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High-yield savings accounts are a low-risk, low-effort way to reward yourself for saving.
With high-yield savings accounts right now, you can make about 0.50% APY (annual percentage yield, which is the expected rate of interest earned over a year). These extra earnings can be small, but over time make a difference.
For example, a traditional savings account that has an APY of 0.01% with $1,000 in it will earn 10 cents per month. That same $1,000 will earn $5 per month in a high-yield account with a 0.50% APY — a rate of return 50 times higher.
Interest rates have been on a steep downward trend since the beginning of the COVID-19 pandemic, but even a rate that’s dropped to 0.50% is still significantly better than a conventional savings account with a rate of 0.01%. To make a long story short, your savings will grow faster over time in a high-yield savings account than a conventional savings account.
Yet only 21% of banked adults in the U.S. have a high-yield savings account, according to a recent NextAdvisor survey. Here’s everything you should know about high-yield savings accounts, along with the accounts we think are the best.
The Best High-Yield Savings Accounts
Ally Bank – Best Customer Service
Founded in 2009, Ally Bank is one of the most prominent online banks. The high-yield savings account, regularly at the top of the pack in terms of interest rates, is one of the bank’s star products, but the institution also offers no-fee investing on stocks, bonds, and ETFs, free interest-bearing checking accounts, money market accounts, CDs, loans, retirement accounts, and other investment vehicles.
Our survey found 48% of Americans with savings accounts said customer service experience is an important factor when choosing where to open such an account, so it’s important to assess how responsive and engaged a bank is when it comes to questions or issues you might have.
Responsive and accessible customer service
Among all banks offering high-yield savings accounts, Ally scored highest in J.D. Power’s 2019 Direct Banking Satisfaction Survey. Ally was second only to Charles Schwab Bank, which focuses more on investments and related accounts for those who have investing relationships with the bank.
Ally offers 24/7 customer service through its phone hotline and live chat service, which allows you to chat with a representative near-instantly. Ally also offers an estimated wait time on its homepage for each medium. Since Ally isn’t the only bank offering this kind of 24/7 support, we tested the live chat response and helpfulness of the five other banks we considered that also offer it.
Ally’s live chat stands out among the banks that offer this option. Ally provided the best customer service experience of the five; the other banks either required you to log in (i.e., be an existing customer) or talk to an AI chatbot before speaking to a real person. The Ally customer service representative we spoke to was prompt and friendly (our wait time was one minute), and after the chat, we were directed to a customer experience survey and offered the opportunity to be sent the chat transcript via email.
ATM network with reimbursement
Ally is covered by a network of 43,000 AllPoint ATMs across the United States. You can use your provided debit card to withdraw cash at in-network and out-of-network ATMs. The bank will reimburse you for up to $10 a month in ATM fees accumulated from those out-of-network ATMs.
No cash deposits
If you receive cash tips or wages, then it could be difficult to work with Ally. There is no way to deposit cash into an Ally savings account at this time, so you would need to find a workaround (such as depositing cash in another institution and then transferring) to take advantage of Ally’s rates and customer service.
Capital One – Best Hybrid
Capital One strikes an interesting balance between a traditional brick-and-mortar bank and a more agile startup. It has locations across the country and carries all the major banking products you’d need (such as checking, savings, and CDs), plus credit cards, while also offering competitive rates. Capital One is beneficial for the consumer who wants all the rewards of a high-yield savings account while maintaining the ability to speak to a bank representative face-to-face.
More than 700 branches
If you prefer to bank in person, then Capital One is a good choice. The bank operates hundreds of branches across the U.S., including a number of coffee shop-style locations that offer a unique spin on stopping by the bank. If you would prefer to apply for a loan, request a replacement for a lost credit card, or open a new high-yield savings account in person, then Capital One provides a good middle ground between pure online banks and brick-and-mortars.
Multiple savings account options
Capital One also offers an IRA savings account (tax-advantaged and specifically designed for retirement) and a kids saving account, which offers a lower APY than the regular high-yield savings account but balances that with child-friendly features and parental controls.
Data breach controversy
In one of the largest hacks ever of a major bank, more than 100 million Capital One customers suffered a data breach in 2019 that left their bank account numbers, Social Security numbers, and other private information vulnerable to fraud.
As a result, the U.S. Treasury ordered Capital One to pay a $80 million civil penalty, according to the Wall Street Journal. “The government has stated they believe the data has been recovered and that there is no evidence the data was used for fraud or shared by this individual,” the bank said in an official statement.
In addition to the fine, Capital One is complying with a U.S. Treasury consent order to up cybersecurity measures. Currently, all individuals whose private information was accessed have been contacted and offered free credit monitoring and identity protection services, according to the bank, and the hacker has been captured by the FBI.
“Honestly, this could have happened to any financial institution,” says Ted Rossman, industry analyst at CreditCards.com. “In this case, the accused perpetrator was caught before she was able to sell or use any of the stolen information. While consumers should be mindful of potential future hacks of all types (banks, credit cards, retailers, etc.), the best fixes are to freeze your credit and check your statements regularly. As long as a bank offers FDIC insurance (or NCUA protection for credit unions), I’d feel very confident.”
AXOS Bank – Best for Cash Accessibility
Founded in 1999 as Bank of Internet USA, AXOS is one of the oldest online-only banks in the country. It offers interest-bearing checking accounts, high-yield savings accounts, CDs, mortgages, personal loans, auto loans, and managed portfolios, and allows customers access to 91,000 ATMs throughout the U.S. AXOS is one of only a handful of online banks that allow people to deposit cash — a boon for those who often deal in cash or receive wages in cash.
Comes with ATM Card
Not every online savings account allows for ATM usage. AXOS provides its customers with ATM cards upon request, allowing you to view balances and make deposits and withdrawals. Keep in mind, though, that the ATM card is not a debit card. You are not able to make purchases and, per federal law, cannot initiate more than six transactions from a savings account per month.
Cash deposits allowed at ATMs and Green Dot locations
With AXOS, you have access to 91,000 ATMs across the U.S. Of the ATMs that allow cash deposits, you can directly transfer those dollar bills into your account. Many of the most popular online banks, like Ally, do not allow you to deposit cash, so we see this as a huge plus for people who receive wages in cash. You can also deposit cash in person at a Green Dot location, which can be found at participating locations of Walmart, CVS, Kroger, Walgreens, Rite Aid, Dollar General, Family Dollar, and other big-box, convenience, and discount stores.
No ATM reimbursements
Some online banks, like Ally, offer full reimbursement of fees incurred from using out-of-network ATMs (up to a certain dollar limit per month). AXOS only offers ATM reimbursement to checking account users, not savings account users, so you will still have to pay $3-5 per ATM withdrawal whether the machine is in or out of network.
What is a High-Yield Savings Account?
A high-yield savings account is a savings account that offers a competitive APY, or interest rate. A high interest rate can yield tens or hundreds of dollars in earned interest, depending on how much money you have saved.
Interest rates are always changing, and they have been trending downward since the U.S. entered a recession earlier this year. In other words, a great interest rate for a high-yield savings account is relative, and based on how it compares with other available options.
For our purposes, we have defined a high-yield savings account as having an APY of 0.50% or above. While 0.50% was considered low in pre-pandemic times, it is currently in line with what many online banks are offering. Traditional brick-and-mortar banks tend to have savings accounts with rates around 0.01%.
Emergency funds are one of the most popular reasons people save; 57% of banked* U.S. adults with savings in a recent NextAdvisor survey say they are currently saving for emergencies. Most experts we talk to recommend building a fund of about six months’ expenses, even as you pay down debt. Given that emergency savings should be kept on reserve in an account with easy access, putting that money into a low-risk vehicle like a high-yield savings account is a smart move.
The best high-yield savings account rates are currently between 0.50% and 1.00%. While the ones we feature below are standouts, there are many good options available. As long as it has a competitive APY, is FDIC-insured, and doesn’t charge any monthly fees, you’ll be better off than you would leaving your savings in a conventional account with a low APY.
How We Chose the Best High-Yield Savings Accounts
In August 2020, NextAdvisor conducted a representative survey of 1,202 U.S. adults to understand customer needs and intent surrounding bank account usage. We found that only 21% of banked adults in the U.S. have a high-yield savings account with an APY above 0.50%.
To get a comprehensive overview of the online bank landscape, we compiled a list of the 25 most commonly reviewed and searched-for high-yield savings accounts. We then evaluated them based on more than 20 different factors, including APY, minimum opening deposit, minimum balance requirement, overdraft fees, customer service options and availability, and what other accounts each bank offers.
Find a bank that charges $0 in monthly maintenance fees! You shouldn’t have to pay to use your bank account.
We used an APY of 0.50% as the cutoff for what we consider a high-yield savings account, so all picks will have rates higher than 0.50%. Currently, interest rates are down due to a pandemic-induced Federal Reserve cut in target rates in March. In a boom economy, interest rates for bank accounts are typically much higher—in August 2019, high-yield savings account APYs were often higher than 2.00%. If and when rates change, whether upward or downward, the interest rate used as a cutoff for what’s considered high-yield will likely be reassessed.
None of the banks we recommend charge any monthly service or maintenance fees. Because so many reputable banks offer good APYs on free accounts, we think people should take a hard pass on any banks that do charge a monthly maintenance fee to keep a savings account.
Finally, all of the contenders and final picks are insured by the Federal Deposit Insurance Corporation (FDIC), which protects your money up to $250,000 in the event a bank goes out of business.
The Case For an Online Bank
Only 30% of U.S. adults have an account with an online bank, according to a NextAdvisor survey. Yet they offer considerable perks.
Compared to national bank chains with a network of physical locations, online-only banks have far less overhead. This helps explain why they offer more competitive interest rates, and typically charge fewer and lower fees. Many of them also forgo common fees (such as monthly maintenance fees) or offer other benefits (such as early direct deposit), in line with their role as banking industry disruptors. Among U.S. adults not currently using online banks, 20% said they were more likely to open an account with an online bank due to social distancing measures.
Are High-Yield Savings Accounts Safe?
Yes. High-yield savings accounts are offered by FDIC-insured banks and NCUA-insured credit unions. This backing by the federal government means that if the bank were to shutter, you would be able to recover up to $250,000. Avoid any banks or credit unions that aren’t federally insured.
What to Consider When Choosing a High-Yield Savings Account
There are many factors to consider when reviewing the marketplace of savings account:
- Annual Percentage Yield (APY): This is the interest rate at which you’ll earn money in one year, in exchange for keeping your funds in the savings account. The higher, the better.
- Fees: Many banks require monthly maintenance fees in order to keep the account open. We recommend going with a bank or credit union that doesn’t charge this fee.
- Minimum deposit required: Oftentimes, to open a savings account, you’ll need to provide an initial deposit to the bank, though many online banks allow you to open an account with $0. Keep the minimum deposit in mind if you’re low on cash.
- Minimum balance required: Many banks require a certain amount of money to be in the savings account at all times. If you don’t maintain the minimum balance, you could incur fees or lose your APY for the months you don’t meet the threshold.
- Withdrawal options: You’ll want a bank that has ATMs or partners with ATM companies, so you’re able to withdraw cash on the go. Just keep in mind that federal law limits savings accounts to six monthly withdrawals or transfers.
Best Uses for a High-Yield Savings Account
High-yield savings accounts are all-purpose, allowing you to save for both short-term and long-term goals. They offer competitive interest rates while also keeping your funds liquid in case of an emergency. Here are some ideas for how you can use your high-yield savings account:
- Emergency fund
- Down payment on a home
- Wedding expenses
- Vacation expenses
- Moving expenses
- College tuition
- A new car
High-Yield Savings Account FAQs
Why are interest rates so low?
In March 2020, the Federal Reserve cut target interest rates to near-zero, causing nearly every lender and bank to lower their rates in turn. The low rates make for a competitive borrower’s market for those with a steady income, but the move also led to a decrease in returns on savings accounts and other types of bank accounts.
How do high-yield savings accounts work?
High-yield savings accounts allow you to earn a little bit of money in exchange for keeping your money secure with the bank. Savings accounts are intended for short- and long-term savings goals, whereas checking accounts are intended as your primary account for paying bills and making purchases.
The interest rates for savings accounts tend to be higher than checking accounts, and those rates are even higher for online banks and credit unions. But savings accounts do have some limitations. For example, you can’t make more than six monthly withdrawals or transfers due to federal law, and some online banks don’t allow you to deposit cash into an ATM.
Are high-yield savings accounts FDIC insured?
Yes. High-yield savings accounts from banks are insured by the FDIC, while accounts from credit unions are insured by the NCUA. Any bank or credit union you consider should be federally insured for your protection. All of our picks in this review are federally insured.
How do you open a high-yield savings account?
To open a high-yield savings account, you’ll need to provide information about yourself to the bank or credit unions. You may be asked to provide your full name, permanent address (and proof you live at that address), contact information, date of birth, Social Security number, a photo ID, and bank account information if you’re looking to transfer funds into the new account. You may be asked to required to put up an initial deposit by cash, check, or online transfer.
From there, you’ll pick between an individual and joint account, and submit the application, which can be approved near-instantly or within a few days. Most major banks — and all online banks — offer ways to open an account online or through their banking apps.
How do you find the best high-interest savings accounts?
There are hundreds — even thousands — of bank and credit unions that offer savings accounts. We recommend doing your research based on what’s best for you? Do you value a high interest rate? Do you need a bank that allows cash deposits? Do you prefer mobile banking to going to a branch in person? Then you’ll need to take APY, ATM locations, and mobile app experience into consideration before opening an account. At very least, it’s best to go with a bank that’s federally insured and doesn’t charge a monthly maintenance fee.
All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1,202 adults. Field work was undertaken between Aug. 6-7, 2020. The survey was carried out online. The figures have been weighted and are representative of all U.S. adults (aged 18+).
* U.S. adults who have checking, saving, MMA, or CD bank accounts.
We have covered savings accounts at length. We like to think we’re experts. Read on for more of our savings account coverage: