How to Pick a High-Yield Savings Account

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Key Takeaways

  • The best high-yield savings accounts have few fees and low minimum balance requirements.
  • Online banks typically offer the highest APY on savings accounts.
  • Small banks and credit unions are good places to look for a high APY.

Choosing the best high-yield savings account requires comparing APYs and other features that might be important to you, like mobile app availability, other products at the same institution, and customer service.

Finding High-Yield Savings Accounts

The APY, or annual percentage yield, refers to the amount of interest the money in your savings account can earn over a year. High-yield savings accounts earn higher APYs than traditional savings accounts because your money compounds, you earn interest on the money you save and interest on the interest, which helps you reach your savings goals faster. A high-yield savings account is also considered a safe place to store your money because it is a federally insured savings vehicle.

When searching for the best APY and high-yield savings account for you, look for ones that offer high interest rates and low fees. Too many service fees can quickly eat away at your savings potential.


Smaller banks and credit unions may offer better APYs and have lower initial deposit and minimum balance requirements.

Online vs. In-Person

Online banks tend to offer the best APYs because of lower overhead costs. Since they have no branches to maintain, there is minimal staff to pay. That means they can pass those savings on to you through higher interest rates. Online banks typically also charge fewer fees, allowing you to keep more of the interest your money earns.

Bank vs. Credit Union

Banks and credit unions may differ in how much interest they pay on your deposits and the fees they charge. Credit unions are typically not-for-profit institutions owned by the members (customers). They generally offer many of the same products and services as big banks but have eligibility requirements to join. As a member, you’ll typically enjoy higher interest rates on savings accounts, lower loan rates, and fewer fees than with big banks.

Larger banks often have more locations and can offer specialized products such as student loans and trustee services. While some big banks may offer competitive interest rates above some credit unions, they also typically have higher minimum balance requirements. Your money is backed by the federal government with a bank or credit union as long as the institution is insured.


The FDIC insures banks and the NCUA insures credit unions. Both organizations offer coverage protection on your funds up to $250,000 per depositor, per account category—for instance, one savings account and one IRA.

Fees and Other Costs That Affect APY

High yields are only one part of the equation when you’re looking for an account to park your cash. Here are some other things you need to consider before making your decision.


Fees are one way financial institutions make money. When you pay excess fees, your APY earnings can take a hit, or you may even see your savings account balance drop each month. High-yield savings accounts can have fees that range from none at all up to $35. Identifying your banking needs and shopping around to compare terms and fees can help you find the best high-yield savings account for you.

Some typical fees to watch out for include:

  • Monthly account maintenance fee
  • Excess withdrawal fee
  • Minimum balance fee
  • Paper statement fee
  • Return item fee
  • Inactivity fee
  • Wire transfer fee

Minimum Balance Requirements

Some high-yield savings accounts may require a minimum deposit to open. They may also require you to maintain an ongoing minimum balance amount to benefit from the higher APY.

For example, an account may offer a 1.50% APY with an opening deposit of $2,500 and a minimum balance requirement of $2,500. So if your balance drops below $2,499.99, the interest drops to 0.05% APY. Being fully aware of the requirements will help ensure you get the full benefit from your high-yield account.

Average Savings in the U.S.

Having a well-funded savings account can come in handy when unexpected expenses pop up that could otherwise strain your finances. Financial experts often recommend having at least three to six months' worth of expenses saved for emergencies.

According to a 2019 survey by the Federal Reserve, the average American family had a median balance of around $5,300 between their checking and savings accounts. How much time it will take you to meet the median average depends on your saving rate. Some budgeting methods, like the 50/30/20 rule, recommend saving at least 10%-20% of your income.


Savings rate is the percentage of disposable income you contribute toward monthly savings.

If you reach the median amount of $5,300, here’s what kind of return you could expect from a high-yield savings account with a 1.00% APY that compounds monthly.

Use this formula:

A = P(1+r/n)^nt

A = the total earning you are trying to determine

P = starting principal of $5,300

r = convert interest rate to decimal format 0.01 (divide 1 by 100)

n = number of months for compounding (i.e., 12 months = 12 times a year)

t = total interest earned in one year

Enter the numbers:

A = 5,300(1+0.01/12)(12 X 1), then calculate it. 

Your total should come to $5,353. That means you can earn around $53 in one year on your money if you do not make any withdrawals or add any additional money.

How To Open a High-Yield Savings Account

Most high-yield savings accounts you’ll come across will be online. Most financial institutions make opening an account simple, so here’s what to expect:

  • Create an account: Visit the financial institution's website and set up an account. This process typically involves providing your name and email address, creating a password, and adding a phone number.
  • Fill out the online application: You’ll need to prove your identity. That typically means providing information such as a driver's license or passport, date of birth, Social Security number, and address.
  • Add funds to the account: Some banks require an initial deposit when opening a new account.

Frequently Asked Questions (FAQs)

What is considered a high-yield savings account?

A high-yield savings account allows you to store your money safely and pays a higher interest rate than traditional brick-and-mortar savings accounts. While interest rates vary from bank to bank, the top high-yield savings accounts often pay around 18 times above the national average for savings accounts.

When should you use a high-yield savings account?

Keeping money in a high-yield savings account should be just one part of your savings portfolio. Determining how much cash you need to access quickly can help you determine how much you should keep in your high-yield savings account versus other investment accounts such as CDs. When planning for the future, it’s also essential to consider long-term retirement account options such as a 401(k) or an IRA.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
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  2. National Credit Union Administration. “What Is a Credit Union?

  3. Synchrony Bank. “6 Features of the Best Savings Accounts.”

  4. FDIC. “Your Insured Deposits.”

  5. National Credit Union Administration. “​​How Your Accounts Are Federally Insured.”

  6. Bank of America. “7 Common Bank Fees Explained.”

  7. Ivy Bank. “Savings Accounts That Help You Grow to New Heights.”

  8. Vanguard. “What's the Right Emergency Fund Amount?

  9. Federal Reserve. “Changes in U.S. Family Finances From 2016 to 2019: Evidence From the Survey of Consumer Finances.”

  10. American Express. “The Basics of High Yield Savings Accounts.”

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