Are High-Yield Savings Accounts Worth It?
See how a high-yield savings account can grow your savings faster than a traditional account, with no added risk.
High-yield savings accounts pay meaningfully more interest than a typical savings account, and for most savers, that difference is worth switching for.
Consider a $10,000 emergency fund. In a traditional savings account earning 0.05% annual percentage yield (APY), that money earns about $5 a year. The same $10,000 in a high-yield savings account earning a hypothetical 3.50% APY earns about $350 a year, with no added risk and no change to how you access your money.
What Is a High-Yield Savings Account?
High-yield savings accounts are typically offered by online banks and often pay well above the national average savings rate. Online banks can pass more of that savings on to customers through higher rates and fewer fees because they carry lower overhead than banks with in-person branches.
The Forbright Bank high-yield savings account, Growth Savings, offers a competitive APY with no monthly maintenance fee, no minimum opening deposit, and no minimum balance requirement. That means you keep more of what you earn.
Why Are High-Yield Savings Accounts Worth It?
- Higher earnings. Traditional savings accounts often pay between 0.01% and 0.06% APY. High-yield accounts often pay several times that. On a $10,000 balance, a 3.50% APY earns about $350 a year, compared to just a few dollars in a standard account.
- No added risk. High-yield savings accounts are deposit accounts, so your money is protected by the FDIC up to $250,000 per depositor, per insured bank, for each account ownership category. That makes them a solid place for emergency funds and near-term savings goals.
- No penalty for access. Unlike a Certificate of Deposit, which keeps your money in place for a fixed term, a high-yield savings account lets you withdraw or transfer funds without an early withdrawal penalty.
- Low or no minimum balance requirements. Many high-yield accounts like Growth Savings have no minimum opening deposit and no minimum balance to earn the advertised rate. On the contrary, some traditional accounts require a set balance to avoid fees or earn interest.
- Few or no monthly fees. Many high-yield savings accounts like Growth Savings charge no fees, while traditional savings accounts may charge monthly maintenance fees just for having an account. They may also charge transfer fees or other fees.
- Compounding interest. Most high-yield accounts compound interest daily and pay it monthly, so interest earned starts generating its own interest sooner than in accounts with less frequent compounding.
- Easy to open and manage online. Many high-yield savings accounts, like Growth Savings, can be opened online in a matter of minutes and managed through a mobile app, without needing to visit a branch.
When Should You Choose a High-Yield Savings Account?
High-yield savings accounts work well when you need security, easy access, and a competitive rate. They can be especially good fits for:
- Emergency funds: Your money earns a competitive APY while staying available when you need it.
- Short-term goals: Saving for a vacation, wedding, or down payment over the next one to three years? A high-yield account can match a CD’s rate without keeping your money in place.
- Temporary parking for windfalls: If you’ve received a bonus, inheritance, or other lump sum and haven’t settled on a long-term plan, a high-yield account lets it earn a decent return without a long-term commitment.
What Should You Look for in a High-Yield Savings Account?
A few factors matter more than the headline rate.
- APY: Compare the ongoing rate, not a temporary promotional offer that drops after a few months.
- Compounding frequency: Daily compounding, such as with Growth Savings, earns you slightly more than monthly compounding over time.
- Fees: A $5 monthly fee costs $60 a year, which can erase the benefit of a higher rate on smaller balances. Look for accounts with no monthly fees.
- Minimum balance requirements: Some accounts require a minimum deposit to open or a minimum balance to earn the top rate. Make sure any requirement fits your finances.
- Withdrawal limits: Some savings accounts have historically limited certain withdrawals to six per month, though many banks have relaxed this requirement. Growth Savings, for example, has no limit on the number of transfers or withdrawals. Make sure you know your bank’s policy.
- Digital access: Since most high-yield accounts are managed online, look for a mobile app with features like check deposit and easy transfers.
- Customer reviews: Check app ratings and read customer reviews to see if others have had a good experience with the account.
- Transfer times: Moving money to other accounts typically takes one to three business days by ACH. Faster is better if you need the funds quickly.
- FDIC insurance: Only open an account at an FDIC-insured bank.
- Customer care: When you need help, responsive phone and chat support matter. Ensure that customer support is accessible when and where you need it.
A high-yield savings account can be a smart way to earn more with money you want to keep safe and accessible. Compare APY and fees carefully and remember that even a strong rate may not fully offset inflation over time. You can open a Growth Savings account online in minutes and start earning more on your savings today.
Disclaimer: This article is for general information and education only. It should not be considered financial or tax advice.