Many savings products are available to consumers to help them reach their savings goals. While traditional savings accounts typically offer a fairly low annual percentage yield, high-yield savings accounts often provide a much higher interest rate. As a result, it can be an excellent product for consumers looking for safe investments with a good return on investment.
Both traditional savings accounts and high-yield savings accounts are federally insured for up to $250,000 per depositor and are also federally regulated. Also, unlike with CDs, there are no withdrawal penalties, so you can take money out whenever you need it.
However, whereas currently, the average national savings rate is just 0.24%, high-yield savings accounts can return over 3% annually. For example, if your account holds $10,000, that is the difference between it returning $24 or $300 at the end of the year. Over many years, those numbers can quickly add up.
Is it worth opening a high yield savings account?
High yield account rates can change in conjunction with the federal funds rate, so lending institutions can do the same if the Federal Reserve raises or cuts the interest rates. Even if interest rates are lowered, you are still earning interest on the money in the savings account.
When shopping around for the best high-yield savings account for your needs, it’s wise to look for an account with high interest rates and low service fees. Some accounts don’t charge service fees at all or waive service fees if a certain minimum monthly balance is met. As with traditional savings accounts, there are tools online to help you learn how high yield savings accounts work and compare different accounts to find the right one for you and determine if it’s worth it for your goals.