim Tax Deductions: Don’t forget about claiming deductible savings account interest on your annual tax return.

As you evaluate high-yield savings accounts, prioritize the APY first, avoiding any accounts with monthly fees or excessive minimums. Automate contributions early and often maximize compound growth. Follow these tips consistently, and your high-interest savings balance can grow significantly over time thanks to the power of compounding.

Is a High-Yield Savings Account Right for You?

While high-yield savings accounts offer definite interest-earning advantages over typical savings, they aren’t necessarily the optimal cash deployment strategy for all situations. Here are a few key considerations when deciding if a high-yield savings account aligns with your financial situation and goals:

Savings Time Horizon: High-yield savings work best for short-term savings goals due within 3-5 years. For longer horizons, other options like stocks may warrant consideration.

Cash Flow Consistency: Variable income may lean more towards keeping cash in checking vs. savings. Whereas stable employment suits recurring savings contributions.

Total Savings Size: Once your high-yield deposits exceed the $250,000 FDIC coverage limit, alternatives to savings like CD ladders may be preferable for amounts above the insurance cap.

Rate Volatility Tolerance: While high-yield savings rates move less drastically than bonds or stocks, their interest rates still fluctuate up and down over time. If guaranteed fixed rates suit your preferences more, certificates of deposit could be better aligned.

Access Frequency Needs: Those needing routine access to deposited funds may lean towards keeping more in checking if a high-yield savings account limits monthly transactions.

So assess your situation across these factors to decide if now presents a prime opportunity to take advantage of higher savings returns. Just make sure you pick the right high-yield savings account!

Next Steps to Open a High-Yield Savings Account

We hope this thorough overview has shown the value and appeal of high-yield savings accounts in the current rising rate environment. If you’re ready to earn more interest on your cash deposits, here is a summary of actionable next steps:

1. Vet the shortlist of top high-yield savings accounts showcased above that meet your minimum balance and usage requirements.

2. Submit account applications for your 1-2 favorite options to get the opening process started.

3. Arrange to transfer your initial funding deposit to the account upon approval to start earning interest.

4. Set up direct deposit or automatic monthly transfers for effortless, recurring contributions.

5. Download mobile apps to monitor balances and interest closely as your money grows each month.

Now is the time to seriously consider shifting some cash over to a high-yield savings account before rates potentially peak later this year. Taking action now allows your money to work harder on your behalf so you reach personal finance goals sooner. Don’t let this opportunity pass by to earn outsized interest on your savings.

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