What Is Considered a High-Yield Savings Account?

Use a high-interest savings account to give your savings a boost.

Because savings account rates are currently low, you should shop around to get the best possible interest rate to optimize your hard-earned cash. Some banks offer high-yield savings accounts, which can make a big difference in your long-term savings plan when compared with typical savings account rates.

Find out what you need to know about high-yield savings accounts — including what they are, how to find one and how to compare them. Before you sign up for an account, make sure you get the best possible deal by checking out current bank promotions, then watch your money grow.

What Is a High-Yield Savings Account?

A high-yield savings account is simply an account that offers you more than the average interest rate. One of the primary benefits of a high-yield savings account is that you can put money in and take it out whenever you like — up to six withdrawals per month per the Federal Reserve’s Regulation D — unlike some other deposit accounts like CDs.

You can use a high-yield savings account as an emergency fund that you can access on short notice. You can also make regular deposits if you’re saving for a specific goal — the higher interest rate can enable you to reach your goal faster.

Interest Rates on High-Yield Savings Accounts

There is no specific interest rate a bank must provide to call a savings account “high yield.” It’s up to you to compare savings account rates to find the best one. In addition, you should research the qualifications you must meet to get an advertised rate.

One good way to find the best online savings account is to check out online-only banks. Because they have fewer overhead costs compared with brick-and-mortar banks, they typically pass those savings on to their customers.

The interest rate on a high-yield savings account in today’s rate environment might not seem particularly impressive until you compare it to a typical rate. For example, check out these high-yield online savings accounts that feature some of the best interest rates*:

  • Salem Five Bank: 1.25% APY
  • Synchrony Bank: 2.20% APY
  • Barclay’s Bank: 1.85% APY

Although these rates might seem low, remember that many banks don’t even offer high-yield savings accounts. Chase Bank, for example, offers only 0.01% APY on its savings account.

Check Out: 10 Best Savings Accounts of 2017

Requirements for High-Yield Savings Accounts

Many high-interest savings accounts have criteria you must meet in order to earn the higher interest rate. Here are a couple of common qualifiers:

  • Debit card transactions: Some accounts require you to make a certain number of debit card transactions, which must post to your account in the statement period to qualify for the higher rate.
  • ACH or direct deposits: You might be required to set up one or more direct deposits for your savings account to qualify for the higher rate.

If you get charged for conducting more than a certain number of transactions per month with your high-yield savings account, keep a close eye on your activity. The fees a bank might charge can easily wipe out the advantage of a higher interest rate.

Find Your High-Yield Savings Account

When you research high-yield savings accounts, make sure you compare apples with apples. Compare the accounts’ annual percentage yields, not annual percentage rates. The APY gives you compound interest and more accurately determines how much money you’ll actually earn on your savings. Because savings account rates can be so low, it pays to do your homework to find the right high-interest savings account for you.

Up Next: Credit Card Companies That Offer High-Yield Savings Accounts

*Rates accurate as of July 31, 2017, except for Barclays Bank Delaware, Chase and Synchrony, which are accurate as of today.

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