Best High-Yield Savings Accounts for 2023

Saving money is great, but earning interest on that cash is even better. While historically low interest rates are great when you need a loan, they don’t help much when you want to put your money to work. However, there are still several acceptable high-yield savings accounts currently available that offer high-interest yields.

They vary in terms of fees, balance minimums, and extra perks, so you have plenty of options available. Review each one carefully before picking the right one to house your hard-earned money.

Best High-Yield Savings Accounts with No Minimum Balance Requirements

A lot of high-yield savings accounts require you to make a minimum deposit to open an account. But not everyone wants to start their savings account with a ton of cash, especially for those just beginning to save.

Luckily, you can still access high-yield savings accounts without worrying about any type of starting deposit. Here are our top picks that don’t require any cash upfront.

Best High-Yield Savings Accounts with Minimum Balance Requirements

Some of the best high-yield savings accounts do require an initial deposit to open your account. But most of them aren’t extremely high thresholds and don’t create a barrier for many people.

If you’ve already started saving money, check out these savings accounts with low opening balances.

What is a high-yield savings account?

High-yield savings accounts, as the name suggests, are savings accounts that offer a higher interest rate than standard savings accounts. They are offered by banks and credit unions. Like traditional savings accounts, they are also insured. The Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) provide this insurance. This coverage goes up to the legal limit, ensuring your money is safe.

How do high-yield savings accounts work?

The functioning of high-yield savings accounts is similar to that of regular savings accounts. You deposit money into the account, and the bank pays you interest on your balance. However, the key difference lies in the interest rate.

High-yield savings accounts offer significantly higher interest rates, often more than 20 times the national average of a standard savings account. This means that the money you deposit into a high-yield savings account will grow at a much faster pace.

The interest on these bank accounts is usually compounded daily or monthly and paid out monthly. The interest earned gets added to your initial deposit, forming a larger base on which future interest is calculated, thereby accelerating your savings growth.

Pros and Cons of High-Yield Savings Accounts

High-yield savings accounts offer a multitude of benefits but, like any financial product, they also come with a few potential drawbacks. Understanding these will help you make an informed decision about whether a high-yield savings account is the right fit for you.

Pros

• Increased earnings: With their higher interest rates compared to traditional savings accounts, high-yield savings accounts help your money grow faster.
• Safety: Deposits in high-yield savings accounts at FDIC or NCUA member institutions are insured up to the legal limit, reducing the risk of loss.
• Accessibility: Unlike many investment options, you are permitted up to six withdrawals or deposits per month, providing a degree of liquidity.
• Ease of use: Many online savings accounts, particularly those offered by online banks, offer user-friendly digital platforms and mobile access, simplifying account management.

Cons

• Variable interest rates: The interest rates are variable and can fluctuate over time, potentially reducing the rate of return.
• Minimum balance requirements: Some high-yield savings accounts require a minimum balance to earn the stated interest rate or avoid monthly fees, which could be a drawback for some customers.
• Limited transactions: Federal regulations typically limit certain types of withdrawals and transfers to six per month. Exceeding this limit could result in fees or other penalties.
• Potential for fees: Some high-yield savings accounts come with fees, such as maintenance fees or withdrawal fees, which could offset the benefits of the higher interest rate.
• Less access than checking accounts: While a high-yield savings account provides more access than some investment vehicles, they offer less frequent access to funds than checking accounts.

How to Choose a High-Yield Savings Account

Here’s what to consider when choosing the best high-yield savings account for your needs:

• Annual percentage yield: The most important factor in choosing a high-yield savings account is the annual percentage yield (APY). There are many savings accounts available with varying annual percentage yields. Make sure to compare rates and find the one that offers the highest rate for your particular needs.
• Fees: Some savings accounts may have monthly maintenance fees associated with them. So, make sure to check for any potential account fees or other charges.
• Accessibility: If you need to access your money quickly, you should look for a savings account with easy and convenient access. Consider whether you need to be able to access the funds online or if you need a physical bank location.
• Minimum deposit and balance requirements: Some savings accounts require a minimum deposit to open or a minimum balance to avoid fees or earn the highest APY. Make sure you can meet these requirements without stretching your finances.
• Digital access and mobile features: If you value being able to access and manage your account on the go, consider the digital features offered by the account. These may include mobile deposits, online transfers, digital customer service, and more.
• Customer service: A quality customer service experience is important when considering any type of financial product. Look for a bank or credit union with good customer service ratings and reviews.

By considering these factors, you’ll be able to find the best high-yield savings account for your individual needs. Make sure to do your research and shop around for the best deal.

See also: Best 5% Interest Savings Accounts

Tips on Maximizing Your High-Yield Savings Account

With a high-yield savings account, it’s not just about opening the account and watching your savings grow. To make the most out of these powerful financial tools, understanding the intricacies of their operation is crucial. Let’s dive into some key strategies to ensure you’re utilizing your high-yield savings account to its full potential.

The Power of Automatic Transfers

One of the most effective ways of nurturing your high-yield savings account is by setting up automatic transfers. This can be a certain percentage of your paycheck or a fixed sum that moves from your checking account to your savings account regularly.

Automatic transfers take the guesswork and effort out of the saving process, effectively turning it into a seamless, automatic habit. This strategy not only ensures regular deposits into your account but also helps in maintaining a consistent account growth.

Dodging the Fees

While high-yield savings accounts are often marketed as ‘fee-free’, this is frequently contingent upon meeting certain requirements. These could include maintaining a minimum balance, making a limited number of withdrawals, or setting up direct deposits.

Understanding the fee structure of your high-yield savings account is key to avoiding unnecessary charges. Make sure you’re familiar with any potential fees and the requirements to evade them. Maintain your balance above the minimum, limit your transactions, and make use of online platforms over bank branches or ATMs whenever possible to avoid transaction fees.

Decoding Withdrawal Limits

Regulatory constraints usually limit the number of certain types of withdrawals or transfers from savings accounts to six per statement cycle. Exceeding this limit typically incurs a fee.

Keep in mind, however, that this limit generally doesn’t apply to in-person withdrawals (at a branch or ATM) and electronic transfers made to repay loans at the same bank. Being aware of these limits and planning your withdrawals accordingly can help you manage your savings more effectively.

Alternatives to High-Yield Savings Accounts

While high-yield savings accounts are a popular choice for many, there are several other financial products available that may better suit your specific needs. Here are some alternatives to consider:

1. Certificates of Deposit (CDs)

CDs are time deposit accounts offered by banks and credit unions. They often offer higher interest rates than savings accounts, but in exchange, you agree to leave your money deposited for a specific term, ranging from a few months to several years. If you withdraw your money before the term ends, you will usually face a penalty. CDs are best for funds you know you won’t need for a set period.

2. Money Market Accounts

A money market account is a type of savings account that often offers higher interest rates in exchange for higher minimum deposit and balance requirements. They sometimes come with check-writing privileges and a debit card, making them a bit more flexible than high-yield savings accounts. However, they also are subject to the six withdrawals per month limit.

3. Checking Accounts

While checking accounts don’t typically offer interest rates as high as high-yield savings accounts, they are designed for frequent transactions, making them ideal for everyday spending. Some checking accounts do offer interest, though rates are typically lower than what you’d get with a savings account.

4. Investment Accounts

Investment accounts, such as brokerage accounts, mutual funds, or retirement accounts, can potentially offer higher returns than high-yield savings accounts, particularly over the long term. However, they also come with a higher risk, and your capital can decrease as well as increase. These accounts are best for long-term goals and should be used in conjunction with, rather than instead of, secure savings methods.

5. Treasury Bonds and Bills

Treasury bonds, bills, and notes are low-risk investments backed by the U.S. government. While they may not offer as high a return as a high-yield savings account, they are virtually risk-free. They can be a viable option for conservative investors looking for a safe place to store money.

Frequently Asked Questions

How often are interest payments made?

Generally, interest payments are made on a monthly basis. However, this can vary depending on the financial institution and the terms of the account.

How often your interest is compounded depends on the bank. With some banks and credit unions, interest is compounded daily, while others do so monthly. The more frequent your interest compounds, the greater your return.

How often do high-yield savings rates change?

Savings rates can change frequently, depending on the financial institution offering the account and the current market conditions. In many cases, savings rates can change several times a year, or even more often than that.

Most financial institutions may also change their savings rates in response to changes in the Federal Reserve’s benchmark interest rate, which can happen several times a year.

Savings rates may also change in response to the type of account and the amount of money you’re keeping in the account. The more money you keep in the account, the more likely it is that the financial institution will offer you a higher rate of interest to keep it there.

Can I open a high-yield savings account if I already have a regular savings account?

Yes, you can open a high-yield savings account even if you already have a regular savings account. Many people maintain both types of accounts for different purposes – for instance, a regular savings account for short-term needs and a high-yield savings account for long-term savings goals.

Is my money safe in a high-yield savings account?

Yes, your money is generally safe in a high-yield savings account. The accounts are offered by banks and credit unions, which are regulated by federal law.

If these financial institutions are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), the money in your high-yield savings account is insured up to the legal limit per depositor. The limit is $250,000 per depositor, per insured bank, for each account ownership category.

Is the interest on a high-yield savings account taxable?

Yes, the interest earned on a high-yield savings account is typically subject to federal (and possibly state) taxes. Banks usually send a 1099-INT form if you earn more than $10 in interest in a year, and you’ll need to report this when you file your taxes.

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3. The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is accurate as of May, 22, 2023. No minimum balance required. Must have $0.01 in savings to earn interest.

8. A Chime Checking Account is required to be eligible for a Savings Account.