Best High-Yield Savings Accounts

As the name implies, high-yield savings accounts pay much higher interest rates than traditional ones. Typically offered online, whether by an internet-only bank or a brick-and-mortar institution, they're based on the idea that it's smart to hold your savings wherever it can earn a competitively high yield, even if that's a different bank than where you hold your checking account.

The difference in interest rates can be dramatic, with the top savings accounts in the country typically paying 15 to 20 times the national average rate. You can still keep your checking account where it is because it's simple to link a high-yield savings account to your primary account for easy transfers.

The vast majority of banks, whether physical or online, carry FDIC insurance, which protects banking customers by insuring up to $250,000 of their deposits per institution if the bank fails. The U.S. government similarly backs credit union customers up to $250,000 by providing NCUA insurance to the vast majority of credit institutions.

So whether your institution has branches or is an internet-only bank, your deposits are equally safe and protected. Just be sure to check for the FDIC or NCUA logo before you begin doing business with any new financial institution. 

Savings accounts and money market accounts are close cousins. Both allow you to move money in and out at your convenience, with their main function being to provide an option for you to sock away savings while earning interest on your balance. In addition, the federal regulation that limits savings account withdrawals to six per month is applied to both types of accounts.

Traditionally, what differs between savings and money market accounts is that money market accounts include the option to write checks on the account. In contrast, savings accounts typically only allow fund withdrawals via electronic transfer, ATM cards (when offered), or in-branch visits. 

The APY that a savings account pays on the day you make your initial deposit is not guaranteed. In fact, the account’s rate can change at any time.

Whether the rate goes up or down, and how often it changes, is largely influenced by the Federal Reserve. When it adjusts the federal funds rate, banks and credit unions often follow suit in the same direction.

That said, rate changes among savings accounts are not typically a daily or weekly event. Barring recent moves by the Fed, rates often remain at the same level for weeks or months at a time.