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High-interest savings accounts defined
A high-interest savings account is a type of savings account that earns an above-average interest rate on deposits. The average national rate for savings accounts pays only 0.46%. Many traditional banks and credit unions pay even less. But a high-interest account, also called a high-yield savings account, earns much more — up to 10 times more in interest (or even more).
High-interest savings accounts are also typically federally insured, up to $250,000 per depositor, per insured bank and per account ownership category. “Ownership category” refers to types of legal ownership. Examples include “single” (owned by one person) and “joint” (owned by two or more people). See the section below on keeping your money safe for more details on federal insurance.
If you want to earn more interest on your money, compare today’s best high-interest savings accounts. They can boost your savings balance without much effort on your part.
Which banks have the best savings interest rates?
High-interest savings accounts are typically offered by online-focused banks and credit unions. These institutions don’t have the expense of maintaining branches like brick-and-mortar banks and credit unions do, and they can pass the savings on to customers by offering higher yields.
Many online savings accounts also have no monthly maintenance fees. That can go a long way toward boosting your bank balance.
» Understand: Learn the difference between APY and interest rate
Examples of three high-interest online savings accounts
Discover Bank, 4.35% APY, no minimum opening deposit
Discover Bank's online savings account offers a 4.35% annual percentage yield, or APY, with no minimum balance. There are also no monthly fees.
Varo, 3.00% APY, $0.01 minimum opening deposit
Varo offers a savings account in which you can earn a rate of 3.00% APY with just the first penny deposited. And there is no monthly fee. Varo also gives you the opportunity to earn 5.00% APY on balances up to $5,000 if you meet other account requirements.
Bask Bank, 5.10% APY, no minimum opening deposit
The Bask Interest Savings Account earns a strong rate of 5.10% APY. There is no minimum deposit required, and there are no monthly fees.
How to choose the best high-interest savings accounts
Start by looking for banks with the highest rates; these days, anything above 3% APY is a solid return. Then look at the requirements to earn that rate. With some banks, you must keep a certain amount of money in the savings account — such as $10,000 — to earn the bank’s best rates. Others offer a competitive rate without minimums or other requirements.
Consider whether you'll have access to good customer service and ATMs, the quality of mobile apps and the remote deposit features. NerdWallet’s bank and credit union reviews take all these factors into account when researching banks. It’s also a good idea to confirm that the funds will be federally insured, which would keep your money safe if the institution goes out of business.
Is my money safe in a high-interest savings account?
Putting your money in a federally insured high-interest savings account is safe. Funds at covered banks are insured up to $250,000 per depositor, per ownership category by the Federal Deposit Insurance Corp., or FDIC. At credit unions, the National Credit Union Administration, or NCUA, has a fund that also federally insures up to $250,000 per depositor. This means that you won’t lose your money, up to this amount, if the bank or credit union goes under. Apart from checking your institution's website, you can make sure it's covered by searching for it using the FDIC’s BankFind search page (for banks) or the NCUA’s research page (for credit unions). To learn more, read NerdWallet’s primers on FDIC and NCUA insurance.
Do the math on high-yield savings
When you put money in an account that earns a high interest rate, your balance grows faster than with a low-yield option. Want to see how fast your savings can grow? Use NerdWallet’s savings calculator to estimate your balance over time.
With a 3% APY, a savings balance of $1,000 would earn a bit more than $30 after a year. It may not make you rich, but the earnings are much better than in an account with a 0.30% APY, which would earn about $3 during the same time period.
But interest in a savings account compounds — which means the interest you earn on your money also earns interest. Take that same $1,000. If you leave it in your 3% APY account for three years and it "compounds" interest each month, you’ll earn about $94. (Without compounding, you would earn $30 a year for three years for $90 total because you're earning interest only on the principal and the principal stays the same.)
When you have money in savings, compounding time frames make a difference. For example, instead of having an account that compounds monthly, some savings accounts compound daily, and that gives your money more opportunities to grow. You can add up how much you could save with daily, monthly or annual compounding interest using NerdWallet’s compound interest calculator.
Best uses for a high-interest savings account
High-yield savings accounts are a great place for your emergency fund. Your money is parked in a safe place, and the APY boosts your savings balance.
You can also use high-yield savings accounts to put money away for short-term goals, such as the down payment on a house, a big vacation or a rainy day fund to cover repair or maintenance expenses. You’ll know you’re earning interest, and there’s not the risk of losing your principal as there is with investment accounts. However, an investment account is likely a better way to go for longer-term savings goals, such as retirement, as the returns are likely to be higher over time.
» Looking for more? Read our picks for the best high-interest accounts
How often do savings rates change?
Savings rates are variable and technically can change at any time. In practice, it’s common to see a bank’s rate remain the same for several weeks in a row. But if the Federal Reserve recently cut rates or increased them (as with the recent federal rate increases), you will often see several banks change their savings rates around the same time.
How to open a high-interest savings account
Depending on the type of bank or credit union, you can open a high-rate account online or in person:
1. Provide contact information. Be prepared to share your Social Security number and at least one form of identification, such as a driver’s license or passport. (For a joint account, everyone wanting access to the account must provide this information and ID.)
2. Sign up for online access — if you'll be managing your account with your desktop or mobile device. You’ll typically need to create a username and password to log in to the account online. For security, choose a strong password that’s hard to guess and is different from passwords you have for other accounts.
3. Make a deposit. A bank will generally let you set up a transfer from an existing bank account, set up a wire transfer or provide a check or cash.
What happens if I can’t open a savings account?
Not everyone who applies to open a new bank account gets approved on their first try. If you apply online, for example, the financial institution may not be able to confirm your identity. Or you may have a negative banking history — such as a past unpaid bank fee — that another institution reported to a consumer reporting agency, such as ChexSystems.
If you're unable to open a savings account, you can take steps to get your consumer file on track. For example, you may be able to open a second chance bank account. That way, you’d have an opportunity to establish a solid banking history for a few months or a year. Then, you’d be in a much better position to shop around for a higher-yield option and successfully open a new account.
The bottom line
The best high-interest savings accounts can help you grow your money faster than basic options. They pay many times more than the national average of 0.46%.
Where to learn more
You can get additional information on high-rate accounts by comparing institutions that are offering the best rates. For an up-to-date list of online options, check out today’s best high-yield online savings accounts.
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