A high-yield savings account is a type of deposit account that pays many times more than the national average, often because it comes from an online bank with low overhead.
Right now, the average national rate for savings accounts is 0.38%. The average rate for NerdWallet's favorite high-yield accounts is currently 3.66%.
If you're earning less than a 3% annual percentage yield on your savings, you should switch to a higher-rate option.
Nerdy Perspective
How I choose a high-yield savings account
High savings yields are important to me. I've been tracking APYs for more than a decade, and I've noticed that some banks and credit unions consistently outperform others. So I start with accounts that have a good track record. Then, I narrow my options based on other factors I consider important: good customer service hours and easy online access. Even when I find a winner that makes it worthwhile to switch, I keep my old account open for a few weeks until I'm sure I'm ready to close it.
How do you find accounts with consistently high rates?
If you want a snapshot of the best accounts today, take a look at NerdWallet's list of best high-yield savings accounts. It's also important to look at how well the best accounts have performed over time.
I track more than 100 savings accounts. I've found that the most competitive options tend to consistently outperform their competitors; they may not always have the absolute highest APY, but they're always in contention. This historical chart shows the yields at select online banks. It also compares the national average and the rate at a traditional branch bank.
(Would you like to see your bank listed in this chart? Send me an email at [email protected] with your suggestions, and I’ll consider them.)
Along with historical rate performance, you should consider other factors, such as ATM access, mobile app ratings and whether there are any monthly fees.
NerdWallet’s bank and credit union reviews take all these factors into account when researching banks. You'll also want to confirm that your funds are federally insured in the event the institution is shut down. (Bank failures are rare, but some high-profile banks collapsed in 2023. We had a lot of readers reach out to learn how their money is protected.)
AD
Member FDIC
Forbright Bank Growth Savings
APY
Up to 4.15%
Min. balance for APY
$1,000
Member FDIC
Varo Savings Account
APY
3.75%
Min. balance for APY
$0
Member FDIC
E*TRADE Premium Savings
APY
4.00% for 6mo
Min. balance for APY
$0
How much money can you earn?
Let's start with an example. Say you have $4,000 to deposit into a new account that you just opened, and you plan to add another $100 a month, from each paycheck. Currently, some of the best savings rates around are north of 4%. So if you earn 4% on a $4,000 balance that compounds each month, your money would grow to more than $5,385 after one year. That's your original deposit, plus your $1,200 in contributions and more than $185 in interest earned. That's much better than in an account with a rate of, say, 0.50%. You'd still have those extra contributions, but you'd earn barely more than $20 in interest.
Compare $185 to $20, a difference of $165. If your funds are sitting in a basic savings account that doesn't earn much, that's 165 reasons why opening a high-yield account is worthwhile.
What if you keep up those contributions in that account for three years? If it continues to earn 4% a year, you’ll have more than $8,300.
It's worth noting that rates can change at any time, especially around Federal Reserve rate announcements. But you are free to change banks at any time, too, so it's worth looking at different scenarios. Use the calculator below to see how much your money can earn.
It's worth noting that rates can change at any time, especially around Federal Reserve rate announcements. But you are free to change banks at any time, too, so it's worth looking at different scenarios. Use the calculator below to see how much your money can earn.
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When should you switch?
If you're reading this, you've probably already identified some good high-yield options. But what makes it worth taking the extra step to open an account? As noted earlier, the best accounts currently earn more than 3%, so my advice is to draw the line there. If your money is earning less, it's worth the effort to make the move.
It also helps to consider what the money is for, and how important it is to you. For example, I believe saving for emergencies should be a priority for anyone. If you are building an emergency fund and your money is earning a low rate, moving the money into a higher-rate option will help it grow faster.
Another good time to open a new high-yield account is when you've decided you want to save for something specific. Short-term goals such as paying for a down payment on a house, a big vacation or a rainy day fund to cover repair expenses are all good reasons to start. And again, a higher rate can help you reach your goals faster.
A high-yield savings account helps your money work harder than a regular savings account. If yours is earning less than 3%, go ahead and make a switch.
