High-yield savings accounts let your money work for you. They’re great places to park money that you want to access, like an emergency fund, but grow at the same time. You don’t have to do anything—just let it ride.
But with so many banks and credit unions touting high-yield savings accounts, it may be challenging to decide which one is best. It’s important to know what to look for when choosing a high-yield savings account.
Annual Percentage Yield
The first item you should look at is the annual percentage yield (APY). The APY, or interest, is the amount you stand to earn over a year.You want a high APY. When looking at high-yield banks or credit unions, compare their APY. A high APY is the reason you’re looking in the first place, so make sure it’s worth your while.
In November 2024, according to the Federal Deposit Insurance Corporation (FDIC), the average bank’s APY is 0.43 percent. But many banks dip below this. For example, Chase’s APY is 0.01 percent, and TD Bank is 0.01—0.05 percent.
High-yield savings accounts pay much more. For example, Ally pays 3.85 percent, and Capital One 360 had an APY of 3.9 percent as of November 2024. It should be noted that the lower APYs come from traditional brick-and-mortar banks and the higher APYs come from digital banks.
But don’t leave credit unions out of the mix. They also tend to offer high-yield savings accounts. For example, Affinity Federal Credit Union offers a 4 percent APY, and Keypoint Credit Union offers an APY of 4.85 percent.
Digital or Brick-and-Mortar Financial Institutions
Whether a financial institution is digital only or brick-and-mortar is important to many people. When searching for a high-yield savings account, it’s essential to research what type of banks or credit unions are available. Are you open to the possibility of using a digital-only bank?
If you genuinely don’t want a digital bank, then your choices will probably be limited. Consider looking at a credit union. Many of these have high-yield savings accounts. Otherwise, you'll probably have to look closely at digital banks.
Frequency of Compounded Interest
If you want an even bigger impact on your savings, explore how often interest compounds. It may be daily, monthly, or quarterly.The more frequently compounding, the faster your money will grow.
Insured by FDIC or NCUA
Check the bank’s website for verification that the bank or credit union’s deposits are insured. This should be a deal breaker if the bank doesn’t have FDIC insurance. Credit unions must have National Credit Union Administration (NCUA) insurance.The FDIC and NCUA each insure a depositor up to $250,000 per category.
How Much Are the Bank Fees
Too many fees or fees that are too high can diminish your savings. For example, many banks and credit unions charge maintenance fees. These are usually charged monthly. Some of them go as high as $25 per month.There are banks and credit unions that have minimum balance fees. This may be difficult for people just starting out with their savings.
Digital banks typically don’t have minimum balance fees.
Minimum Opening Deposit
Some high-yield savings accounts require a minimum deposit to open an account. This is important to look at when comparing banks or credit unions.Minimum deposits vary, but typically they run between $25 to $100. But some financial institutions charge $1,000 or more.
If you have enough for the larger minimum deposit, you’ll be able to earn a lot more from it than you would with a low-yield financial institution. But if you’re just starting out, that may be difficult.
Conveniently Accessing Money
How often you can access money differs among financial institutions. Some limit free electronic transfers and withdrawals. You may be capped at six or less per month.Ensure you are aware of this; it can be a real shocker if you need money for an emergency and can’t access it.
You should know how much money you can move out of your account per day, week, etc. Ensure you know how long it will take to receive a transfer from your high-yield account.
What Is the ATM Availability?
Many high-yield savings accounts, like digital banks, don’t have wide ATM networks. That means you’re forced to use an out-of-network ATM. This typically costs you $2 to $5 in fees. This adds up fast if you’re a heavy ATM user.It’s important to know if there is an in-network ATM and how big it is. Check that there’s one in your area.
If the network isn’t large or is nonexistent, you may have difficulties when you travel.
Customer Service Provided
Ensure the financial institution you’re considering has good customer service. Check the reviews and see what past customers have said.Many banks and credit unions have phone numbers or online chats you can call if you need help. Digital banks also have online chats, and many of them, but not all, also have phone numbers to call for help.
High-Yield Savings Accounts Worth Using
The difference between the APY of a high-yield and traditional bank savings account is significant. If you just need a place to park your emergency or regular savings, it’s prudent to earn as much interest as you can.Do some research and find the financial institution that works for your needs.
The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
