16 of the Best High-Yield Online Savings Accounts in March 2024 (2024)

Best High-Yield Savings Accounts: Things To Know

It may be tempting to find the savings account with the highest interest rate and ignore everything else.

But you should look for a financial institution that won’t charge you fees, doesn’t require a high minimum balance or initial deposit, offers strong customer service and has a good website and/or app. And of course, you’ll want to make sure that your account choice is federally insured.

Several banks shut down in 2023 after a long period of interest rate hikes by the Fed. The possibility that this could happen at other banks makes it important to make sure that your account(s) include FDIC insurance for every dollar you hold in the bank.

It’s also important to understand the withdrawal rules before choosing a high-yield savings account. Federal law used to limit savings account transactions to six per month, excluding ATM and bank teller withdrawals. If you went over that limit, you were subject to a penalty.

Because of economic conditions related to COVID-19, the Federal Reserve lifted that restriction in April 2020. It’s now up to each bank to decide whether to charge fees or penalties if you exceed the limit.

What You Need in a High-Yield Online Savings Account

For a real savings account, other than the interest rate, the main things you want are a good website and/or app, a lack of hidden fees and good customer service.

High-Yield Online Savings Account Features You Want

• Good interest rate. If everything else is equal, you want the option that’s going to pay you the most interest.
• Good website and app. There’s little excuse for a bank to have a clunky website and app. You should be able to access your account easily. Many bank websites and apps have features like savings goals that allow you to allocate the money in your savings account to things like an emergency fund or a family vacation.
• Good customer service. You probably will not spend as much time managing your savings account as you will with your checking account. But it’s still important to be able to call, email or chat with someone helpful at your bank whenever you have questions or concerns.

Things To Avoid

• Lots of fees and service charges. Look for a savings account that doesn’t charge you for things like monthly maintenance or paper statements. A good interest rate won’t help you if your financial institution cancels out all your earnings by slapping you with fees.
• High minimum balance requirement. This may not be a dealbreaker if you are fortunate enough to have considerable assets. But even then, it’s nice if your bank can offer you peace of mind that it will continue paying you interest and avoid penalizing you even if your account balance gets low.
• High initial deposit requirement. There are a few banks that offer you very competitive interest rates if you make a big deposit when you open your account. But some banks will pay you a good interest rate without requiring a large deposit.
• Delayed access to your money. Some of the savings accounts that pay the highest yield will set up hoops that you have to jump through to access your money after you make your initial deposit. They may also intentionally delay processing all deposits. In the meantime, they sometimes earn extra money on your cash rather than paying you interest.

How Does a High-Yield Savings Account Work?

If you’re new to banking, a high-yield savings account may seem a little odd. How can a bank pay you to hold your money in a safe, insured place?

The bank takes all the money it has on deposit and loans it out at a slightly higher interest rate than what it pays you. That’s one way that these institutions make money.

By doing business only online, these financial institutions can operate with lower overhead costs than if they had to maintain physical locations.

The interest rates that banks offer change depending on market conditions — namely, the rate set by the Federal Reserve. That’s the central bank of the United States. “The Fed,” as it’s often called, helps the U.S. maintain a safe, flexible monetary and financial system and influences interest rates at other banks.

Good Ways To Use Your High-Yield Savings Account

Clark believes in goal-oriented savings accounts that are as automated as possible. In other words, he likes accounts that help you save for specific expenses like family vacations. And he likes for you to save a set, automated amount every paycheck.

Some of the high-yield online savings accounts that I recommend meet these criteria by letting you allocate funds toward multiple goals within a single account. You can set up automatic transfers that go into each savings “bucket.” If the financial institution you choose doesn’t allow you to split up your savings by goal, you may need more than one savings account. The idea is to keep the money for each savings goal separate.

“People do the best with savings accounts when they have a clear purpose in mind and they contribute to it automatically,” Clark says. “People need to think in terms of every paycheck, putting a certain amount of money in for the different goals. Because otherwise they’re always chasing their tails.”

According to Clark, if you keep your funds for different goals in the same pool of money, it becomes too easy to “borrow” the money from one goal to pay for something else.

If you keep separate pools of money for different savings goals, depleting one still leaves another.

Some potential goals for savings accounts include:

• Family vacation
• Car
• Furniture
• Down payment on a house
• Wedding
• Rainy day fund

Frequently Asked Questions About Savings Accounts

How Do I Calculate How Much Interest I’ll Get?

The best high-yield online savings accounts offer competitive interest rates, usually expressed as APY.

APY stands for Annual Percentage Yield: the total amount of interest you’ll earn in one year, assuming you don’t add or withdraw funds. Interest can compound daily, monthly or quarterly. It’s important to look at APY because it standardizes the time frame and helps you compare apples to apples.

The formula for how much interest you’ll earn is simple. Just multiply the amount of money in your account by the APY, and that’s how much you’ll earn in one year.

For example, if you have $1,000 in savings and your bank offers you 4% APY, you’ll multiply $1,000 by 0.04, which equals $40. An interest rate of 0.4% APY would yield $1,000 times .004, or $4 per year. Use our calculator to see how much interest you’ll get over a select period.

How Often Do Interest Rates Change?

The answer depends on multiple factors, including whether the Federal Reserve is making changes to its interest rate and whether your bank is trying to attract more depositors by offering a limited-time promotional rate.

You don’t want a bank that’s going to secure your business with a high interest rate only to slash it in short order. It’s also important to know that savings account interest rates tend to be variable, so they can change at any time.

Should I Open a Savings Account for My Child?

Teaching your children about finances can give them a great advantage. Opening a “custodial” or joint savings account can be an excellent way to educate them about finances. And making sure that the account comes with low fees and minimum requirements boosts the value of the lesson.

Children who are old enough to actively participate in maintaining a savings account can make regular deposits and watch their balances grow over time. This can instill good habits. Money in a savings account also isn’t as accessible as money in a piggy bank or wallet.

It’s an especially good idea to avoid accounts with minimum balance requirements and fees when you open a savings account for a child. He or she is likely going to be depositing small amounts at a time. You will need to act as a custodian for the account and have full access. When your child turns 18, you may sign over your custodial rights if you wish.

When Should I Use a Savings Account vs. a CD or Money Market Account?

If you want to earn interest on your money in a safe, low-risk way, you have multiple options.

Money market accounts sometimes offer higher interest rates than savings accounts. But you might have to maintain a higher minimum balance. Traditionally, you get check-writing and debit card privileges with money market accounts, which you usually don’t get with savings accounts.

A CD, or Certificate of Deposit, is akin to a low-risk investment. You agree to leave your money in the CD for a specified period, and in exchange, the bank offers you a fixed interest rate that often is higher than a regular savings account. There are penalties if you withdraw the money early.

If your goal is to get the highest interest rate possible and you know you won’t need to access the money for a certain amount of time, it makes sense to at least shop for CDs to see if you can secure a better rate than a savings or money market account.

Are there Transactions Limits for My Savings Account?

Maybe. Federal Reserve Board Regulation D used to stipulate that you couldn’t make more than six transactions during a single statement cycle. (The rule applies to money market accounts as well.)

It included online transfers, automatic transfers, withdrawals and transfers made with a savings account that act as overdraft protection for a checking account and debit card purchases.

The Federal Reserve amended that rule in April 2020. Banks are now allowed to set their own rules on transaction limits. You’ll want to know those details before opening an account to make sure the bank’s transaction limits work for you.

Final Thoughts

If you have a savings account at a traditional big bank, or you’re earning a paltry interest rate at any kind of financial institution, consider switching to one of the options I’ve recommended in this article.

If you’re looking to open a new high-yield savings account, look for the account with the best APY that still offers low fees and reasonable minimum deposit and balance requirements.

I haven’t listed many credit unions here because most of them are either limited to local areas and/or base memberships on specific criteria. But Clark recommends that you check out the product offerings from your local credit union to see if there’s a savings account there that best fits your needs.