High-yield savings account

What It Means

A high-yield savings accountSavings accountA bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions. See more is a savings account that pays a variable interest rateVariable interest rateAn interest rate that can rise or fall over the life of a loan or card because it's tied to an index, such as the prime rate, plus a set margin. See more generally higher than a traditional savings account's. You can still deposit and withdraw money, often by online transfer to and from checkingChecking accountA bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit. See more, and the rate can go down as well as up after you open it. Online banks offer many of them, though some branch banks do too. At an FDIC-insured bank it's an ordinary deposit, insured the same way as any savings account.

How It Sounds at Home

• "My emergency fund sits in a high-yield savings account."
• "The rate dropped again this month."
• "It's an online bank, so the rate's better."

The Breakdown

Worked example. Maya keeps a $10,000 emergency fundEmergency fundMoney set aside only for unplanned costs, like a car repair, a medical bill or a lost paycheck, kept where you can reach it quickly. See more and leaves it alone for 3 years. Here's what two example APYsAPYA yearly rate showing the total interest a deposit account pays, counting how often interest compounds, as defined by federal Truth in Savings rules. See more would do, if each rate stayed the same the whole time:

The high-yield account earns about $1,098 more on the same money.

What the result means. The gap comes entirely from the rate, and the rate on a high-yield account is variable, so treat the figure as an estimate for the rates you entered. For a benchmark, compare an offer with the national savings rateSavings rateThe share of your income you save, found by dividing what you saved in a period by what you earned in that same period. See more the FDIC publishes each month.

Before you open one

• The APY, and whether it applies to your whole balance
• Any monthly fee, and what waives it
• That the bank is FDIC insured, by searching its exact name in the FDIC's BankFind, or for an app, which insured bank holds the money
• How transfers to and from your checking account work, and any limit on withdrawals in the account agreement

Good to Know

The FDIC insures savings accounts at insured banks up to $250,000 per depositor, per insured bank, for each ownership category. A nonbank app is never FDIC insured itself, the FDIC warns in its 2024 guidance on third-party apps, so if an app offers a high-yield account, find out which insured bank holds the money and look it up. On withdrawals, the Federal Reserve deleted Regulation D's six-per-month limit on convenient savings transfers on April 24, 2020, and banks may still set their own limits or fees in the account agreement. The FDIC's national savings rate, published monthly, is based on the $2,500 product tier and weights each institution by its share of domestic deposits.

Related Terms and Categories

• Savings account

  A bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions.

• APY

  A yearly rate showing the total interest a deposit account pays, counting how often interest compounds, as defined by federal Truth in Savings rules.

• Compound interest

  Interest paid on your original amount and on the interest it has already earned, so each year's interest is a little bigger than the last.

• Emergency fund

  Money set aside only for unplanned costs, like a car repair, a medical bill or a lost paycheck, kept where you can reach it quickly.

• Money market account

  A bank or credit union deposit similar to savings that may pay a higher, tiered rate for bigger balances and often allows checks or a debit card.

Household money and budgeting