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You're Throwing Away Money If You Don't Have a High-Yield Savings Account — Here's Why

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If you’ve stashed your cash in a traditional savings account, you’re losing money. The problem is that your account’s vanishingly low annual percentage yield (APY) is no match for inflation. Or, to put it simply, stuff is getting more expensive faster than your money is growing. The good news is that there’s an easy fix. All you have to do is move your money to a high-yield savings account.


What Is a High-Yield Savings Account?

A high-yield savings account is like a normal bank account except that you can earn as high as 5% APY, around 12 times the national average. Typically, lesser-known online banks offer the best rates. If that sounds sketchy, don’t worry too much. As long as the bank is FDIC insured, your money is safe.


To give you an idea of how impactful moving your money can be, consider you have $5,000 in savings:

  • In an account with a 0.39% APY, the national average, you’ll earn $19.50 in interest after a year.

  • In an account with a 5% APY, you’ll earn $250 in interest after a year.

How Do High-Yield Savings Accounts Work?

You shouldn’t run into any surprises with a high-yield savings account. The only shock may be switching to an online bank that doesn’t have any ATMs and brick-and-mortar branches. But in place of those in-person conveniences, you’ll benefit from higher interest rates, lower fees, and snazzier online banking portals.


Which Banks Offer the Highest Rates?

The banks listed below have the highest interest rates at time of publication. Note that a few have minimum balance requirements that you’ll need to meet to earn the account’s APY.

HTML Table Generator

CFG BankUpgradeCitizens BankApple SavingsSoFi
Institution Type  Community bankFinTech company  Commercial bankOnline bank FinTech company and bank 
 Annual Percentage Yield (APY) 5.02% 4.56%4.25% 4.15% 4% 
 Minimum Deposit $1,000+ $1,000$0.01 $0 $0 
 Yield After One Year ($5,000 balance) $251$228  $212.50$207.50$200 


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Are There Any Alternatives?

The downside to high-yield savings accounts is that the interest rates aren’t fixed. So if the Federal Reserve lowers its rate — a distinct possibility, experts say — then commercial banks might follow suit.


If you’d prefer a guaranteed high-interest rate, you should look into opening a certificate of deposit. In a certificate of deposit account, you can put aside a lump sum for a set amount of time that will benefit from a fixed interest rate. Unlike a savings account, however, you won’t be able to touch that money until the CD matures. That makes CDs a good fit for long-term savings goals and a bad fit for emergency funds.


A money market account is another alternative. While it may sound like it has something to do with markets and stocks, it’s essentially a high-yield savings account with the features of a checking account.


Gallery: Banks' Most Embarrassing (and Expensive) Mistakes


The Bottom Line: It’s Free Money

Aside from a few exceptions, most people should consider putting the bulk of their savings in a high-yield savings account. They’re safe, practical, and protective against inflation. The only reason you might pass on one is if you can’t stand online banks.


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