How to find the best high-yield savings accounts

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High-yield savings accounts offer higher interest rates than traditional accounts, helping you achieve your financial goals sooner. (iStock)

If you’re saving for a down payment on a house, a vacation, or just putting money aside for an emergency fund, you want to earn as much interest as you can on the money you put in the bank. A high-yield savings account may be your best option.

These accounts earn a higher interest rate and therefore a better return than a regular savings account, adding to your nest egg more quickly. With the national average savings account APY at just 0.06% as of August 2021, according to the FDIC, it’s even more vital that you find a high-yielding account for your savings. (APY stands for annual percentage yield, and refers to the interest you earn.)

Here’s how to find the best high-yield savings accounts, which can help you meet your financial goals sooner.

What’s a high-yield savings account and how does it work?

A high-yield savings account is a bank account that pays a significantly higher interest rate than a traditional savings account. Banks may be able to offer these rates by requiring a higher minimum balance, charging monthly fees for inactive accounts, or by virtue of being an online-only bank without the expense of physical branches.

When you deposit money in an account, the bank can then use those deposits to lend money to other people. Interest is the fee your bank pays you to use your money. With most savings accounts, this interest is compounded — meaning you don’t just earn interest on the money you put in the account, but also on the interest you earn. With compound interest, even a slightly higher interest rate can make a huge difference in your savings.

Here’s an example: Say you have $5,000 in a traditional savings account paying 0.06% APY. After one year, you’d have $5,003. You earned $3 in interest. After five years, you’d have a little over $5,015, assuming the rate stayed the same and you didn’t make any other deposits into the account.

But if you put that same $5,000 in a high-yield savings account paying 2% APY, after one year, you’d have $5,100. That’s $100 in interest compared to $3 from the traditional account. In five years, you’d have about $5,520 — again, assuming you added nothing more to the account.

Credible makes it easy to compare high-yield savings rates.

What makes the best high-yield savings accounts?

When you’re shopping for a high-yield savings account, there are a few attributes you should look for. The best high-yield accounts will have high APYs, low minimum balance requirements, and low fees.

Annual percentage yield, or APY

APY measures the interest you earn on your account. The higher the APY, the more interest you earn and the faster you reach your savings goals. Most banks will prominently feature the APY they offer on their high-yield savings accounts, making it easy to compare with other accounts.

Minimum opening deposit

This refers to the amount of money you must deposit to open the account. For most accounts, this is somewhere between $25 and $100, though high-yield accounts may require higher amounts. Shop for an account with a minimum deposit that meets your needs.

Minimum balance

The minimum account balance is the amount you’re required to have in your account in order to earn interest. Some high-yield savings accounts have no minimum balance, meaning that you’ll earn the full APY on whatever amount you have in your account. But other accounts may have minimum balances of $10,000 or more to earn the advertised interest rate.

FDIC insurance

Deposit insurance from the FDIC protects your money in the event that your bank fails. Verify that the bank offering the high-yield savings account you choose is FDIC-insured.

Compounding method

Interest can be compounded daily, monthly, quarterly, annually, or somewhere in between. The more frequently your interest is compounded, the faster your savings will grow. The best high-yield savings accounts are compounded daily.

Deposit and withdrawal options

Banks may allow you to use direct deposit, online transfer, check deposit, or other methods for socking money away in a high-yield savings account. Think about how you plan to save, and make sure the account you choose has that option. Remember, though: Federal law limits your transactions to no more than six withdrawals or transfers out of a savings account each month. So you won’t want to use this account for daily expenses.

Low fees

Banks may charge monthly maintenance fees on their savings accounts, but most will offer ways to avoid the fee, such as maintaining a minimum balance, making regular deposits, or linking to another account at the bank. The best high-yield savings accounts will have no fees, or easy ways to avoid fees.

Where can I find the best high-yield savings accounts?

You can find high-yield savings accounts at many financial institutions, from traditional banks and credit unions to online-only banks.

Brick-and-mortar institutions: Traditional banks may offer high-yield savings accounts. These deals may be available exclusively online or require you to hold other accounts with the same bank. An account with a brick-and-mortar bank or credit union gives you the option for in-person service and the ability to deposit cash.
Online banks: High-yield savings accounts are more commonly found at online-only banks. These institutions are able to offer higher rates because they don’t have the expense of maintaining a physical branch network. But with a high-yield online savings account, you may not have access to ATMs or the ability to deposit cash. You also won’t have a branch to go into if you need in-person help with your account.

With Credible, you can compare high-yield savings account rates from various financial institutions in minutes.

How do I get a high-yield savings account?

High-yield savings accounts are typically easy to open.

Shop around. The first step is to find the best type of savings account for you. Shop around using a site like Credible to compare APYs and other account features.
Apply for an account. Most banks with high-yield savings accounts have an online application. All you’ll typically need is your Social Security number or Taxpayer Identification Number, address, name, and birthday.
Fund your account. When you open your account, you’ll need to make an initial deposit. This can be as little as $1 or $5, or as large as $100 or more. You can usually do this through a transfer from another bank account. You may also be able to mail in a check, use mobile app check deposit, or send a wire transfer.

Best high-yield savings accounts: 6 banks to consider

As you research high-yield savings accounts, you can use a site like Credible to compare the APY and minimum balances from different banks. While eligibility requirements vary, the following three banks are Credible partners with high-yield savings accounts worth checking out. Rates are current as of September 2021.

American Express National Bank

APY: 0.40%
Minimum balance: $0

Discover Bank

APY: 0.40%
Minimum balance: $0

Wealthfront

APY: 0.10%
Minimum balance: $1

Other banks to consider

Here are three more banks Credible evaluated. Keep in mind that these banks are not offered through Credible, so you won’t be able to easily compare your rates with them on the Credible platform like you can with partner banks. Rates are current as of September 2021.

Ally Bank

APY: 0.50%
Minimum balance: $0

Live Oak Bank

APY: 0.50%
Minimum balance: $0

Marcus by Goldman Sachs

APY: 0.50%
Minimum balance: $0

Methodology: How Credible evaluated the best high-yield savings accounts

Credible chose the best high-yield savings accounts solely for the following factors:

APY of 0.10% or higher
Minimum balance requirements of $0 or $1

Are high-yield savings accounts safe?

Yes, high-yield savings accounts are safe. Unlike investments, you won’t lose money in a high-yield savings account. In virtually all cases, high-yield savings accounts are offered by financial institutions insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA). Deposits of up to $250,000 are protected from loss in the event of bank failure.

If you’re ready to find a high-yield savings account that works for you, use Credible to compare rates.

Alternatives to high-yield savings accounts

If you’re looking for relatively safe ways to earn interest on your savings, a high-yield savings account isn’t your only option. Here are a couple of other ways you can save.

Certificate of deposit, or CD: Also known as time deposits, CDs allow you to earn a higher rate of interest in exchange for depositing your money in the account for a certain length of time. The longer the time period, the higher your APY tends to be. But keep in mind that you’ll usually face penalties for withdrawing money early.
Money market account: A money market account is like a cross between a savings account and checking account. You’ll earn interest and may be able to write checks against this account, but you’re limited to six withdrawals or transfers per month. These accounts are also insured by the FDIC or NCUA.