How to Choose a High-Yield Savings Account

There are plenty of places worth investing your money for long-term growth. But what about short-term savings? Shouldn’t you be able to earn a little something extra on that, too?

A high-yield savings account functions like a traditional savings account but offers significantly higher interest rates. More specifically, the average interest rate on savings accounts is currently 0.41% per the FDIC. Compared to those meager returns on a traditional savings account, high-yield alternatives can deliver more than 4.50% APY—turning a potential $50 annual return on $10,000 into $450 or more.

These accounts are typically offered by online banks and financial institutions with lower overhead costs, allowing them to pass those savings to customers through better rates. So: With all the high-yield savings accounts out there, how do you choose? 

What to look for in a high-yield savings account

While maximizing returns is going to be your top priority, here are other features to consider when choosing your high-yield savings account.

Annual percentage yield (APY)

The APY represents your actual return after compounding interest. This aspect is no doubt your top priority. Even small differences in APY can significantly impact your earnings over time. Currently, the most competitive high-yield accounts offer between 4.50% and 5.25% APY.

Fee structure

While many accounts don’t have a minimum deposit to open an account (remember, they want you to sign up), some charge a monthly fee if your balance is below a certain threshold. For example, Citi Accelerate Savings charges $4.50 per month if you don’t keep a minimum of $500 in your account. Look for accounts with:

• No monthly maintenance fees

• No minimum balance requirements

• Free transfers between linked accounts

• Reasonable excessive withdrawal fees (if any)

Access to your money

Since you’re probably housing short-term savings in one of these accounts, you’ll want to be sure you can access your money when you want to withdraw it to pay for your next family vacation or the new brakes the car will need this year. Consider how you’ll need to use these funds:

• Do you need ATM access?

• Is mobile check deposit available?

• How many monthly transactions are allowed without penalty?

• How quickly can you transfer funds to your primary checking account?

Insurance protection

Ensure your deposits are federally insured. FDIC insurance for banks goes up to $250,000 per depositor; NCUA insurance for credit unions has the same coverage limits. Most financial institutions are up front about this, noting their FDIC status on the homepage or account features list. A lot of banks put “Member FDIC” right next to their name.

User experience

Read some reviews and ratings for the account’s mobile app, customer service, and account opening process.

Minimum deposit requirements

While many accounts don’t have a minimum deposit to open an account (remember, they want you to sign up), some charge a monthly fee if your balance is below a certain threshold. And still, some accounts do require substantial opening deposits or minimum balances to earn the advertised APY. Choose an account that aligns with your financial situation.

Some of the top high-yield savings accounts right now

Let’s take a look at how you might decide between some of the most competitive accounts on the market right now. I broke down some of the most popular options by their APY, as well as the factors that help minimize fees and ensure easy access.