What makes a savings account "high yield"

A high yield savings account is a savings account where the bank pays you a higher interest rate than a traditional savings account at a brick-and-mortar bank. That rate is called the APY — the annual percentage yield — and it tells you how much money you'll earn in a year if you leave your balance untouched.

Most high yield accounts are offered by online banks, which have lower overhead costs than physical branches. Because they spend less on buildings and staff, they pass some of that savings to you in the form of higher rates. The tradeoff is that you manage your account online or by phone instead of walking into a branch.

The APY on these accounts changes regularly — sometimes weekly — because banks adjust their rates based on what the Federal Reserve does and what other banks are offering. When you see a rate advertised, that's what the bank is paying right now, not a promise of what you'll earn forever.

Key Takeaways

  • High yield savings accounts at online banks typically pay 4% to 5% APY, while traditional bank savings accounts often pay less than 1%.
  • Your money is insured up to $250,000 per account at banks that carry FDIC insurance, so your balance is protected even if the bank fails.
  • You can move money between accounts and withdraw it without penalty, though some banks limit how many transfers you can make per month.
  • The APY you see advertised changes frequently, so the rate you open with may be different three months later.
  • Banks with no monthly fees, no minimum balance requirements, and no strings attached exist — you don't have to pay to save.

Where to find current rates and compare accounts

The easiest way to see what banks are paying right now is to visit a rate-tracking website like Bankrate, DepositAccounts, or the FDIC's own National Rates and Rate Caps page. These sites update daily and show you the APY each bank is currently offering, so you can see which ones are paying the most.

When you compare, look at three things: the APY itself, whether the bank charges a monthly fee, and whether there's a minimum balance you have to keep. Some banks advertise a high rate but only pay it if you maintain $25,000 or more. Others charge $5 or $10 per month if your balance drops below a certain level. The best accounts for most people have no fees and no minimums.

You can also check the bank's own website directly. Most online banks display their current rate prominently on the homepage. If you can't find it easily, that's often a sign the rate isn't competitive.

Banks that consistently offer competitive rates

Several online banks have built their business around offering high yield savings. These include Marcus by Goldman Sachs, Ally Bank, American Express Personal Savings, Discover Bank, and Capital One 360. None of these require a minimum balance to open an account, and none charge monthly fees. The rates they offer tend to be within a fraction of a percent of each other — sometimes one is highest, sometimes another is, depending on the week.

Credit unions also offer high yield savings accounts, though rates and terms vary widely by location and membership. If you belong to a credit union, it's worth asking what rate they're paying. Some credit unions pay rates competitive with online banks; others pay much less.

Traditional banks — the ones with physical branches in your town — almost never offer high yield rates. A Chase savings account or Bank of America savings account typically pays less than 0.5% APY. If you have money sitting in one of those accounts, moving it to a high yield account at an online bank could earn you significantly more without any additional risk.

How FDIC insurance protects your money

When you open a high yield savings account at a bank that carries FDIC insurance, your money is protected up to $250,000 per account. FDIC stands for Federal Deposit Insurance Corporation, and it's a government agency that guarantees deposits at member banks. If the bank fails, the FDIC pays you back.

This protection applies to each account separately. If you have $100,000 in a high yield savings account and $100,000 in a money market account at the same bank, both are covered. If you have $200,000 in one account, only $250,000 total is covered — so the extra $50,000 is at risk if the bank fails (though bank failures are rare).

Before you open an account, check that the bank is FDIC-insured. You can search the FDIC's Bank Find tool on their website by bank name. All the banks mentioned above are FDIC-insured, but it's a good habit to verify before you move money anywhere.

Withdrawal limits and how they work

Federal rules used to limit how many times per month you could withdraw money from a savings account — the limit was six. Those rules were relaxed in 2020, and now most banks allow unlimited withdrawals. However, some banks still impose their own limits, so check the account terms before you open.

Withdrawals are free and usually process within one to three business days if you're moving money to another bank account. If you need cash when ready, you can use an ATM if the bank offers ATM access (many online banks partner with ATM networks so you can withdraw at thousands of locations). Some online banks reimburse ATM fees charged by other banks, which is a nice bonus.

The key point: you're not locked into a high yield savings account the way you are with a certificate of deposit (CD). You can move your money out whenever you want without penalty.

Why the rate you see today might not be the rate you get tomorrow

Banks change their APY frequently — sometimes multiple times per week. When the Federal Reserve raises or lowers its benchmark interest rate, banks adjust what they pay depositors. When a competitor launches a new promotion, other banks may raise their rates to stay competitive. When a bank wants to attract less new money, it lowers its rate.

This means the 4.75% APY you see advertised today might be 4.50% next month. It could also go up to 5% if the Fed raises rates again. You don't have any control over this, and the bank doesn't owe you a warning before the rate changes.

The practical takeaway: don't wait for the "perfect" rate. If you have money in a traditional savings account earning nearly nothing, moving it to a high yield account earning 4% or more is a significant improvement, even if the rate drops later. You're still earning far more than you would at a traditional bank.

How to move money from your current bank

Opening a high yield savings account takes about 10 minutes online. You'll need your Social Security number, a government-issued ID, and your current address. The bank will verify your identity and ask you to fund the account.

To move money from your current bank, you have two options. The easiest is to link your old account to the new one and initiate a transfer from the new bank's website. You'll provide your old bank's routing number and your account number (both appear on the bottom left of your checks, or you can call your bank to ask). The transfer usually takes one to three business days.

The second option is to have your old bank send a check to the new bank, or to withdraw cash and deposit it yourself. This is slower and less common, but it works if you prefer not to link accounts online.

Frequently Asked Questions

Is my money safe in an online bank?

Yes, as long as the bank is FDIC-insured and your balance is under $250,000. Online banks are regulated the same way as traditional banks. You can verify FDIC insurance on the FDIC's website. The only real difference is that you access your account online instead of in person.

Can I lose money if the interest rate drops?

No. The interest rate is what the bank pays you — it doesn't affect the money you've already deposited. If you have $10,000 in the account and the rate drops from 4.75% to 4.50%, you still have $10,000. You'll just earn slightly less interest going forward.

What's the difference between a high yield savings account and a money market account?

A money market account is similar to a savings account but sometimes pays a slightly higher rate. The main difference is that some money market accounts come with a debit card or checkbook, so you can spend the money more easily. For most people, a high yield savings account is simpler and the rate is just as good.

Do I have to keep a minimum balance?

Most online banks with competitive rates don't require a minimum balance. You can open an account with $1 and add money later. However, some banks do require a minimum — usually $500 to $2,500 — so check the terms before you open.

How often should I shop around for a better rate?

You don't need to check constantly, but it's reasonable to look once or twice a year. If you find a bank paying 0.5% or more above what you're currently earning, it might be worth moving. The process takes about 10 minutes, and you'll earn the difference for years.