A high-yield savings account, or HYSA, is a type of savings account that offers interest rates at least 10 times higher than the national average. Most HYSAs are found at online-only banks. Since online banks don’t have the overhead costs of maintaining physical branches, they pass some of these cost savings down to customers in the form of lower fees and better APYs on savings, certificates of deposit and money market accounts.
And with the highest rates hovering around 5% APY right now, transferring some or all of your savings to a high-yielding account could definitely pay off.
High interest rates are making saving products a topic of everyday conversation, said Shang Saavedra, founder and CEO of Save My Cents. Saavedra’s followers have recently been asking her more questions about how high-yield savings accounts work. “The rates are so attractive that some people see it as an investment product,” Saavedra added.
A high-yield savings account can be considered an investment product for short-term goals. These accounts also provide quick access to withdraw and deposit money.
While many high-yield savings accounts offer high APYs on your full balance, some banks cap the amount of money you can earn at this rate. For instance, Digital Federal Credit Union offers an impressive 6.17% APY on its high-yield savings account — but only on balances up to $1,000. Any balances over that receive a paltry 0.15% APY.
And, in some cases, banks might require a higher minimum deposit to be eligible for the higher APY.
What experts are saying about high-yield savings accounts
Rita-Soledad Fernandez Paulino
Expert Reviewer
Anna N’Jie-Konte
Expert Reviewer
Shang Saavedra
Expert Reviewer
We spoke with three financial experts to learn the best way to use high-yield savings accounts, what to look out for and additional tips and guidance in the current rate environment.
Savings rates are soaring. Anna N’Jie-Konte, a certified financial planner, recommends a high-yield savings account for anyone looking for flexibility and easy access to their money — especially to house an emergency fund.
“High yield savings accounts should always be a mainstay for emergency funds.”
Currently, some of the best high-yield savings accounts offer APYs as high as 5.27%. Compare this to some traditional savings accounts, which offer APYs as low as 0.01%, and you’ll see the real value. For example, if you deposit $100 a month into a high-yield savings account for a year with a 5% APY, you’ll earn about $28 in interest (if rates stay the same). If rates go up, you’ll get a bigger return. If you deposit the same amount in a traditional savings account with a 0.01% APY, you’ll only earn $1.
Since the best rates are often at online-only banks, you’ll need to feel comfortable managing your money online. Many online bank names may feel unfamiliar, so Saavedra encourages her followers to read reviews, ask questions and do their research to get more acquainted with how an online bank operates. Most importantly, she suggests ensuring the bank is insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration to protect your funds up to $250,000 per person, per institution.
Don’t assume a high-yield savings APY applies for all balances. Some banks have balance requirements to earn the highest interest rate, while others keep it straightforward, said Soledad. For instance, a bank may only offer a 5% APY on up to $3,000 or if you deposit that amount when opening the account. “I prefer to work with a bank that gives me an interest rate that’s going to be the same for all my money,” she said. “Always read the fine print.”
Lastly, don’t expect 5% high-yield savings rates to stick around long term. Savings APYs are variable and often move in lockstep with the federal funds rate. The Federal Reserve has raised rates 11 times since March 2022 to tamp down on staggering inflation. While that’s boosted savings rates, it’s also raised interest rates on consumer loan products, like credit cards, personal loans, home equity loans and home equity lines of credit. When borrowing rates are high, it makes financing more expensive and difficult for households and businesses, which plays a role in slowing economic growth.
“Right now we might be in an environment with really, really high interest rates. But by default, the Fed doesn’t like to stay there,” said Delyanne Barros, founder of The Money Coach.
Though the Fed raised interest rates again in July, and there’s the potential for another rate hike this year, experts don’t expect savings rates to climb much higher. If you aren’t earning over 4% on your savings account, you should consider switching to a high-yield account to earn a better return while rates are high.
Read more: Types of Savings Accounts Compared
What a high-yield savings account is best for
A high-yield savings account is a great place to park money dedicated to short-term savings goals. Here are a few types of purposes you might use a HYSA for:
- Emergency fund: Your emergency fund provides an extra layer of security against unexpected expenses, and it should always be in a high-yield savings account, said Soledad. You’ll have access to the money when you need it, and you can make regular contributions over time to be prepared for an unforeseen event, such as a job layoff or medical bill. You should keep your emergency fund separate from any other savings goals and only pull funds from this account to cover essentials like housing costs, bills, medical care or an unexpected expense.
- Sinking fund: A sinking fund is a way to set aside savings for a short-term goal, such as holiday gifts or a concert. It’s money you save for a specific upcoming expense, said Soledad. You can open separate high-yield savings accounts or use a bank like Ally that offers savings buckets to help organize and separate savings goals within one account. You may set up automatic transfers or contribute occasionally to reach your goal. That way, when it’s time for your purchase, you’ll have the money you need without overspending or taking on debt.
- Money you haven’t earmarked yet: If you’re unsure about how you want to use some funds, you may keep the money in a high-yield savings account to earn interest while you decide. When you’re ready, you can move the funds to the right account or goal — whether you choose to invest, start a new sinking fund or spend the money.
You shouldn’t use a HYSA as your primary retirement savings vehicle. Although APYs are higher than they’ve been in years, they can’t compete with the compounding interest rates of the stock market. Your main retirement fund should be parked in a 401(k), IRA or other tax-advantaged growth account. But that doesn’t mean you shouldn’t park extra funds in a high-yield savings account as you approach retirement age.
“I’m planning to have two to three years of expenses saved [in a high-yield savings account] by the time I retire. Because if for some reason the market crashes the year that I retire, I don’t want to be pulling out of my investments that year,” said Barros. “That’s when a high-yield savings account or a regular savings account becomes something even more vital to your portfolio.”
The strategy can be helpful so you don’t have to sell your investment assets at reduced prices, echoes Soledad. “If you only have one or two years left before retiring, I suggest you balance between saving in products that provide a guaranteed rate of return,” she said. That can include high-yield savings accounts, CDs, bonds and investments you don’t plan to sell for at least three years.
What to look for when opening a high-yield savings account
Keep these factors in mind when comparing your high-yield savings account options.
Deposits and withdrawals
Since most high-yield savings are at online banks, make sure you understand the ways you can deposit and withdraw your money. Aside from direct deposit and transfers from other bank accounts, most banks with online access offer mobile check deposit, which lets you take a photo of your check to scan and deposit it into your account. Just watch out for mobile check deposit limits, said Soledad. Sometimes you can’t exceed a limit of $5,000, for example. If your check is larger than the limit, you can often deposit the money into your checking account, then transfer it.
Some high-yield savings accounts may offer cash deposits at ATMs, but many don’t. This can pose a challenge if you regularly receive money in cash. In this case, depositing into a separate bank account and transferring it to your savings account may work well, but will take more time.
Savings goals and features
Many high-yield savings accounts offer ways to earmark money for different savings goals.
“I’m a big fan of Ally because I like their buckets feature,” said Soledad. Ally Bank lets you keep your money in one account, while clearly categorizing it for different savings goals. “Not all high-yield savings accounts have this bucket feature where you can categorize your money.” However, you could also open multiple savings accounts to keep your financial goals separate.
“The ability to categorize your savings so that you can set up sinking funds is very beneficial,” said Soledad. However, some banks will limit how many accounts you can link, she adds. For instance, you may have a checking account and several savings accounts to track your goals individually.
If you have multiple accounts, make sure your high-yield savings account is linked to the primary account where your paycheck or other income is deposited so you can easily transfer funds.
Withdrawal limits
If several emergency expenses pop up in a row, you might find yourself tapping into your savings multiple times in a given month. “Look out for how many times you can pull money out a month for this account,” said Soledad.
Although Regulation D (PDF), which limited savings account transfers to six per month, was indefinitely suspended by the Federal Reserve, some banks still adhere to this limit. That means if you exceed this number of transfers, you may be charged an excessive transfer fee. The charge can vary by bank but is usually $10 for each transaction that exceeds the limit.
Pros and cons of high-yield savings accounts
Experts often recommend high-yield savings accounts as a low-risk way to save money, but there are some drawbacks to consider. Here are a few pros and cons to weigh.
Pros
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Higher interest: Usually, high-yield savings accounts have higher APYs than traditional savings and checking accounts — which can yield a bigger return.
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Flexibility: You can withdraw money when you need it; it’s not locked in for a set term like a certificate of deposit.
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FDIC-insured: As long as your high-yield savings account is at a bank that’s FDIC- or NCUA-insured, your money will be protected for up to $250,000 per person, per account.
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Can help curb spending: Money that is out of sight is often out of mind. Keeping extra funds in a HYSA can help prevent you from spending on nonessentials.
Cons
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Limited or no physical bank access: Usually, only online-only banks offer high-yield savings accounts, so you’ll need to be comfortable managing your account online.
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Transfer time: It can take one to three business days to transfer money from your savings to an external bank account.
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Withdrawal limits and fees: Some banks may limit your withdrawals to six per statement cycle before charging an excessive withdrawal fee.
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Variable interest rate: You won’t lock in a fixed savings rate like you can with a CD. Instead, your APY could change anytime.
How to open a high-yield savings account
You can typically open a high-yield savings account online in a matter of minutes. While the steps may vary by bank, here’s what the process generally looks like.
- Compare your options: Before opening an account, review different banks, features, rates and requirements to make sure you’re choosing the right fit for your financial situation.
- Apply: You’ll likely apply online, but you may be able to apply in person if your bank has physical branches. You’ll typically need to provide your Social Security number, physical address and contact information for your application. If you don’t have an SSN, some banks may allow you to open an account with an Individual Taxpayer Identification Number, or ITIN. Some banks may also require you to link your account and routing numbers from another account or financial institution to transfer your funds.
- Make a deposit: Depending on the bank, you may need to make a minimum deposit when opening the account. If not, you can transfer money when you’re ready. Most banks allow bank transfers, automated clearing house, or ACH, transfers and mobile check deposits.
FAQs
High-yield savings accounts are good for anyone saving for emergencies or short-term savings goal, such as car repairs or a vacation. It’s also a great place to put unexpected financial windfalls, such as a tax refund or inheritance, while you decide whether you want to save, invest or spend the money.
While each bank has a proprietary methodology for establishing APYs, many accounts are loosely connected to the federal funds rate — the interest rate at which banks lend to each other. Since the Fed has raised the federal funds rate 11 times since March 2022, APYs for deposit accounts such as savings accounts and CDs have also risen.
The Fed rate hikes generally trickle down to consumer deposit accounts, but it can take a while to see the effects. Since the latest rate hikes, more banks have continued to increase APYs on high-yield savings accounts. Rates have surpassed 5.00% APY for many banks.
Despite the Fed rate increases, the major national banks such as Wells Fargo, Bank of America and Chase seem unwilling to budge so far and are still offering savings accounts with meager rates between 0.01% and 0.15%.
Right now, some online-only banks are still slightly raising savings APYs, and experts predict rates will remain elevated as the Fed keeps interest rates high.
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Our approach
CNET reviews high-yield savings accounts based on the latest information posted on bank, credit union and neobank websites. We evaluated APYs, minimum deposits, monthly maintenance fees, minimum balances and other terms and conditions for saving accounts from more than 50 organizations. We selected the savings accounts with the highest APYs and the best terms for banking consumers.
The banks, credit unions and neobanks we reviewed include: Affirm Savings, Alliant Credit Union, Ally, America First Credit Union, American Express High Yield Savings Account, Axos High Yield Savings, Bank of America Advantage Savings, Bank of the West, Bank5 Connect, Barclays, Bask Bank, Bread Savings, BrioDirect High-Yield Savings, Capital One 360 Checking, Charles Schwab, Chase Premier Savings, Chime, Citibank, Citizens Online Savings Account, Colorado Federal Savings Bank, Consumers Credit Union, Discover, First Internet Bank of Indiana, LendingClub, Live Oak Bank, M&T Bank, Marcus, My Banking Direct, Nationwide My Savings, Navy Federal Credit Union, NBKC, OneUnited Bank, PenFed CU, PNC, Popular Direct Select Savings, PurePoint Financial, Quontic Bank, Rising Bank, Salem Five Direct, Sally Mae Smarty Pig, Santander Bank, Synchrony, TAB Bank, TD Bank, TIAA Bank, Truist Bank, U.S. Bank, UFB Direct, Union Bank, USAA Bank, Varo, Vio and Wells Fargo.
