The main places to look are online banks, credit unions, and some traditional banks

A high-yield savings account is a savings account that pays you more interest than a standard savings account at a brick-and-mortar bank. The reason the interest rate is higher is usually because the bank operates mostly online, with lower costs to run, and passes some of those savings to you.

You can open a high-yield savings account at three types of institutions: online banks (which have no physical branches), credit unions (member-owned financial cooperatives), and some traditional banks that also offer online accounts. Each has different requirements and different interest rates, so comparing a few options before you choose is worth your time.

The interest rate you earn changes over time and varies between banks, so the "highest" account today may not be the highest next month. Before you open an account, check the current rate on the bank's website — not an article or comparison site, which may be outdated.

Key Takeaways

  • Online banks typically offer the highest interest rates because they have lower operating costs than banks with physical branches.
  • Credit unions often offer competitive rates and may have lower minimum balance requirements, but membership rules vary by credit union.
  • You can compare current rates across multiple banks on the banks' own websites or on financial comparison sites like Bankrate or DepositAccounts.
  • All accounts at FDIC-insured banks and NCUA-insured credit unions are protected up to $250,000 per account holder, so safety does not differ between institutions.
  • Opening an account online takes 10 to 20 minutes and requires a government ID, Social Security number, and a way to fund the account (bank transfer, debit card, or check deposit).

Online banks usually have the highest rates

Online banks have no physical locations, so they spend less money on buildings, staff, and equipment. They pass some of that savings to customers through higher interest rates. Examples include Marcus by Goldman Sachs, Ally Bank, American Express Personal Savings, Discover Bank, and Capital One 360. Each of these is FDIC-insured, meaning your money is protected up to $250,000.

The trade-off is that you cannot walk into a branch to deposit cash or speak to someone in person. Most online banks let you deposit checks by taking a photo with your phone, and they reimburse ATM fees if you use an out-of-network machine. If you rarely need to deposit cash, this is usually not a problem.

Interest rates at online banks change frequently — sometimes weekly — based on what the Federal Reserve does with interest rates. When you compare banks, look at the current rate on their website the day you plan to open the account, not a rate you saw last week.

Credit unions may offer competitive rates and lower minimums

A credit union is a bank owned by its members rather than by shareholders. Many credit unions offer high-yield savings accounts with rates close to online banks, and some have lower minimum balance requirements (the smallest amount you need to keep in the account to earn the advertised rate).

To open an account at a credit union, you first have to become a member. Membership rules vary — some credit unions are open to anyone in a geographic area, some are only for employees of a specific company, and some are only for people in a certain profession or community. The easiest way to find a credit union you can join is to search on CO-OP or Shared Branch, which are networks that let credit union members use ATMs and branches at other credit unions.

Credit unions are insured by the NCUA (National Credit Union Administration) rather than the FDIC, but the protection is the same: up to $250,000 per account holder. If you already belong to a credit union through your employer or a family member, ask them what savings rates they offer before you open an account elsewhere.

Traditional banks sometimes offer high-yield options online

Large banks like Chase, Bank of America, and Wells Fargo have physical branches but also offer online savings accounts with higher rates than their in-branch accounts. These rates are usually lower than online-only banks, but they can be worth comparing if you already have a checking account at that bank or if you value having a branch nearby.

The advantage of staying with a bank where you already have an account is convenience — you can move money between accounts when ready and use the same login. The disadvantage is that these banks' online rates are typically 0.5% to 1% lower than rates at online-only banks, which means less interest earned over time.

How to compare rates across different banks

The most reliable way to compare is to visit each bank's website directly and write down the current rate. Comparison websites like Bankrate, DepositAccounts, and NerdWallet show rates from multiple banks in one place, but they update at different speeds, so always confirm the rate on the bank's own website before you open an account.

When you compare, look at the Annual Percentage Yield (APY), not just the interest rate. The APY tells you the total return you will earn in a year, including the effect of compounding (earning interest on your interest). Two banks might advertise similar rates, but the one with higher APY will earn you more money.

Also check whether the rate requires a minimum balance. Some banks offer their highest rate only if you keep a certain amount in the account — often $2,500 or $25,000. If you cannot meet that minimum, you may earn a lower rate. Read the fine print before you open the account.

What you need to open an account

To open a high-yield savings account, you will need a government-issued photo ID (driver's license, passport, or state ID), your Social Security number, and a way to fund the account. Most banks let you fund an account by transferring money from another bank account, using a debit card, or mailing a check.

The entire process usually takes 10 to 20 minutes online. You will create a username and password, provide your personal information, and choose how much money to deposit to start. Some banks have no minimum opening deposit, while others require $25 or $100. Check the bank's website for their specific requirement.

After you open the account, it typically takes one to three business days for your initial deposit to arrive. Once the money is in the account, it starts earning interest when ready at the rate advertised when you opened it.

Things to watch out for when choosing

Not all high-yield savings accounts are the same. Some banks charge monthly fees if your balance drops below a certain amount, though most online banks have no monthly fees. Check whether the bank charges for things like wire transfers, overdrafts (if the account can overdraft), or early withdrawal penalties.

Also confirm that the bank is FDIC-insured (for online banks and traditional banks) or NCUA-insured (for credit unions). You can verify FDIC insurance on the FDIC's website by searching the bank's name, and you can verify NCUA insurance on the NCUA's website. If a bank is not insured, your money is not protected if the bank fails.

Finally, remember that interest rates change. The rate you earn today may be lower in three months or higher in six months, depending on Federal Reserve decisions. You are not locked into a rate, so you can move your money to a different bank if another bank offers a significantly higher rate.

Frequently Asked Questions

Is my money safe in an online bank?

Yes, as long as the bank is FDIC-insured. FDIC insurance protects your money up to $250,000 per account holder if the bank fails. You can verify a bank's FDIC status on the FDIC's website by searching the bank's name. Online banks are required to be FDIC-insured to operate legally.

Can I withdraw money from a high-yield savings account whenever I want?

Yes, but there are limits. Federal rules allow you to make up to six withdrawals or transfers per month from a savings account. If you exceed that limit, the bank may charge a fee or close the account. Most people do not hit this limit because they use savings accounts for long-term money, not daily spending.

What is the difference between APY and interest rate?

Interest rate is the percentage the bank pays you on your money. APY is the total return you earn in a year, including the effect of compounding — earning interest on the interest you already earned. APY is always equal to or higher than the interest rate, so it is the number to compare between banks.

Do I need a minimum balance to earn the advertised rate?

It depends on the bank. Some banks offer their highest rate with no minimum balance requirement. Others require you to keep $2,500, $10,000, or more in the account to earn the advertised rate. If your balance drops below the minimum, you earn a lower rate. Always check the bank's website for their specific requirement before you open an account.

How long does it take to open an account?

The process process takes 10 to 20 minutes online. After you submit your process, the bank verifies your information, which usually takes a few minutes to a few hours. Your initial deposit then takes one to three business days to arrive, depending on how you fund the account.