High Yield Savings Accounts

Who Pays Most?

High-yield savings accounts pay above-average interest rates on cash deposits, allowing savers to earn passive income. Online banks tend to offer the highest yields given lower overhead costs. Reviewing top providers’ rates and features identifies the best high-yield savings options maximizing returns on saved money.

What are High-Yield Savings Accounts?

High-yield savings accounts work much like traditional passbook savings accounts but pay elevated interest rates. They provide a secure place to build savings and earn monthly interest.

Key high-yield savings features:

• Interest rates significantly higher than national averages
• FDIC insurance protecting balances up to $250,000
• Savings remain liquid allowing withdrawals anytime
• Limited or no minimum balance requirements
• Opportunity to grow savings just via interest earning

Average Savings Account Interest Rates

The national average interest rate for savings accounts as of 2023 is:

• 0.13% at brick-and-mortar banks
• 0.65% at credit unions
• 0.75% at online banks

Compare rates against these benchmarks to identify accounts paying comparatively higher yields.

How Do High-Yield Savings Accounts Work?

High-yield savings operate similar to standard passbook savings:

• Deposit money anytime and funds become available quickly
• Interest compounds daily based on account balance
• Interest gets credited monthly to the account
• Federal insurance protects balances like any bank savings account
• Transfers and withdrawals allowed at any time

The main difference is the higher interest yield.

Why High-Yield Savings Pay More

High-yield savings accounts allow online banks to pay increased interest because:

• They operate digitally at lower overhead costs than traditional banks
• Money gets reinvested in loans and investments at higher returns
• Depositors receive a portion of returns back in the form of interest
• High yields help online banks attract deposits as an appeal

Lower expenses and smarter reinvestment of deposits enables passing higher earnings to customers.

Benefits of High-Yield Savings Accounts

Advantages high-yield savings offer:

• Earn interest income on cash equivalents without market risk
• Provide liquidity to withdraw cash anytime for opportunities
• Protect savings against erosion from inflation over time
• Supply “rainy day” emergency funds for unexpected expenses
• Give savers more money without effort simply through interest compounding

Typical Features of High-Yield Savings Accounts

Common high-yield savings account features include:

• Interest rate of at least 1% and up to 3%
• FDIC insurance protecting deposits up to $250,000
• No minimum balance requirements
• Unlimited deposits and withdrawals
• Free ATM card for easy account access
• Availability on mobile apps allowing remote access
• Option for joint accounts to share savings

Leading High-Yield Savings Providers

Top online banks and fintechs offering high-yield savings include:

• Marcus by Goldman Sachs
• Ally Bank
• Capital One
• CIBC
• Barclays -Synchrony Bank
• Alliant Credit Union
• Redneck Bank
• SalemFiveDirect
• Bread Savings

Several pay over 2% interest – much higher than brick-and-mortar bank averages.

Questions to Ask When Opening Accounts

• What is the current interest rate being paid?
• Do rates fluctuate or remain consistent until maturity?
• How often is interest compounded – daily, monthly, quarterly?
• When is interest credited – monthly, at maturity?
• Are withdrawals available anytime without penalties?
• Is there a minimum opening deposit or balance?
• What customer service options are available for assistance?

Other High Yield Cash Options

Beyond savings, other cash holdings earning high yields include:

CDs – Certificates of deposit paying fixed interest for terms like 3 months or 5 years

Money Market Accounts – Offer check writing capabilities and ATM access. May require minimum balances.

Treasury Securities – Government debt investments buying 1-month to 30-year Treasury bills and bonds

Evaluate tradeoffs between flexibility, FDIC protection, and yields offered.

Avoiding High-Yield Savings Pitfalls

Stay clear of accounts with:

• Minimum balance requirements and monthly fees
• Limits on monthly transactions allowed
• Excessive early withdrawal penalties if cash needed
• Teaser rates quickly dropping after opening
• Significant lag time on withdrawal availability

Read fine print to ensure convenient access without constraints.

Managing Savings Goals with High-Yield

High-yield savings work well supporting financial goals like:

• Building an emergency fund covering 3-6 months of expenses
• Saving for a down payment on a home
• Setting aside money for taxes to avoid penalties
• Earmarking funds for vacations or large future purchases

Let compound interest passively grow savings over time.

Closing Thoughts

Online high-yield savings accounts offer easy liquidity with interest rates vastly exceeding old-school brick-and-mortar banks. Take advantage of rates over 1.5-2% compounding monthly without any investment risk. Parking cash earns money market beating returns with complete flexibility to withdraw as needed. Review frequently updated rate listings to find the top yields available as benchmark interest levels evolve. A little time researching optimizes idle cash.