A high-yield savings account can be a great place to keep your emergency fund or other cash savings. They're known for offering higher annual percentage yields (APYs) than traditional savings accounts. That allows your balance to earn interest and work a little harder for you. Some of the best places to get a high-yield savings account include online-only banks, credit unions and traditional banks. Understanding their pros and cons can help you decide which one may be right for you.
1. Online-Only Bank
This is a bank that operates entirely online. You can view your account details via a mobile app or computer. Account holders typically receive a debit card and can withdraw, deposit and transfer funds at an ATM. They can also transfer funds from one account to another online.
Many online-only banks offer a variety of financial products and services like auto loans, mortgages, investment options and more. They're also known for offering generous interest rates on high-yield savings accounts.
Pros of Online-Only Banks
- Higher APYs: Online-only banks usually offer the best APYs on high-yield savings accounts.
- Convenience: Mobile banking makes it easy to view and manage your accounts. You can also open a high-yield savings account relatively quickly online.
- Potentially lower fees: When compared to traditional banks, online-only banks typically charge lower fees. Most don't charge a monthly maintenance fee or require a minimum opening deposit.
Find High-Yield Savings Accounts
Cons of Online-Only Banks
- Physical branches might be limited (or nonexistent): If you prefer to do your banking at a brick-and-mortar location, an online-only bank may not feel right.
- ATM access may be slim: You might be required to use in-network ATMs. Depending on your bank and location, that may be a problem. Using an out-of-network ATM could trigger fees.
- Customer service is handled strictly online: This could be an issue if you prefer to speak with an in-person representative, or your online bank has subpar customer service.
2. Credit Union
Just like a bank, a credit union offers many popular banking services and financial products. That includes high-yield savings accounts. What makes a credit union different from a bank is that it redirects its profits back to its members. As a result, you might find better savings rates. Credit unions also promote financial wellness.
You must be a member of a credit union to do your banking there. Eligibility requirements vary, but credit unions usually serve a specific group of people. That may be community members, employee groups or folks who work in a shared industry or field.
Pros of Credit Unions
- Competitive APYs: When compared to traditional banks, credit unions typically offer higher interest rates on savings accounts.
- Prioritize financial wellness: Credit unions are committed to the communities they serve. They often provide free financial education and personalized credit assistance to members.
- Other financial products: If you eventually apply for a loan or credit card, you might find more lenient eligibility criteria at a credit union.
Cons of Credit Unions
- Locations may be limited: Credit unions may have fewer physical branches than traditional banks in your town. ATM access may also be limited.
- Membership required: Membership fees (if they exist) typically range anywhere from $5 to $25. You'll also have to meet their other eligibility requirements.
- Technology can vary: Some may have excellent mobile apps and online services, but others might not have the same digital capabilities.
3. Traditional Bank
A traditional bank is another place to open a high-yield savings account. Most deliver exactly what you'd expect from established banks, like a wide variety of financial products and services. That includes everything from checking and savings accounts to loans to wealth management options. Traditional banks usually have many locations, which can be appealing for folks who prefer to do their banking in person. Mobile banking also comes standard.
Pros of Traditional Banks
- Simple cash deposits and withdrawals: Traditional banks usually have a large network of ATMs and physical branches, making it easy to deposit and withdraw funds as needed.
- In-person banking: If you have questions or concerns about your high-yield savings account, you can meet with a banker in person to discuss them.
Cons of Traditional Banks
- APYs may be better elsewhere: Traditional banks generally lag behind credit unions and online-only banks when it comes to savings rates.
- Potentially higher fees: You may face higher fees when compared to a credit union or online bank.
Frequently Asked Questions
Think about what matters to you most in a savings account. Aside from a good interest rate, consider fees, minimum account balance requirements, opening balance requirements, ATM access and mobile banking capabilities. Shopping around and comparing your options can help you find a high-yield savings account that makes the most sense for you.
It isn't likely you'll lose money, because your balance isn't linked to the stock market. If you have more than $250,000 in a single account, you could theoretically lose money if the financial institution were to fail. One workaround is to spread your money across another high-yield savings account at a different bank.
Rates vary from one financial institution to the next, though online banks tend to offer the most competitive rates. In general, whenever interest rates are on the rise, APYs on savings accounts typically increase too.
The Bottom Line
You can open a high-yield savings account through an online-only bank, credit union or traditional bank. Online banks tend to offer the best interest rates, but you'll also want to consider fees and accessibility when deciding which one is right for you.
Learn More About High-Yield Savings Accounts
- Pros and Cons of High-Yield Savings Accounts
A high-yield savings account can be a great place to keep your emergency fund, but there are some potential drawbacks to consider.
- Are High-Yield Savings Accounts Worth It?
A high-yield savings account can be a safe space to store and grow your cash reserves, but there are some potential drawbacks to be aware of.
- 5 Ways to Use a High-Yield Savings Account
Stashing money for emergencies and big expenses in high-yield savings can help you earn more interest than you might in a typical savings account.