What a high-yield savings account is and why the rate matters

A high-yield savings account is a regular savings account that pays you more interest on the money you keep in it. Banks and credit unions offer these accounts, and the interest rate they pay — called the APY — is usually several times higher than what you'd earn in a standard savings account at a big national bank.

The reason the rate matters is straightforward: the difference adds up. If you keep $10,000 in a standard savings account earning 0.01% APY, you earn about $1 per year. In a high-yield account earning 4% or 5% APY, you earn $400 to $500 per year on the same money, doing nothing. The higher the APY, the more your savings grow without you having to do anything.

High-yield accounts work exactly like regular savings accounts — you deposit money, you can withdraw it whenever you need it, and your money is insured by the FDIC (Federal Deposit Insurance Corporation) up to $250,000. The main difference is where the account lives and how much interest the bank pays you.

Key Takeaways

  • High-yield savings accounts are offered by online banks and some credit unions, not by most big national banks, which is why you may not have seen them before.
  • You can open an account entirely online in about 10 minutes using your ID, Social Security number, and a small deposit, usually $0 to $25.
  • The APY on these accounts changes over time as interest rates in the economy rise and fall, so the rate you see today may be different in six months.
  • Your money is protected by FDIC insurance up to $250,000, the same as any other bank account, so your savings are safe even if the bank fails.
  • You can move money between your high-yield account and a checking account at the same bank, or transfer it to an account at a different bank, though transfers between different banks take one to three business days.

Where to find high-yield savings accounts

High-yield accounts are offered almost entirely by online banks — banks that have no physical branches and operate only through websites and apps. These banks can pay higher interest rates because they don't have the cost of running buildings and hiring tellers. Some examples include Marcus, Ally Bank, American Express Personal Savings, and Discover Bank, though there are many others.

A few credit unions also offer high-yield savings accounts, though their rates vary widely. If you belong to a credit union, it's worth asking whether they have a high-yield option. Some credit unions partner with other credit unions through a network called CO-OP, which means you can use ATMs across the network even if your local credit union is small.

Big national banks like Bank of America, Chase, and Wells Fargo rarely offer high-yield savings accounts. If you have an account at one of these banks, the savings account you already have is probably earning very little interest — often less than 0.01% APY. You don't have to close that account to open a high-yield one elsewhere; many people keep both.

The steps to open an account online

Opening a high-yield savings account takes about 10 minutes and happens entirely on your phone or computer. Here's the actual process:

  1. Go to the bank's website or app and look for a button that says "Open an Account" or "Sign Up". This is usually on the home page.
  2. Enter your personal information: your full name, date of birth, address, phone number, and email address. The bank will ask for your Social Security number so they can check your identity and run a background check (this is required by law).
  3. Choose your account type. Most online banks offer just one savings account, so you may not have a choice. Some offer both a regular savings account and a high-yield one — make sure you pick the high-yield version.
  4. Verify your identity. The bank will ask you to upload a photo of your ID (driver's license, passport, or state ID card). Take a clear photo of the front and back, and upload it through the app. This usually takes a few minutes.
  5. Link a funding source. You'll need to tell the bank where the money is coming from. You can link a checking account at another bank, or you can provide a debit card number. The bank will make two small deposits (usually under $1 each) to that account to confirm it's really yours. You'll see those deposits in a few days, and you'll need to enter the amounts to confirm.
  6. Make your first deposit. Some banks let you deposit $0 to start; others require a minimum of $25 or $100. Check the bank's website to see what they require. You can deposit more money later whenever you want.
  7. Set up online access. Create a username and password, and set up two-factor authentication (usually a code sent to your phone) so only you can log in.

Once your account is open, you can start moving money into it. You can transfer money from another bank account, or you can have your employer deposit your paycheck directly into the high-yield account if you want.

What documents and information you'll need

Before you start, gather these things so the process goes smoothly:

  • A valid photo ID: a driver's license, passport, or state ID card. The photo needs to be clear enough to read.
  • Your Social Security number (the nine-digit number on your Social Security card).
  • Your current address.
  • A phone number and email address where the bank can reach you.
  • Information from another bank account (checking or savings) that you want to link, or a debit card number. This is how you'll fund your new account.

You do not need to print anything, mail anything, or visit a bank in person. Everything happens online.

Understanding APY and how rates change

The APY — annual percentage yield — is the amount of interest the bank promises to pay you over one year, shown as a percentage of your balance. If you have $1,000 in an account with a 4.5% APY, you'll earn about $45 in interest over the year (the actual amount is slightly different because interest compounds daily, but this is close enough to understand).

The APY on high-yield accounts is not locked in. Banks change their rates frequently, usually every few weeks, based on what the Federal Reserve does with interest rates in the broader economy. When the Fed raises rates, banks tend to raise the APY they pay on savings accounts. When the Fed lowers rates, banks lower APY too. This means the rate you see when you open your account may be different in three months.

This is not a reason to delay opening an account — it's just how the system works. Your money is still safe, and you're still earning more interest than you would in a standard account. If you want to track whether your bank is still offering a competitive rate, you can check websites like Bankrate or DepositAccounts, which list current APY rates across many banks.

FDIC insurance and how your money stays safe

When you open an account at an FDIC-insured bank, your money is protected by the Federal Deposit Insurance Corporation. This means if the bank fails or goes out of business, the government will return your money up to $250,000 per account.

Most online banks are FDIC-insured. Before you open an account, you can check whether a bank is insured by visiting the FDIC's website (fdic.gov) and using their "Bank Find" tool. Type in the bank's name, and it will tell you whether they're insured and what the coverage limit is.

The $250,000 limit applies per account type at each bank. This means if you have a savings account and a checking account at the same FDIC-insured bank, each one is covered up to $250,000. If you have $250,000 in a high-yield savings account at one bank and $250,000 at another bank, both amounts are fully covered because they're at different banks.

Moving money in and out of your account

Once your account is open, you can move money between your high-yield account and other accounts you own. If you have a checking account at the same bank, transfers between them usually happen when ready or within a few hours. If you want to transfer money to a checking account at a different bank, it takes one to three business days (the exact timing depends on both banks' systems).

You can also withdraw money from your high-yield account by transferring it to your checking account and then using your debit card or writing a check. Some high-yield accounts come with a debit card, but not all — check with your bank. If your account doesn't have a debit card, you'll need to transfer money to a checking account first before you can spend it.

There are no penalties for moving money in and out. You can deposit and withdraw as much as you want, whenever you want. The only limit that used to exist — a rule that you could only make six withdrawals per month — was removed by the Federal Reserve in 2020, so that's no longer a concern.

Frequently Asked Questions

Can I open a high-yield savings account if I don't have a bank account right now?

Yes. You can open a high-yield account as your first account. You'll need to fund it with money from somewhere — either a debit card, a check you deposit by mail (some online banks accept these), or a transfer from someone else's account. Once it's open, you can use it as your main savings account.

What happens to my interest if the bank lowers the APY?

The interest you've already earned stays in your account. Only the new interest going forward is calculated at the lower rate. For example, if you earn $50 at 5% APY and then the bank drops to 3% APY, you keep the $50 and future interest is calculated at 3%.

Do I need a minimum balance to keep the account open?

Most online banks don't require a minimum balance, but some do. Check the bank's website before you open the account. If there is a minimum and you fall below it, the bank may charge a monthly fee or close the account.

Can I have a high-yield savings account and a regular checking account at different banks?

Yes. Many people keep a checking account at a big bank (for ATM access and branch locations) and a high-yield savings account at an online bank (for the better interest rate). You can transfer money between them whenever you need to.

What if I need to close the account later?

You can close a high-yield savings account anytime by transferring your money out and then requesting closure through the bank's website or app. There are no penalties for closing early. Just make sure you've moved all your money out first, or the bank will return it to you.