If you have a nice rainy day fund saved up, you might be looking to stash your cash in a place that will earn competitive interest rates without exposing your money to market risk. A high-yield savings account could be the best choice.
[See: Best High-Yield Savings Accounts in 2025]
What Is a High-Yield Savings Account?
A high-yield savings account is a type of savings account that pays a better-than-average interest rate, according to Frank Newman, director of portfolio construction and due diligence at Ally. “They are simple to use and offer you flexible access to your money at any point,” he says.
Currently, the national average savings account rate is 0.41%, according to the Federal Deposit Insurance Corp. However, money-saving expert Andrea Woroch notes this is just an average and your financial institution could be giving you much less than that, even 0.01%. Meanwhile, the typical high-yield savings account offers around a 4% annual percentage yield. Even with recent interest rate cuts made by the Federal Reserve, you could earn much more on your savings today.
“A high-yield savings account is the best option to store your cash for emergencies or short-term goals since you could earn a much higher yield than through a savings account at a traditional bank,” Woroch says.
[Read: Best Savings Accounts.]
How a High-Yield Savings Account Works
High-yield savings accounts work similarly to any traditional savings account. They can be found at many types of financial institutions, though they’re typically offered by online banks and credit unions. Online banks and credit unions can offer the highest rates and lowest fees because they have lower overhead than traditional banks. Because of this, high-yield accounts may also come with perks such as no minimum balance or no monthly maintenance fee.
Even so, certain high-yield savings accounts may have different requirements and restrictions than traditional savings accounts. For instance, you may need to maintain a certain minimum balance to earn the best rate, and there may be limits on how often you can withdraw funds.
Top High-Yield Savings Accounts
There are many high-yield savings accounts to choose from. Here is a look at some of the banks offering the best rates and terms right now:
— CIT Bank. This online bank, a division of First Citizens Bank, offers a 4.00% APY on its Savings Connect account. A minimum deposit of $100 is required to open. There are no monthly service fees for savings accounts.
— Marcus by Goldman Sachs. Marcus is the online banking arm of global investment firm Goldman Sachs. The online savings account earns a 3.90% APY with no minimum deposit or maintenance fees.
— Synchrony Bank. Another online-only bank, Synchrony offers a high-yield savings account that earns a 4.00% APY. There’s no minimum deposit or minimum balance required, and there are no monthly maintenance fees.
— Citizens Bank. The Citizens Access account, an online-only, no-fee high-yield savings account from Citizens Bank, earns a 3.70% APY.
— Barclays. The online savings account from Barclays bank offers a 3.90% APY. There is no minimum opening balance or deposit required to open.
[Read: Best CD Rates.]
How to Pick a High-Yield Savings Account
You may have a lot of choices when it comes to a high-yield savings account, but not all accounts are created equal. It’s important to evaluate your options. Here are some tips to keep in mind when shopping for a high-yield savings account.
Compare the Annual Percentage Yield
This refers to the amount of interest you will earn on a savings account in a year, which Newman says can give you a big-picture view of your earning potential. “APY is designed to help consumers comparison shop for savings accounts … the higher APY, the more you can earn and the faster your account balance can grow,” he says.
Consider Online Options
Digital-only banks generally offer higher APYs than traditional banks, according to Newman. This is because online banks don’t have the same physical footprint to maintain as brick-and-mortar institutions, so they can pass those savings on to customers.
Watch Out for Fees
Be sure to check for any fees associated with the account, such as monthly maintenance fees, ATM fees or overdraft fees. These can eat into your interest earnings, so look for an account with low or no fees.
Read the Fine Print
When choosing a high-yield savings account, watch for things like promotional rates and withdrawal penalties, Newman says. “Some banks may offer different APYs that apply to specified account balance levels or balance tiers,” he says. For example, a bank may only offer a high APY up to a certain balance.
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What Is a High-Yield Savings Account? originally appeared on usnews.com
Update 02/12/25: This story was previously published at an earlier date and has been updated with new information.
