The Best High Yield Savings Accounts (And Why You Should Open One Now)

by | Apr 29, 2020

When most people think about beefing up their emergency fund, they think about socking away cash in a traditional savings account. Oftentimes, these traditional savings accounts are tied to the same bank that hosts your checking account. And yes, saving money for an emergency or special occasion is a great idea.

But what most people don’t know is that they are missing out on hundreds, sometimes thousands of dollars a year by not storing their savings in a high yield savings (HYS) account. High-yield savings accounts are like a traditional savings account, with one small difference: They help you make a lot more money. And they’re FDIC-insured which means you know your money is safe. Here are the top high-yield savings accounts and what you need to know in order to open one today: 

1. High Rate: UFB Direct 1.9% APY

UFB Direct currently holds the market-leading Annual Percentage Yield (APY) for HYS bank accounts at a whopping 1.90%. The catch? You need to have a good chunk of money set aside in order to get the top rate. In fact, that chunk needs to be $25,000 or more, otherwise your APY goes down to 0%. UFB doesn’t have monthly maintenance fees so if you have the capital, this is a great choice for you. 

2. High Rate: CitiBank – 1.85% APY

Citi shook up the high-yield savings world last year when they launched their Citi Accelerate Savings Account.While the market has slowed, they still hold some of the highest APY for customers out there. There are no balance minimums to get this rate, however a balance below $500 a month does incur a $4.50 maintenance fee. 

3. High Rate: HSBC – 1.85% APY

HSBC Bank has been a reputable institution for a long time. Based overseas, it hasn’t gained a lot of traction in the United States until recently. If you don’t mind that it’s a foreign bank, this should definitely be a top choice for customers with less than $500 in current savings. This account has $0 monthly fees and no minimum deposit.  

4. High Rate: Betterment- 1.83% APY

Betterment Cash Reserve isn’t technically a savings account. Betterment is an investing firm and online app, but they partner with banks in order to hold their cash and money. By opening a Cash Reserve account, you are not putting your money directly into the stock market, but depositing the cash to perhaps several different banks that Betterment partners with. All their partner banks, where your money is kept, are FDIC-insured. This is a good option if you have a large amount of cash that you don’t want in the stock market.

5. High Rate: CIT Bank- 1.75% APY

CIT Bank advertises simple banking, which is exactly what you get. CIT is an online-only savings bank. They have one of the highest rates in the nation with low minimums. In order to get the Savings Builder rate of 1.75% APY, you need to auto-deposit $100 a month to your account or keep a daily balance of $25,000. Their online system is a little antiquated and can leave customers wanting, but their friendly and secure customer service makes it worth it.  

6. High Rate: Marcus by Goldman Sachs -1.70% APY 

If you’re someone who likes trusting big-name banks, Marcus might be a great option for you. Marcus was created by Goldman Sachs and doesn’t have a minimum monthly balance. There are zero monthly fees which means you don’t have to sweat in order to get the best rate. 

7. High Rate: Barclay’s -1.70% APY

For over 325 years Barlcay’s has been one of the most trusted banks in the world. Based in London, they’re now making an impression in the online banking world. Barclay’s has zero fees and no minimum balance requirement to get their competitive rate. 

8. High Rate: Capital One- 1.70% APY

Capital One might be better known for its credit card offers than savings accounts, but they do have one of the more competitive high-yield savings account rates on the market. Go online or head into one of their branches to open up this savings account that has zero monthly fees or minimums. Not only are they great for savings, they even have some of the best rates out there for regular deposit accounts. 

9. High Rate: Ally Bank- 1.60% APY

Historically, Ally has been at the top of high-interest savings accounts, with some of the best customer service ratings out there for online banks. Ally, unlike some of the banks and accounts on this list, also has a checking account, making it easier to access your money rather than waiting 3-5 business days for a transfer to be completed. Ally does not require minimum deposits or minimum balances to get their best rate. 

10. High Rate: Fitness Bank – up to 2.20% APY

Fitness Bank is a new and very unique banking model that motivates your good financial habits via your fitness habits. It is a division of Affinity Bank, which has been around since 2002. Fitness Bank requires you to download an app that tracks your steps. Every month it averages out your steps which will determine the APY your account earns for that period. There is a low monthly minimum fee and a monthly fee of $10 for account balances under $100. Overall, this option offers  great monetary rewards if you’re already an avid stepper or looking for more motivation. 

High Yield Savings Account FAQs

What benefit do I get by opening a High Yield Savings Account?

To put it simply, high-yield savings accounts make money for you. 

As we mentioned above, APY means stands for annual percentage yield. That’s the interest your money is earning – i.e., the amount the bank pays you every year. The bank is basically saying thank you for letting a pile of cash sit with their institution. 

High-yield savings accounts offer the best interest rates for an FDIC-insured account, which means you know your money is safe. A typical savings account at your local bank earns you 0.01% APY on your sitting balance. That’s literally pennies! An average high-yield savings account offers somewhere between 15-20X that amount. 

For example, let’s say you had $10,000 in your high-yield savings account with an APY of 1.8%. Even if you didn’t contribute anything to it over the course of a year, you would earn about $180 having your money sit there compared to $8 (0.01% APY) at a traditional bank.

How are high yield savings accounts able to offer high APY rates? 

High-yield savings accounts are generally offered by online banks. Online banks don’t have the same overhead costs that a traditional brick-and-mortar bank does. By saving on regular business costs such as office rent, supplies, and labor costs, these banks are able to give back some of the profit to their customers. 

How can I choose which account to open with so many options?

Opening the right account means you need to sort out your current financial situation and goals, and figure out what you’re comfortable with. Some people hesitate to go with an online-only bank because they like being able to go into a physical branch bank to sort out their finances. Others want less accessibility because it means they won’t dip into their savings account easily. There are many factors to consider in choosing the account that’s best for you. Remember that if you need to move your money later, that’s always an option. 

Do I have to pay taxes on my savings account? 

By law, your bank will issue you a 1099-INT form for any interest earned over $10 for the calendar year. Interest from a savings account can be counted towards extra income. Most likely it won’t make a large difference when you’re ready to file your taxes, but it’s always good to set aside some cash just in case! 

What’s the difference between a money market account and a high yield savings account?

Before the dawn of online-only banks, Money Market Accounts allowed people to stash money away for a long time, withdraw without early penalties (unlike a CD) and still earn some of the highest APY rates. These days the biggest differences between are:

  1. Money market accounts usually come with a higher minimum balance (sometimes upwards of $10,000).
  2. Money market accounts come with a checkbook or debit card to withdraw funds when you’re in a pinch up to 6 times a month (but they are not a checking account).
  3. Money market Interest rates may be slightly higher than high yield savings accounts. 

Both money market and high-yield savings accounts are FDIC-insured (bank savings accounts need to be) so you know your money is guaranteed. Either type of account could be a good option for you – it all comes down to research and your future financial goals.

Choosing a savings strategy that makes your money work for you – not the other way around – is an exciting process. It can be challenging when there are so many great options out there but just keep in mind fees and account balance minimums. The sooner you make a choice, the sooner you’ll start seeing your savings pile up!

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