Banks and credit unions that offer high yield savings accounts

High yield savings accounts are offered by online banks, some traditional banks with online divisions, and credit unions. The accounts that pay the highest rates tend to be at online-only banks because they have lower overhead costs than branches do. Banks like Marcus, Ally, American Express Personal Savings, and Discover all offer high yield savings accounts. Credit unions also offer them, though the rates vary by institution and by how much you deposit.

You do not have to choose between a high yield account and a checking account at the same place. Many people keep their checking account at a traditional bank near their home and open a high yield savings account elsewhere specifically for the rate. The accounts are separate, and moving money between them takes one to three business days through a standard transfer.

Before opening an account, check whether the bank or credit union is insured by the FDIC (Federal Deposit Insurance Corporation) or NCUA (National Credit Union Administration). This insurance protects your money if the institution fails. Most online banks are FDIC-insured, but it is worth confirming on their website.

Key Takeaways

  • Online banks typically offer higher rates than traditional banks because they do not pay for physical branches.
  • You can open a high yield savings account at an online bank while keeping your checking account at a traditional bank or credit union.
  • Confirm that any bank or credit union you choose is FDIC-insured or NCUA-insured before depositing money.
  • The rate you receive depends on the institution and the amount you deposit, and rates change over time as the Federal Reserve adjusts interest rates.
  • Most online banks have no monthly fees and no minimum balance requirements, though you should read the account terms to be sure.

How to compare rates across different institutions

Rates change frequently, sometimes weekly. Websites like Bankrate, DepositAccounts, and NerdWallet list current rates from many banks in one place, so you can see which institutions are paying the most at any given moment. These sites are free to use and do not require you to enter personal information to browse rates.

When comparing, look at the APY (annual percentage yield), not just the interest rate. The APY includes the effect of compounding and tells you what you will actually earn over a year. A bank advertising a high rate but compounding interest monthly will pay less than one with a slightly lower rate but daily compounding.

Also check the minimum balance requirement and whether the rate applies to all deposits or only deposits above a certain amount. Some banks offer one rate on the first $100,000 and a lower rate on anything above that. Others have no minimum at all.

Opening an account online

Most online banks let you open an account entirely through their website or mobile app. You will need a government-issued ID, your Social Security number, and proof of your current address (usually a recent utility bill or bank statement). The process typically takes 10 to 15 minutes.

After you submit your information, the bank verifies your identity and may ask you to confirm small deposits to a linked bank account. This is a security step to prove you own the account you are linking. Once confirmed, you can transfer money into your high yield savings account.

Some banks offer a sign-up bonus if you deposit a certain amount within a set timeframe. Read the terms carefully — bonuses usually require you to keep the money in the account for a specific period, and the bonus counts as taxable income.

Moving money in and out

You can fund a high yield savings account by transferring money from another bank account you own. This is called an ACH transfer and usually takes one to three business days. You can also deposit money by mailing a check to the bank, though this takes longer.

When you need to withdraw money, you can transfer it back to your checking account the same way. Because high yield savings accounts are meant for money you are not spending regularly, some banks limit you to a certain number of withdrawals per month. Check the account terms to see if this applies.

If you need cash when ready, you cannot withdraw from a high yield savings account at an ATM the way you can from a checking account. Plan ahead if you know you will need physical cash.

Fees and account requirements

Most online banks charge no monthly maintenance fee for a high yield savings account. Some traditional banks do charge a fee if your balance falls below a minimum, so read the account agreement before opening. The agreement is usually available as a PDF on the bank's website.

Watch for fees on transfers, overdrafts, or inactivity. A few banks charge a small fee if you do not make a deposit or withdrawal for several months, though this is uncommon. If the account agreement mentions fees you do not understand, call the bank's customer service line and ask them to explain.

What happens to your rate over time

The rate you earn on a high yield savings account is not locked in. Banks change their rates based on what the Federal Reserve does with interest rates. When the Fed raises rates, banks typically raise the rates they pay on savings accounts. When the Fed lowers rates, banks lower what they pay you.

This means the account that pays the highest rate today may not pay the highest rate in six months. Some people move their money between banks to chase the best rate, while others stay put and accept whatever rate their bank is currently offering. There is no penalty for moving your money, so you can switch if you find a significantly better rate elsewhere.

High yield savings versus money market accounts

Money market accounts are similar to high yield savings accounts but often come with a debit card or checkbook. They typically pay a similar rate and have the same FDIC insurance. The main difference is that money market accounts let you access your money more easily, while high yield savings accounts are designed for money you are setting aside.

If you want to keep your savings separate from your spending money and do not need to write checks or use a debit card, a high yield savings account is usually the simpler choice. If you want the option to access your money quickly without transferring it, a money market account may work better.

Frequently Asked Questions

Can I lose money in a high yield savings account?

No. Your principal is protected by FDIC or NCUA insurance up to $250,000 per account. The rate you earn may go down, but the money itself is safe. The bank cannot take your deposits if it fails.

Do I have to pay taxes on the interest I earn?

Yes. Interest earned on a savings account is taxable income. The bank will send you a 1099-INT form at the end of the year showing how much interest you earned, and you report that on your tax return. The amount is usually small unless you have a large balance.

What if I need to withdraw money before I planned to?

You can withdraw at any time without penalty. The money takes one to three business days to reach your checking account. Some banks limit the number of withdrawals per month, so check your account terms. If you need cash when ready, you will need to use a different account.

Is there a minimum amount I have to deposit?

Most online banks have no minimum deposit requirement. Some traditional banks require $500 or $1,000 to open. Check the specific bank's website to see what they require before you start the account opening process.

What if the bank goes out of business?

The FDIC or NCUA insurance protects your money up to $250,000. If the bank fails, the insurance agency steps in and makes sure you get your money back. This has happened only a handful of times in recent decades, and depositors were protected in all cases.