Best High-Yield Savings Accounts 2023

Are you looking for a way to maximize your savings with higher interest rates? If so, high-yield savings accounts may be the answer you’ve been searching for. Compared to traditional savings accounts, high-yield accounts offer more significant interest rates, making them an attractive option for everyday savers. In addition, these accounts come with numerous benefits, such as easy access to your funds and greater flexibility.

In this article, we’ll explore everything you need to know about high-yield savings accounts, so you can make an informed decision about whether they are the right fit for your savings goals.

Takeaway Points

• A high-yield savings account offers higher interest rates than traditional bank accounts
• For regular high-interest savings accounts, APYs can be up to 10 times the national average for savings accounts
• Online banks offer most high-interest savings accounts, although traditional banks can offer them as well.
• These accounts come with different requirements, from minimum balances to withdrawal dates

If you operate a checking account with your local banking institution, there’s a high probability that you have a savings account with them as well.

Most people use savings accounts to store their money, capitalizing on the interest rates that these accounts offer and using them to grow their wealth over time. However, savings accounts aren’t necessarily the same.

And for people looking to maximize the returns on their savings without any risk, high-yield savings accounts are the gold standard.

As the name suggests, a high-yield savings account helps you increase your savings earnings by providing higher interest rates than regular savings accounts. These accounts have become very popular, with more people opting to store cash to reach their financial goals.

However, like everything that has to do with your finances, it is important to know how to select a high-yield savings account that works for you and your objectives clearly. In this article, we’ll look into the high-yield savings account and everything you need to know about it.

The Best High-Yield Savings Accounts Available

Among the many high-yield savings accounts available, we found some of the best you could choose:

Varo Savings Account

Varo Bank is an online banking solution looking to provide access to financial resources for every American. Among the platform’s many offerings is a high-yield savings account that offers between 3% and 5% in APY.

Back in 2020, Varo became the first consumer fintech company in the United States to get a national bank charter. This means that deposits are insured by the FDIC. Besides this, customers don’t have to deal with monthly fees or account minimums.

As long as you meet specific requirements, Varo’s high-yield savings account will offer up to 5% APY – especially on the first $5,000 deposited. Customers can also access additional tools that help them automate their savings.

Pros:

• Competitive APY
• No monthly fees or minimum deposit requirements
• Automated savings tools
• Excellent customer experience
• Highly rated mobile app

Cons:

• Highest APY available only on daily balances of $5,000 or less
• Not a full-service bank
• Requires a Varo Bank Account to earn the highest APY

Consumers Credit Union Smart Saver Account

One of the most renowned credit unions in the country, the Consumers Credit Union provides a Smart Saver account that offers up to 2% APY.

The account offers a decent dividend-earning structure for all customers, although the highest APYs are reserved for credit union members with checking accounts who meet certain monthly requirements.

Luckily, it’s possible to join this credit union by paying a $5 non-refundable fee. You would also need to maintain a balance of at least $5 in your Membership Share Savings Account.

Pros:

• Very competitive dividend rate
• Low minimum deposit requirement
• Excellent customer experience
• Few fees
• Highly rated mobile app

Cons:

• Limited to deposits of $50 to $1,000 per month
• Must meet requirements to earn the highest interest rate
• Requires membership to open a savings account

Sallie May Bank SmartyPig Account

Sallie May Bank is a notable consumer banking institution with a history dating back to 1972. Like other consumer banks and digital financial institutions in the country, the corporation also allows customers to access a high-yield savings account.

With Sallie May Bank’s SmarrtyPig Account, customers can get up to 3.10% in APY. The account does not require a minimum balance, and no monthly fees are charged. This is one of the best options for people with small balances.

Pros:

• Create and track savings goals
• Competitive interest rate
• No monthly fees or minimum requirements
• Easy online and mobile access

Cons:

• Tiered interest rate structure with higher rates on lower balances
• Mixed mobile app ratings: high on App Store, lower on Google Play

Axos Bank High Yields Savings Account

Axos Bank High Yield Savings Account offers a competitive APY of 0.61% on balances under $25,000, has a low minimum deposit requirement of $250, and provides an extensive ATM network with no monthly maintenance fees. However, other banks may offer higher APY rates, and the account requires a minimum deposit to open.

Pros:

• Competitive annual percentage yield (APY) of 0.61% on balances below $25,000
• Low minimum deposit requirement of $250
• Offers an extensive ATM network with no fees
• No monthly maintenance fees to worry about
• As a full-service bank, it provides 24/7 customer service
• The mobile app is highly rated

Cons:

• Other financial institutions may provide higher APY rates
• APY decreases on balances above $25,000
• A minimum deposit of $250 is necessary to open an account

Marcus By Goldman Sachs High-Yield Online Savings Account

This account has no minimum deposit requirement or monthly maintenance fees and provides a competitive APY of 3.50%. It also allows for same-day transfers of $100,000 or less to or from other banks, but it lacks a mobile check deposit feature and 24/7 customer service. Moreover, it has no ATM network as it is an online bank.

Pros:

• High annual percentage yield (APY) of 3.50%
• No minimum deposit requirement to open an account
• No monthly maintenance fees
• Same-day transfers of $100,000 or less to and from other banks
• Marcus is a consumer division of Goldman Sachs, a well-known name in banking

Cons:

• No mobile check deposit feature available
• Customer service is not available 24/7
• No ATM network as it is an online bank

What Is A High-Yield Savings Account?

The name says it all—a high-yield savings account is a type of savings account that pays much higher interest rates than the traditional ones.

These accounts reward their holders with higher interest rates, allowing them to grow their wealth even faster with minimal effort.

You get an annual percentage yield (APY) with a high-yield savings account. The higher the APY on a specific savings account, the quicker your money grows.

Of course, it is worth noting that these interest rates tend to change occasionally. Rates can vary based on economic conditions or even based on directives from the Federal Reserve and its benchmark interest rate.

Even amid some stringent economic realities, an average high-yield savings account can still pay up to 10 times the interest rate available on a regular savings account.

According to data from the Federal Deposit Insurance Corporation (FDIC), interest rates on regular savings accounts stand at 0.33% annually.

This means that a high-yield interest account can offer much higher than the national average, with rates as high as 3%. As the economy recovers, there may be rates that are offered higher, but it will depend on many factors.

Who Can Benefit From Having A Savings Account?

A savings account can be a useful financial tool for anyone who wants to save money, regardless of age, income, or financial situation. Here are some reasons why someone might consider getting a savings account:

• Establishing an emergency fund: A savings account can be an ideal place to build an emergency fund, enabling quick access to cash when needed.
• Saving for a specific goal: Whether you’re saving for a down payment on a house, a vacation, or another significant purchase, a savings account can help you reach your goals by earning interest on your savings.
• Managing cash flow: A savings account can be a valuable tool for managing your finances by helping you separate your spending money from your savings.
• Earning interest: Savings accounts offer a way to earn interest on your savings, helping your money grow over time.

Types Of High-Interest Savings Accounts

Generally, anyone looking to open a high-interest savings account will have two options: they can either open the account in person or online.

In-person savings accounts operate like the regular accounts you open when you go to the bank. You can head to your local bank branch and open one, and as long as you’re clear on the terms and what each account offers, you should be more than fine.

Then, there are the high-yield savings accounts offered by credit unions and online-focused banks. These institutions tend to offer the highest interest rates because they don’t have to deal with the expenses of maintaining branches like in-person, brick-and-mortar banks and credit unions.

Just as well these institutions can essentially pass the savings on to customers by offering higher interest rates and attracting more people.

Several online high-yield savings accounts also come with no monthly maintenance fees; a significant benefit that can easily are useful when bolstering your overall bank balance.

Planning a vacation? Take a look at our article on the best vacation and travel savings accounts.

High-Yield Savings Accounts: Pros & Cons

While the main point of focus for most high-yield savings accounts is the interest rates, it is worth noting that these accounts tend to be more nuanced than others. Below, let’s briefly examine the different sides of these accounts and what you might want to note.

Pros

• A great way to grow wealth: As expected, the primary benefit that high-yield savings accounts offer is that they allow you to access higher interest rates. With higher interest on your savings, it is much easier for you to grow your wealth and essentially earn more. For people looking to save towards a specific objective or who would just want to get more out of their money, there is no doubt that high-yield savings accounts are a great way to go. And once you can find one that offers an attractive interest rate, you can proceed.
• Flexibility: Many people also love the fact that high-yield savings accounts are available at both brick-and-mortar banks and online-focused banks. To be fair, these savings accounts are more popular among online-only banks. As explained earlier, this is because online-only banks have fewer overhead costs to deal with. So, they’re able to offer higher interest rates on savings. However, many traditional banking institutions have also moved to offer these accounts as well.
• Daily compounding interest: Most high-yield savings accounts offer interest that compounds daily. This means that you earn interest on your money every day, even though most banks just make monthly deposits of the interest into your account as a lump sum. In the long run, this leads to more money for you than what you’d get with a regular savings account.
• Few charges: When you open a high-yield savings account with an online bank, you usually have to deal with fewer fees than with regular banks. Due to online banks having lower costs to manage, their customers can enjoy lower fees and more savings on their balances.

“If you’re looking for a no-risk return vehicle, high-yield savings accounts can be an excellent option for savers looking to maximize their earnings while maintaining access to their funds. These accounts typically offer much higher interest rates than traditional savings accounts (mainly your checking or savings account with your bank set up for daily transactions), with APYs that can be up to 10 times the national average for savings accounts.”

Cons

• Account requirements: Most high-yield savings accounts will impose requirements or prerequisites for you to operate them. For instance, a bank can impose that you can’t have less than $1,000 in your high-yield savings account at a time – or, they can compel you to open your account with a minimum of $100. This is why it is important to understand the bank’s requirements before you forge ahead.
• Penalties: It is also important for you to find out the penalties or fees that might be imposed if you break the terms of a high-yield savings account. Some of these accounts essentially impose tenures on your balance. This means that for a specific period, you might not be able to withdraw your money. If you do decide to withdraw before the tenure ends, a penalty could be charged to your account. Understand the terms before opening your account, and you should be fine.

What To Consider When Choosing A High-Yield Savings Account

Now that we understand why high-yield savings accounts are beneficial, let’s see what you should consider before opening one:

Initial Deposit

You want to know how much money you’d need to deposit to even open the account in the first place.

Some banks allow you to open your account and maintain a $0 initial balance, then fund it later. However, to help keep you on the right financial track, you might want to consider an account that allows you to start with a small sum of money.

Interest Rates

One of the most crucial factors to consider when selecting a savings account is the interest rate. Opting for the highest savings account rate is essential as it can increase the interest earned on your savings, allowing your money to grow faster and accumulate more interest over time.

This can be particularly advantageous if you have long-term savings goals like saving for a down payment on a house or your retirement.

Moreover, having a high interest rate can counterbalance the impact of inflation that tends to erode the value of your savings. By picking a savings account with the highest rate, you can ensure that your money is working harder for you and pushing you closer to your financial goals.

Minimum Balance Requirement

The next step will be to know the minimum balance requirement needed to maintain your account and earn the interest rate.

Most banks that offer high-yield interest accounts tie your interest rates to your balance, while others offer the same interest rates regardless of the balance. Your job is to find the bank that offers the best terms for you and stick with them.

Fees

Account fees can easily chip away at your interest rates. So, be sure to look into the maintenance fees, account fees, and other penalties that might be charged to your account per time.

Carefully review the bank’s fee schedule to see if the account will be the right option for you.

Compounding Frequency

Compound interest allows you to essentially earn money on your savings. And as you shop for an account, you need to consider how often your interest will compound.

Banks have varying compounding periods – daily, weekly, or monthly. The more frequently you get compounding interest, the more your money grows.

Insurance

If you have a savings account at a bank or credit union, you can rest assured that your money is protected by insurance provided by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), respectively. These government-backed agencies provide deposit insurance coverage up to a maximum limit of $250,000 per depositor per institution in case of a financial crisis or bank failure.

The insurance coverage ensures that your savings will not be lost in the event of bank failure, offering peace of mind and security for depositors. It is important to remember, however, that savings account deposits are not completely risk-free. Economic factors, such as inflation, can affect the value of your savings, and the interest earned on your savings may not keep up with the rising cost of living.

Despite these risks, FDIC and NCUA insurance helps to minimize the risks associated with savings accounts, providing a safe and secure place to store your money.

“Some of the better high-yield savings accounts are offered by online banks and come with different requirements, such as minimum balances and withdrawal dates. To make an informed decision, consider the pros and cons of each account, as well as your savings goals and financial situation.” Matthew Levy

How To Open A High-Yield Savings Account

Depending on the type of bank or credit union, it’s possible to open a high-yield savings account digitally or in person. To do so, keep the following in mind:

• Provide your contact information: You’d need to provide your Social Security Number and at least one government-issued form of identification – a driver’s license, an international passport, etc. if you’re opening a joint account, then everyone will need to share their IDs as well.
• Sign up: If you’ll be managing your account with a mobile or desktop platform, then you’d need to open an account and set up a username and password that allows you to easily log into it. Be sure to select a strong password to prevent hacks.
• Make a deposit: Once your account is set up, you can begin funding it via a cash transfer or an electronic transfer portal.

Reasons For The Bank To Deny You A High-Yields Savings Account

Although high-yield accounts are considered a safe investment, you may be denied a high-yield account due to certain circumstances such as:

• Insufficient Identification: If you do not provide the necessary identification documents or if your information does not match the information on file with credit bureaus, your application may be rejected.
• Poor Credit: If you have poor credit, applying for a high-yield account may result in your application being denied as banks and credit unions often check your credit history when you apply for one. Poor credit may cause you to be considered a higher risk, leading the bank to hesitate in approving your application.
• ChexSystems Report: ChexSystems maintains a record of bank account history, including negative information such as unpaid bank fees, outstanding debts, and fraudulent activities. If you have a negative ChexSystems report, your application may be denied.
• Fraudulent Activities: If you have a history of fraudulent activities, your application may be rejected.
• Insufficient Funds: Some banks may require a minimum deposit to open a high-yield account. If you do not meet the minimum opening deposit requirements, your application may be denied.
• Outstanding Debts: If you have outstanding debts or unpaid bills, your application may be rejected.
• Geographical Restrictions: Based on state regulations, some banks may not offer high-yield savings accounts to residents of certain states.

How Often Do Interest Rates And Balances Change For High-Yield Savings Accounts?

Typically, high-yield savings account rates follow the broader interest rate environment. This is because the Federal Reserve sets a target for the federal funds rate, which is the interest rate at which banks can borrow from each other overnight.

When the Federal Reserve raises or lowers the federal funds rate, it can impact interest rates on savings accounts. However, it’s essential to note that the interest rates on savings accounts, including high-yield accounts, may not move in sync with the federal funds rate.

Several factors may affect interest rate on high-yield accounts, including:

• Economic conditions: Interest rates usually rise when the economy is strong and fall when the economy is weak.
• Inflation: When inflation is high, interest rates are usually increased to keep up with the rising prices.
• Competition: Banks may lower interest rates on high-yield accounts to attract customers or stay competitive.
• Bank’s profitability: Banks may adjust interest rates to maintain their profitability.

Frequently Asked Questions (FAQs)

What is the current highest-yielding savings account available?

Western Alliance Bank currently offers the highest-yielding savings account, with an APY of 4.35%.

Are high-yield savings accounts a good choice?

High-yield savings accounts can be beneficial if they offer higher savings rates than traditional accounts.

Which bank offers a 7% interest rate on savings accounts?

There is no single bank that universally offers a 7% interest rate on savings accounts. The interest rate offered depends on the bank and region.

What are the drawbacks of a high-yield savings account?

High-yield savings accounts may have lower liquidity and higher monthly fees than traditional accounts.

Which bank currently offers the highest savings interest rate?

Western Alliance Bank currently offers the highest savings interest rate at 4.35% APY.

Why is it important to look for the highest savings account rate?

A higher savings rate means more interest earned on deposits, which can lead to higher returns over time.

What is the difference between a savings account and an online savings account?

The main difference between online savings accounts and traditional savings accounts is in the benefits they offer. Online savings accounts provide higher interest rates and are accessible 24/7, while traditional savings accounts offer local accessibility and in-person interaction, although with lower interest rates.

Who insures high-interest savings accounts in banks and credit unions?

Banks and credit unions provide insurance for high-interest savings accounts through either the FDIC (Federal Deposit Insurance Corporation) or NCUA (National Credit Union Administration).

Are high-yield savings accounts safe?

Yes, high-yield savings accounts are generally safe, as they are insured by the FDIC or NCUA.

Can I lose money in a high-yield savings account?

No, it is not possible to lose money in a high-yield savings account as it is insured by the FDIC or NCUA. However, the value of savings may be impacted by inflation.

Are high-yield savings accounts worth it?

Investing daily in high-income savings accounts can be profitable, but it may not be the most straightforward option for wealth generation. Due to inflation, the value of money saved is likely to decrease more quickly than the interest earned, making investing a better choice than simply saving money.

Is it better to have a high-yield savings account with a bank or a credit union?

Whether it is better to have a high-yield savings account with a bank or a credit union depends on individual factors such as interest rates, fees, accessibility, customer service, and other features. On average, credit unions offer higher interest rates on their savings accounts than banks do.

Can I have multiple high-yield savings accounts?

Yes, it is possible to have multiple high-yield savings accounts.