Choosing the right savings account can make a big difference in your bottom line. For example, if you deposit $5,000 in a high-yield savings account with an annual percentage yield, or APY, of 5%, you’d earn $256.43 in interest in one year (if interest is compounded monthly). With a traditional savings account with the national average APY of 0.46%, you’d earn only $21.60. Competitive rates have remained steady for at least a year now. But don’t wait too long.
The Federal Reserve may begin to cut rates later this year, which could impact the variable savings rates on top-performing accounts. The sooner you open a high-yield savings account, the longer you can enjoy a high rate -- and the more interest you stand to earn.
Explore the savings accounts listed below to help you decide which bank best suits your needs.
Savings accounts with 5% APY or higher
Savings account APYs are variable. That means they could change at any time at a bank’s discretion and sometimes without notice.
| Bank | APY | Min. deposit to open |
|---|---|---|
| Digital Federal Credit Union | 6.17% (on balances up to $1,000) | $5 |
| BrioDirect Bank | 5.35% | $5,000 |
| My Banking Direct | 5.35% | $500 |
| TAB Bank | 5.27% | $0 |
| Newtek Bank | 5.25% | $0 |
| UFB Direct | 5.25% | $0 |
| Upgrade | 5.21% (on balances of $1,000 or more) | $0 |
| Bread Savings | 5.15% | $100 |
| EverBank | 5.15% | $0 |
| Bask Bank | 5.10% | $0 |
| BMO Alto | 5.10% | $0 |
| CIT Bank | 5.05% (on balances of $5,000 or more) | $100 |
| DollarSavingsDirect | 5.00% | $0 |
| CommunityWide Federal Credit Union | 5.00% | $1 |
| Laurel Road | 5.00% | $0 |
| Varo Bank | 3.00% to 5.00% | $0 |
Digital Federal Credit Union
Primary Savings- APY APY = Annual Percentage Yield.
- 6.17% (on balances up to $1,000)
- Min. deposit to open
- $5
The DCU Primary Savings account’s 6.17% APY tops our list of high-yield savings accounts. However, this APY only applies to balances up to $1,000. Any balance above that earns a 0.15% APY, which is less than the national average of 0.46%. We like that DCU offers mobile check deposits and has plenty of fee-free ATMs, but it doesn’t offer many perks beyond that.
The credit union has 24 branches in New Hampshire and Massachusetts, but it serves members nationwide through a network of more than 5,900 co-op shared branches. Membership is available to employees or members of partner organizations or people who live in specific communities in Massachusetts. Visit its website for eligibility requirements.
Aside from the Primary Savings account, DCU also offers several other savings accounts that may have different APYs and features. These include an Advantage Savings account and a Member Described Savings account.
- No monthly fees or minimum balance requirements
- $5 deposit required
- Mobile check deposits via app
- 80,000 fee-free ATMs nationwide
The DCU Primary Savings account’s 6.17% APY tops our list of high-yield savings accounts. However, this APY only applies to balances up to $1,000. Any balance above that earns a 0.15% APY, which is less than the national average of 0.46%. We like that DCU offers mobile check deposits and has plenty of fee-free ATMs, but it doesn’t offer many perks beyond that.
The credit union has 24 branches in New Hampshire and Massachusetts, but it serves members nationwide through a network of more than 5,900 co-op shared branches. Membership is available to employees or members of partner organizations or people who live in specific communities in Massachusetts. Visit its website for eligibility requirements.
Aside from the Primary Savings account, DCU also offers several other savings accounts that may have different APYs and features. These include an Advantage Savings account and a Member Described Savings account.
- No monthly fees or minimum balance requirements
- $5 deposit required
- Mobile check deposits via app
- 80,000 fee-free ATMs nationwide
BrioDirect Bank
High-Yield Savings- APY APY = Annual Percentage Yield.
- 5.35%
- Min. deposit to open
- $5,000
BrioDirect is the online-only arm of Webster Bank, a full-service bank with over 200 branches located throughout Connecticut, Massachusetts, Rhode Island and New York City. This bank works best as a secondary savings option as it only offers a high-yield savings account and CD with terms ranging from 30 days to five years.
While the competitive rate is attractive, the highest APY only applies when you open the account with an initial deposit of $5,000 or more. However, once you’ve opened the account, you’ll continue to qualify for the best APY available as long as you maintain a minimum balance of $25. We also like that there are no monthly fees associated with this account.
- No monthly fees
- Online and mobile banking app
BrioDirect is the online-only arm of Webster Bank, a full-service bank with over 200 branches located throughout Connecticut, Massachusetts, Rhode Island and New York City. This bank works best as a secondary savings option as it only offers a high-yield savings account and CD with terms ranging from 30 days to five years.
While the competitive rate is attractive, the highest APY only applies when you open the account with an initial deposit of $5,000 or more. However, once you’ve opened the account, you’ll continue to qualify for the best APY available as long as you maintain a minimum balance of $25. We also like that there are no monthly fees associated with this account.
- No monthly fees
- Online and mobile banking app
My Banking Direct
High Yield Savings Account- APY APY = Annual Percentage Yield.
- 5.35%
- Min. deposit to open
- $500
My Banking Direct is an online service of Flagstar Bank, which is owned by parent company New York Community Bancorp. Its high-yield savings account offers the most competitive APY for all balance levels on this list. This online savings account has no maintenance fees, no minimum balance requirements and pays interest on all balances above $1. While we like that this bank offers a high APY, you’ll need at least $500 to open an account.
My Banking Direct doesn’t advertise information about wire transfer fees on its website or in its official account disclosures.
- No monthly fees or balance requirements
- $500 minimum deposit required to open an account
- $1 account balance needed to earn the highest APY
My Banking Direct is an online service of Flagstar Bank, which is owned by parent company New York Community Bancorp. Its high-yield savings account offers the most competitive APY for all balance levels on this list. This online savings account has no maintenance fees, no minimum balance requirements and pays interest on all balances above $1. While we like that this bank offers a high APY, you’ll need at least $500 to open an account.
My Banking Direct doesn’t advertise information about wire transfer fees on its website or in its official account disclosures.
- No monthly fees or balance requirements
- $500 minimum deposit required to open an account
- $1 account balance needed to earn the highest APY
TAB Bank
High Yield Savings- APY APY = Annual Percentage Yield.
- 5.27%
- Min. deposit to open
- $0
TAB Bank, an online-only bank, offers a highly competitive APY for its high-yield savings account. There’s no minimum balance or deposit required, and you only need 1 cent in your account to start earning interest.
We also like that you can receive mobile alerts and text messages. For example, you can receive alerts about withdrawals when your account falls below a certain limit. Another benefit is that TAB has extended customer service hours -- Monday through Friday from 6 a.m. to 7 p.m. MT and Saturdays from 9 a.m. to 3 p.m. MT, excluding federal holidays.
- No monthly fees, minimum deposit or balance requirements
- $5 monthly fee for paper statements
- Full suite of deposit accounts available
- Mobile check deposits via app, plus text alerts
- Extended customer service hours
TAB Bank, an online-only bank, offers a highly competitive APY for its high-yield savings account. There’s no minimum balance or deposit required, and you only need 1 cent in your account to start earning interest.
We also like that you can receive mobile alerts and text messages. For example, you can receive alerts about withdrawals when your account falls below a certain limit. Another benefit is that TAB has extended customer service hours -- Monday through Friday from 6 a.m. to 7 p.m. MT and Saturdays from 9 a.m. to 3 p.m. MT, excluding federal holidays.
- No monthly fees, minimum deposit or balance requirements
- $5 monthly fee for paper statements
- Full suite of deposit accounts available
- Mobile check deposits via app, plus text alerts
- Extended customer service hours
Newtek Bank
Personal High-Yield Savings- APY APY = Annual Percentage Yield.
- 5.25%
- Min. deposit to open
- $0
Newtek Bank is an online-only subsidiary of Newtek One, a financial services company. Its savings account APY applies to all balance levels, but you’re limited to six withdrawals per statement cycle. Also, the account doesn’t come with an ATM card.
You can open as many personal banking accounts as needed and manage them all through an online banking account or mobile app. But if you don’t want to manage your account online or will need to make more than six monthly withdrawals, it’s best to consider other options.
- No monthly fees, minimum deposit or balance requirements
- Mobile check deposits via app
- No service or transaction fees
- Limit of six withdrawals per statement cycle
- Live customer support available 24/7
Newtek Bank is an online-only subsidiary of Newtek One, a financial services company. Its savings account APY applies to all balance levels, but you’re limited to six withdrawals per statement cycle. Also, the account doesn’t come with an ATM card.
You can open as many personal banking accounts as needed and manage them all through an online banking account or mobile app. But if you don’t want to manage your account online or will need to make more than six monthly withdrawals, it’s best to consider other options.
- No monthly fees, minimum deposit or balance requirements
- Mobile check deposits via app
- No service or transaction fees
- Limit of six withdrawals per statement cycle
- Live customer support available 24/7
UFB Direct
UFB Premiere Savings- APY APY = Annual Percentage Yield.
- 5.25%
- Min. deposit to open
- $0
UFB’s premier savings account has a highly competitive APY that applies to all balances -- unlike some banks highlighted above that reserve top APYs for specific balance tiers.
In addition to great rates, we like that UFB Direct’s savings account comes with a free ATM card and unlimited free transfers between accounts. However, there’s a limit of six withdrawals a month -- after that, there’s a $10 excessive transaction fee. That doesn’t apply to ATM transactions, though.
As an online-only bank, UFB Direct doesn’t have physical branches, but you can make deposits and transfers through its mobile banking app, online platform and SMS mobile banking. This can come in handy if you don’t have access to Wi-Fi or mobile data to manage your account.
- No monthly fees, minimum deposit or balance requirements
- Premier Money Market account also earns the same high-yield APY
- Mobile check deposits via mobile app
- Expanded insurance protection available up to $200 million
- ATM card available
UFB’s premier savings account has a highly competitive APY that applies to all balances -- unlike some banks highlighted above that reserve top APYs for specific balance tiers.
In addition to great rates, we like that UFB Direct’s savings account comes with a free ATM card and unlimited free transfers between accounts. However, there’s a limit of six withdrawals a month -- after that, there’s a $10 excessive transaction fee. That doesn’t apply to ATM transactions, though.
As an online-only bank, UFB Direct doesn’t have physical branches, but you can make deposits and transfers through its mobile banking app, online platform and SMS mobile banking. This can come in handy if you don’t have access to Wi-Fi or mobile data to manage your account.
- No monthly fees, minimum deposit or balance requirements
- Premier Money Market account also earns the same high-yield APY
- Mobile check deposits via mobile app
- Expanded insurance protection available up to $200 million
- ATM card available
Upgrade
High-Yield Premiere Savings- APY APY = Annual Percentage Yield.
- 5.21% (on balances of $1,000 or more)
- Min. deposit to open
- $0
Upgrade’s Premier Savings accounts are held at Cross River Bank, a federally insured bank in New Jersey. There are no monthly or transfer fees. However, only accounts with balances of $1,000 or more earn the competitive APY. While Upgrade’s savings account doesn’t offer ATM access or debit cards, you can initiate deposits or withdrawals through ACH transactions or wire transfers.
- No monthly fees, minimum deposit or balance requirements
- Mobile app
- No excessive transaction fees
Upgrade’s Premier Savings accounts are held at Cross River Bank, a federally insured bank in New Jersey. There are no monthly or transfer fees. However, only accounts with balances of $1,000 or more earn the competitive APY. While Upgrade’s savings account doesn’t offer ATM access or debit cards, you can initiate deposits or withdrawals through ACH transactions or wire transfers.
- No monthly fees, minimum deposit or balance requirements
- Mobile app
- No excessive transaction fees
Bread Savings
High-Yield Savings Account- APY APY = Annual Percentage Yield.
- 5.15%
- Min. deposit to open
- $100
Formerly Comenity Direct, Bread Financial offers high-yield savings and certificate of deposit accounts through its consumer banking arm, Bread Savings. The bank requires a $100 minimum to open a savings account, but there are no monthly maintenance fees. You can make unlimited free deposits via mobile check, ACH transfer and wire transfer. Outgoing wire transfers cost $25, official check requests are $15 and paper statements are $5 per statement.
- No monthly fees
- Monitors and adjusts APYs based on market conditions to remain competitive
- Doesn’t offer ATM or debit cards with savings account
- Banking app supports mobile check deposits
Formerly Comenity Direct, Bread Financial offers high-yield savings and certificate of deposit accounts through its consumer banking arm, Bread Savings. The bank requires a $100 minimum to open a savings account, but there are no monthly maintenance fees. You can make unlimited free deposits via mobile check, ACH transfer and wire transfer. Outgoing wire transfers cost $25, official check requests are $15 and paper statements are $5 per statement.
- No monthly fees
- Monitors and adjusts APYs based on market conditions to remain competitive
- Doesn’t offer ATM or debit cards with savings account
- Banking app supports mobile check deposits
- APY APY = Annual Percentage Yield.
- 5.15%
- Min. deposit to open
- $0
EverBank, formerly TIAA, offers a high-yield savings account with a competitive APY which now applies to your entire balance. (Previously, it only applied to the first year the account was open.) The bank operates several physical branches in Florida, but its online tools and mobile app make opening and managing an account seamless from anywhere in the US. We also like that you can access your money from a network of 100,000 fee-free ATMs and get reimbursed for up to $15 a month in non-network ATM fees.
- No monthly fees, minimum balance or balance requirements
- Yield Pledge promise guarantees APYs remain competitive
- Supports mobile check deposits via app
EverBank, formerly TIAA, offers a high-yield savings account with a competitive APY which now applies to your entire balance. (Previously, it only applied to the first year the account was open.) The bank operates several physical branches in Florida, but its online tools and mobile app make opening and managing an account seamless from anywhere in the US. We also like that you can access your money from a network of 100,000 fee-free ATMs and get reimbursed for up to $15 a month in non-network ATM fees.
- No monthly fees, minimum balance or balance requirements
- Yield Pledge promise guarantees APYs remain competitive
- Supports mobile check deposits via app
Bask Bank
Bask Interest Savings Account- APY APY = Annual Percentage Yield.
- 5.10%
- Min. deposit to open
- $0
Bask Bank, an online subsidiary of Texas Capital Bank, has two different types of savings accounts. Its interest savings account offers a competitive APY on all balances, with no monthly fees or minimum deposit requirements. But if you’re looking to open a joint account, look elsewhere. Bask Bank doesn’t offer joint savings account options.
This bank also has a Mileage Savings Account you can explore if you like to earn American Airlines miles you can redeem for free flights. Instead of earning a cash APY on your balance, you’ll earn 2.5 AAdvantage miles for every dollar you save annually. You can open one savings account of each type.
- No monthly fees, minimum deposit or balance requirements
- Two savings account options available -- Miles Savings and Interest Savings
- Doesn’t offer ATM or debit cards with savings account
- Mobile check deposits via app
Bask Bank, an online subsidiary of Texas Capital Bank, has two different types of savings accounts. Its interest savings account offers a competitive APY on all balances, with no monthly fees or minimum deposit requirements. But if you’re looking to open a joint account, look elsewhere. Bask Bank doesn’t offer joint savings account options.
This bank also has a Mileage Savings Account you can explore if you like to earn American Airlines miles you can redeem for free flights. Instead of earning a cash APY on your balance, you’ll earn 2.5 AAdvantage miles for every dollar you save annually. You can open one savings account of each type.
- No monthly fees, minimum deposit or balance requirements
- Two savings account options available -- Miles Savings and Interest Savings
- Doesn’t offer ATM or debit cards with savings account
- Mobile check deposits via app
BMO Alto
Online Savings- APY APY = Annual Percentage Yield.
- 5.10%
- Min. deposit to open
- $0
BMO Alto is the online-only arm of BMO Financial Group. It offers two deposit accounts: a high-yield savings account and a CD. Its savings account boasts a competitive APY and has no monthly fees, minimum deposit requirements or minimum balances to maintain. The unlimited number of transfers and withdrawals permitted is an added benefit.
This savings account is best paired with a checking account at another bank since BMO Alto doesn’t provide a debit card or ATM access. It also doesn’t have a mobile app. You can only manage your money in this account through the online banking website and access or deposit cash through externally linked bank accounts.
- No monthly fees, minimum deposit or balance requirements
- Account access available only through website
- No mobile app
- No excessive transaction fees
BMO Alto is the online-only arm of BMO Financial Group. It offers two deposit accounts: a high-yield savings account and a CD. Its savings account boasts a competitive APY and has no monthly fees, minimum deposit requirements or minimum balances to maintain. The unlimited number of transfers and withdrawals permitted is an added benefit.
This savings account is best paired with a checking account at another bank since BMO Alto doesn’t provide a debit card or ATM access. It also doesn’t have a mobile app. You can only manage your money in this account through the online banking website and access or deposit cash through externally linked bank accounts.
- No monthly fees, minimum deposit or balance requirements
- Account access available only through website
- No mobile app
- No excessive transaction fees
CIT Bank
Platinum Savings- APY APY = Annual Percentage Yield.
- 5.05% (on balances of $5,000 or more)
- Min. deposit to open
- $100
CIT Bank is the online division of First Citizens Bank, and it may make sense for you if you have $5,000 or more to deposit. It offers three types of savings accounts, but its highest-yielding one is its platinum savings account. There’s no monthly maintenance fee, but it does require a $100 minimum deposit to open an account.
You’ll earn 5.05% APY on balances of $5,000 or more -- but balances below this amount earn a paltry 0.25% APY. You can deposit checks and transfer money via its mobile app, and you can receive up to $30 per month in reimbursements for out-of-network ATM fees.
- No monthly fees
- Three savings account options available
- $5,000 balance required to earn the highest APY with the Platinum Savings account
- Rebates up to $30 per month in out-of-network ATM fees
CIT Bank is the online division of First Citizens Bank, and it may make sense for you if you have $5,000 or more to deposit. It offers three types of savings accounts, but its highest-yielding one is its platinum savings account. There’s no monthly maintenance fee, but it does require a $100 minimum deposit to open an account.
You’ll earn 5.05% APY on balances of $5,000 or more -- but balances below this amount earn a paltry 0.25% APY. You can deposit checks and transfer money via its mobile app, and you can receive up to $30 per month in reimbursements for out-of-network ATM fees.
- No monthly fees
- Three savings account options available
- $5,000 balance required to earn the highest APY with the Platinum Savings account
- Rebates up to $30 per month in out-of-network ATM fees
DollarSavingsDirect
Dollar Savings Account- APY APY = Annual Percentage Yield.
- 5.00%
- Min. deposit to open
- $0
DollarSavingsDirect is an online banking arm of Emigrant Bank that offers a savings account with competitive yields and no minimum initial deposit required. There’s no minimum balance required to avoid monthly fees. DollarSavingsDirect also doesn’t charge an excessive withdrawal fee, as some banks do when you exceed six transactions per month, giving you more flexibility to access your money.
- No monthly fees, minimum balance or balance requirements
- Money can only be accessed with a linked account through ACH transfers
- No excess withdrawal fees
- Deposits and withdrawals only permitted via external transfers
DollarSavingsDirect is an online banking arm of Emigrant Bank that offers a savings account with competitive yields and no minimum initial deposit required. There’s no minimum balance required to avoid monthly fees. DollarSavingsDirect also doesn’t charge an excessive withdrawal fee, as some banks do when you exceed six transactions per month, giving you more flexibility to access your money.
- No monthly fees, minimum balance or balance requirements
- Money can only be accessed with a linked account through ACH transfers
- No excess withdrawal fees
- Deposits and withdrawals only permitted via external transfers
CommunityWide Federal Credit Union
CW Hi-Rate- APY APY = Annual Percentage Yield.
- 5.00%
- Min. deposit to open
- $1
The CW Hi-Rate savings account earns a competitive APR and is available for members of Community Wide Federal Credit Union. Membership is broadly available through employer partners or by joining several local organizations.
You can access your money through one of the 5,500 CO-OP shared branches nationwide or through the mobile and online banking features. In addition to a high-yield savings account, you can also take advantage of financial counseling at no additional charge. One drawback, however, is that penalty-free withdrawals are limited to the first through the fifth day of each month. After that, you could forfeit a portion of your dividends earned with each withdrawal.
- Withdrawal penalties are charged after the 5th of each month
- Free online and mobile banking
- Mobile check deposit
The CW Hi-Rate savings account earns a competitive APR and is available for members of Community Wide Federal Credit Union. Membership is broadly available through employer partners or by joining several local organizations.
You can access your money through one of the 5,500 CO-OP shared branches nationwide or through the mobile and online banking features. In addition to a high-yield savings account, you can also take advantage of financial counseling at no additional charge. One drawback, however, is that penalty-free withdrawals are limited to the first through the fifth day of each month. After that, you could forfeit a portion of your dividends earned with each withdrawal.
- Withdrawal penalties are charged after the 5th of each month
- Free online and mobile banking
- Mobile check deposit
Laurel Road
High Yield Savings Account- APY APY = Annual Percentage Yield.
- 5.00%
- Min. deposit to open
- $0
Laurel Road, the digital arm of KeyBank, offers an online savings account with no minimum deposit or balance requirements to earn its competitive APY. Like many online banks, Laurel Road doesn’t accept cash deposits, so you’ll need to transfer money electronically to fund your account.
Laurel Road began as a student loan originator in 2013. In 2019, it was acquired by KeyBank and now offers checking, savings and loan products primarily geared toward health care and business professionals nationwide. Its digital platform merges technology with banking services to offer a high-yield rate that applies to the entire balance.
- No monthly fees, minimum deposit or balance requirements
- Mobile check deposits via app
- Withdrawal transactions limited to seven per month
Laurel Road, the digital arm of KeyBank, offers an online savings account with no minimum deposit or balance requirements to earn its competitive APY. Like many online banks, Laurel Road doesn’t accept cash deposits, so you’ll need to transfer money electronically to fund your account.
Laurel Road began as a student loan originator in 2013. In 2019, it was acquired by KeyBank and now offers checking, savings and loan products primarily geared toward health care and business professionals nationwide. Its digital platform merges technology with banking services to offer a high-yield rate that applies to the entire balance.
- No monthly fees, minimum deposit or balance requirements
- Mobile check deposits via app
- Withdrawal transactions limited to seven per month
Varo Bank
Online Savings Account- APY APY = Annual Percentage Yield.
- 3.00% to 5.00%
- Min. deposit to open
- $0
Varo Bank has a tiered savings rate that benefits lower balances. You’ll earn 5.00% APY on balances up to $5,000 and 3.00% APY on balances above that. But there are a few catches.
You’ll start off earning 3.00% APY. To qualify for 5.00% APY on balances of $5,000 or less, you must have $1,000 in direct deposits into your account every month, and you must end each month with a positive balance in both your Varo Bank (checking) and savings account. Qualifying direct deposits include paychecks, pensions or other government benefits such as Social Security.
While Varo presents an appealing APY for those with lower balances, any balance amount over $5,000 will earn the lower APY. However, we like that Varo offers more wiggle room to grow your stash with automatic round-ups that move your change from deposits and other transactions to your savings.
- No monthly fees, minimum deposit or balance requirements
- Mobile check deposits via app
- Roundup tools to automate savings
- Highest APY available limited to balances up to $5,000
- Minimum of $1,000 in monthly direct deposits required to earn APY
Varo Bank has a tiered savings rate that benefits lower balances. You’ll earn 5.00% APY on balances up to $5,000 and 3.00% APY on balances above that. But there are a few catches.
You’ll start off earning 3.00% APY. To qualify for 5.00% APY on balances of $5,000 or less, you must have $1,000 in direct deposits into your account every month, and you must end each month with a positive balance in both your Varo Bank (checking) and savings account. Qualifying direct deposits include paychecks, pensions or other government benefits such as Social Security.
While Varo presents an appealing APY for those with lower balances, any balance amount over $5,000 will earn the lower APY. However, we like that Varo offers more wiggle room to grow your stash with automatic round-ups that move your change from deposits and other transactions to your savings.
- No monthly fees, minimum deposit or balance requirements
- Mobile check deposits via app
- Roundup tools to automate savings
- Highest APY available limited to balances up to $5,000
- Minimum of $1,000 in monthly direct deposits required to earn APY
How to find the best savings rates
When searching for a savings account that promises competitive rates, read the fine print. Some accounts advertising exceptional rates have a tiered-balance structure and apply the highest rate available only to a limited balance.
Digital Federal Credit Union, for example, applies a 6.17% APY only to accounts with balances of up to $1,000. Beyond that, your balance earns a mere 0.15% APY. Other banks may offer a competitive rate for a limited time, such as a teaser rate.
How does a 5% interest savings account work?
A high-yield savings account with a 5% APY works like most other savings accounts. You can regularly deposit and withdraw money while earning interest on your balance.
Interest represents the amount of money a financial institution will pay you in exchange for using your money to fund its lending operations. “Banks that need more deposits to feed their lending operations will be a little more aggressive in paying out to bring in deposits,” said Greg McBride, CFA and chief financial analyst for CNET sister site Bankrate.
McBride explained that smaller banks and credit unions without the marketing budget to rival more established banks compete for your dollars by offering better rates on deposit accounts. “How do you compete with the behemoth? You pay a better rate,” he said.
Interest is expressed as a percentage and calculated by multiplying the principal balance by the interest rate by a time period. Compound interest adds the interest earned from the previous period to the principal balance -- thus supercharging your savings growth. The annual percentage yield, or APY, represents the actual rate of return and takes into account the effects of compounding interest.
For example, $1,000 deposited in an account that earns a 5% APY with interest compounded monthly will earn $50 in interest in one year -- assuming the APY doesn’t change.
Interest rates advertised for savings accounts are variable and can change at any time. Your actual annual yield will fluctuate if your APY changes throughout the year.
How to open a high-yield savings account
Most online banks offer high-yield savings accounts. Opening an account is a simple process. Here’s what you should expect:
Choose an account. Before opening an account, remember to read the fine print to understand account details and any requirements to earn interest.
Apply. Complete the application process at your chosen bank or credit union. You may also be able to do so online.
Provide the necessary information. Provide a government-issued form of ID to verify your identity. Most banks will require your Social Security number or Individual Taxpayer Identification Number, phone number, physical address and other personal information.
Make an initial deposit. Transfer or deposit the amount needed to fund the account.
Activate online banking. Follow the steps provided to set up your online banking account if one is available. From there, you should be able to manage your account online and possibly via a mobile app or text messages.
Common savings account fees to avoid
Your savings account should help you save money -- whether for emergency savings, a future expense like a family vacation or to meet your holiday shopping needs. Fees work against your ability to maximize your savings. Here are some common charges associated with savings accounts that you should avoid whenever possible.
Monthly maintenance fee: This is a monthly fee some financial institutions charge for maintaining an account. Sometimes, you can have this fee waived by meeting certain criteria, such as signing up for e-Statements or direct deposit. It’s best to avoid accounts with monthly maintenance fees or those without simple options to waive the fee.
Minimum balance fee: Some savings accounts require you to maintain a minimum balance to avoid incurring a fee. You want to avoid savings accounts that charge this type of fee, especially if you struggle to maintain a certain balance in your savings account.
Excessive withdrawal fee: A Federal Reserve Board rule, Regulation D, historically limited the number of withdrawals or transfers you can make from your savings account to six per month. That rule was removed in 2020, but many banks maintain the withdrawal limit and charge a fee if you exceed it. Always track your withdrawals and note any limits in place to avoid this fee.
ATM fees: If you use an out-of-network ATM, your bank may charge you an ATM fee. If you frequently use ATMs, look for an account that offers a significant number of ATMs in your area or reimburses ATM fees.
Paper statement fee: Many financial institutions charge a fee for receiving paper statements by mail. Sign up for electronic statements to eliminate this fee.
Account closure fee: Closing your savings account within a certain window may also trigger a fee. This window is generally 90 days after opening the account or less and is in place to discourage account churning -- opening and closing accounts in rapid succession to receive new account bonuses. Note any policies regarding account closure fees before closing an account to avoid surprises.
The bottom line
A high-yield savings account that earns a 5% APY or more is an ideal option to store and grow your savings, whether to build an emergency savings fund or save for a specific goal. And since savings rates remain high, now’s a good time to maximize your interest-earning potential by switching to a high-yield savings account.
Be aware that some banks advertising the highest rates may have terms or restrictions. Pay attention to the fine print and choose the account that best serves your overall savings goals.
CNET maintains a regularly updated list of the best savings accounts and best high-yield savings accounts. Use these resources as a starting point to compare the most competitive APYs available from banks, credit unions and neobanks (newer banks that operate exclusively online or through mobile apps) that are insured by the Federal Deposit Insurance Corporation or National Credit Union Administration for up to $250,000 per person, per institution if the bank fails.
Methodology
CNET reviews savings accounts by comparing them across set criteria, including annual percentage yield, monthly fees, minimum deposits or balances, and access to physical branches.
We reviewed more than two dozen leading traditional banks and online financial offerings to determine our best savings accounts. Along with the aforementioned criteria, we also considered sign-up bonuses and other rewards. All savings accounts must also be insured by the FDIC.
The banks, credit unions and neobanks we reviewed include: Affirm Savings, Alliant Credit Union, Ally, America First Credit Union, American Express High Yield Savings Account, Axos High Yield Savings, Bank of America Advantage Savings, Bank of the West, Bank5 Connect, Barclays, Bask Bank, Bread Savings, BrioDirect High-Yield Savings, Capital One 360 Checking, Charles Schwab, Chase Premier Savings, Chime, Citibank, Citizens Online Savings Account, Colorado Federal Savings Bank, Consumers Credit Union, Discover, First Internet Bank of Indiana, LendingClub, Live Oak Bank, M&T Bank, Marcus, My Banking Direct, Nationwide My Savings, Navy Federal Credit Union, NBKC, OneUnited Bank, PenFed CU, PNC, Popular Direct Select Savings, PurePoint Financial, Quontic Bank, Rising Bank, Salem Five Direct, Sally Mae Smarty Pig, Santander Bank, Synchrony, TAB Bank, TD Bank, TIAA Bank, Truist Bank, U.S. Bank, UFB Direct, Union Bank, USAA Bank, Varo, Vio and Wells Fargo.