Picking the Right High-Interest Savings Account: A Guide
Looking for a smart place to stash your dough for short-term savings? High-yield savings accounts are the answer! These bad boys deliver way higher interest rates than traditional savings accounts. The Federal Deposit Insurance Corporation (FDIC) reports the average interest rate on savings accounts sits at a measly 0.41%. Compare that to high-yield alternatives offering more than 4.50% Annual Percentage Yield (APY) – turning a potential $50 annual return on $10,000 into $450 or more.
Online banks and financial institutions with lower overhead costs offer these high-yield accounts. So with a plethora of options available, choosing the right one can be tricky. Here's what to look for:
Key Features to Consider
While maximizing returns is crucial, don't forget to consider other features to ensure you get the best bang for your buck:
Annual Percentage Yield (APY)
The APY represents your actual return after compounding interest. With small differences in APY significantly impacting your earnings over time, you'll want to choose an account with a competitive APY. Currently, the top choices offer between 4.50% and 5.25% APY.
Fee Structure
While opening an account might cost you zilch, some charge a monthly fee if your balance drops below a certain threshold. For example, Citi Accelerate Savings pesters you with a $4.50 monthly fee if your balance falls below $500 [3]. Look for accounts with:- No monthly maintenance fees- No minimum balance requirements- Free transfers between linked accounts- Reasonable excessive withdrawal fees (if any)
Access to Your Money
Since these savings accounts house your short-term stash, it's vital you can access it when needed for that family vacation or new car repairs. Consider how you'll use it:- Do you need ATM access?- Is mobile check deposit available?- How many monthly transactions are allowed without penalty?- How quickly can you transfer funds to your primary checking account?
Insurance Protection
Ensure your deposits are insured. FDIC insurance for banks covers up to $250,000 per depositor; NCUA insurance for credit unions has the same coverage limits [2]. Most financial institutions will flaunt their FDIC status on their homepage or account features list.
User Experience
Read some reviews and ratings for the account's mobile app, customer service, and account opening process.
Minimum Deposit Requirements
While many accounts don't require a minimum deposit, some charge a monthly fee if the balance falls below a certain threshold. Some accounts also mandate a substantial opening deposit or minimum balance to earn the advertised APY. Choose an account that aligns with your financial situation.
Top High-Yield Savings Accounts Right Now
Check out our rundown of some of the best high-yield accounts available today and the factors that minimize fees and make sure you've got easy access:
SoFi Checking and Savings
- APY: 3.80% (with direct deposit)
- Minimum balance: $0
- Monthly/overdraft fees: None
- What else to consider: Combination checking and savings account; no branch access, fees for cash deposits
Capital One 360 Performance Savings
- APY: 3.60%
- Minimum balance: $0
- Monthly/overdraft fees: None
- What else to consider: Highly rated user experience, no minimum opening deposits; no cash deposits at many partner ATMs
CIT Bank Platinum Savings
- APY: 4.10% (on balances of $5,000 or more)
- Minimum balance: $0
- Monthly/overdraft fees: None
- What else to consider: No free ATM network, but ATM fee rebates; high minimum opening deposit
EverBank Performance Savings
- APY: 4.30%
- Minimum balance: $0
- Monthly/overdraft fees: None
- What else to consider: No minimum opening deposits; limited branch access
More Tips to Maximize Your Savings
As you decide on the right account for you, use additional strategies to boost your savings:
Rate Chasing vs. Convenience
Chasing the highest rates can maximize your returns, but consider the hassle of frequently opening new accounts. Settling for a slightly lower rate (within 0.25%) from a more convenient or full-featured institution makes sense.
Laddering Your Savings
Consider dividing your funds between high-yield savings accounts and certificates of deposit (CDs) to create a "ladder" that balances liquidity and higher returns. Experiment with a CD ladder calculator to see if it's worthwhile.
Special Promotions
Many banks offer promotional rates or cash bonuses for new customers. These can sometimes provide better short-term value than slightly higher standard APYs.
The Bottom Line
Once you find an account that suits you, don't go hopping from one account to the next in pursuit of a slightly higher rate. The idea is to let your cash work for you, not have to shake things up to keep up with interest rates. Since rates fluctuate, you may find your interest rate increasing without you having to lift a finger. By prioritizing factors important to your financial goals – whether that's maximizing returns, minimizing fees, or ensuring easy access – you can choose an account that lets your money work for you. Don't forget the habit of stashing your extra cash in a high-yield account instead of a low-interest one is a smart financial move overall [4][5].
- With a competitive Annual Percentage Yield (APY) being important, it's wise to choose high-yield savings accounts that offer between 4.50% and 5.25% APY.
- To avoid monthly fees, look for high-yield savings accounts with no monthly maintenance fees, no minimum balance requirements, and free transfers between linked accounts.
- Access to money is crucial in a high-yield savings account, so consider accounts that offer ATM access, mobile check deposit, a reasonable number of monthly transactions, and quick transfers to your primary checking account.
- Ensure your deposits are insured by choosing a financial institution that provides FDIC or NCUA insurance, covering up to $250,000 per depositor.
- Research the user experience, customer service, and account opening process of various high-yield savings accounts, such as SoFi Checking and Savings, Capital One 360 Performance Savings, CIT Bank Platinum Savings, and EverBank Performance Savings, to find one that suits your financial situation and preferences.
