Published in: Banks | Dec. 3, 2018

How to Choose a High-Interest Savings Account

We are committed to full transparency as part of our mission to make the world smarter, happier, & richer. You should know that offers on The Ascent may be from our partners - it's how we make money. That transparency to you is core to our editorial integrity, which isn’t influenced by compensation.

Don’t lose money on your savings by choosing the wrong savings account. Here’s how to choose the best high-yield savings accounts with high interest rates and low fees.

A yellow road sign reading Higher Interest Rates Ahead.

Image source: Getty Images

Whether you’re looking to kick-start your savings or earn more on what you’ve already saved, opening a high-interest savings account is the first step to making the most out of your cash reserves. These accounts get your money working for you with some of the highest yields on the market, all while keeping your funds completely liquid. Let's look at exactly how you should go about choosing the best high-interest savings account for your needs.

What is a high-interest savings account?

A high-interest savings account, or high-yield savings account, is a deposit savings account that pays a higher APY, or annual percentage yield, than a typical deposit savings account. While a traditional savings account might offer APYs from 0.01% to 0.03%, the best high-yield savings accounts offer anywhere from 1.80% to 2.15%.

You’d be surprised at the difference 1 or 2 percentage points can make on even a modest savings balance. The table below shows the yield you would get on your savings with a high-yield savings account versus a traditional savings account.

Balance APY Yield after 1 year Yield after 5 years Yield after 10 years
$5,000 0.01% $5,000.50 $5,002.50 $5,005
  1.90% $5,095.91 $5,498.28 $6,046.22
$10,000 0.01% $10,001 $10,005 $10,010.01
  1.90% $10,191.81 $10,996.56 $12,092.44
$15,000 0.01% $15,001.50 $15,007.50 $15,015.01
  1.90% $15,287.72 $16,494.84 $18,138.65

Source: Author calculations. 

As you can see, switching from a traditional savings account to a high-yield savings account can earn you hundreds just in your first year depending on the size of your balance. Because both are equally liquid and easy to open, there’s really no benefit to having a traditional savings account with a low APY over a high-interest savings account. That being said, as I’ll explain in the next section, there are some situations in which you might want to consider parking your cash in something other than a savings account.

High-interest savings accounts are best used for money you want to keep saving but might need access to in the near future. These accounts offer a decent return and extreme liquidity, making them great for things like emergency savings funds, saving for an upcoming trip, or saving for a big purchase you might make in the next couple years. If you know you won’t need the money you’re saving for at least a few years, there are other options that are a little less liquid but offer higher interest rates, such as certificates of deposit.

Keep in mind that while savings accounts are very liquid, Federal Reserve Regulation D does place restrictions on how many withdrawals you can make per month, and taking out or transferring money more than six times per month can result in fees and even account closure. If you need that money regularly, it’s better to put it in a checking account.

What to consider when choosing a high-interest savings account

The best high-interest savings account for you will depend a lot on your needs and preferences. However, there are a few things everyone should look for in a high-yield savings account. You should look for an account that...

  • Is insured by the FDIC
  • Offers high interest rates
  • Charges no fees or the fees can be waived easily
  • Comes from a bank with good reviews

Apart from the above guidelines, here are some tips for finding high-yield savings accounts that offer you the best value.

Go for online banks -- Because online banks don’t have to worry about the costs associated with running brick-and-mortar locations, they tend to offer some of the highest interest rates on savings accounts. Many of these banks have no fees.

Go for local and community banks or credit unions -- Second to online banks, many local banks and, in particular, credit unions offer great interest rates. Credit unions pass off their profits to members in the form of better rates and lower fees.

Watch out for promotional offers -- Some banks offer promotional interest rates on their savings accounts. These accounts give you a higher APY for an introductory period, after which the APY falls to the regular rate. Make sure the regular rate is still competitive.

Pay attention to minimum deposit requirements and monthly service fees -- Many savings accounts require a minimum opening deposit and a minimum balance in order to incur interest. Some also charge monthly services fees. It’s usually better to opt for a fee-free account.

Connect it to your checking account -- You want to make it easy for yourself to continue contributing to your savings once you’ve opened up an account. Connect the account to your checking and set up automatic monthly deposits to make building your savings easy.

Which high-yield savings account is best?

There are plenty of options out there for high-yield savings accounts. Our list of best online savings accounts includes only accounts with the highest interest rates -- currently ranging from 1.80% to 2.15%. All of these accounts can be opened and managed online, making them convenient and high value. These accounts also have minimal or no fees. You won’t find a better deal out there.

If you’re looking to open a savings account with a traditional bank, you’re going to have to sacrifice interest and may even have to pay some fees. Consider the following table, which compares a few of our favorite online savings accounts with options from banks like Chase and Bank of America.

Metric Marcus Savings by Goldman Sachs Ally Online Savings Bank of America Rewards Savings Account Chase Savings
APY 2.05% 1.90% Starting at 0.03% Starting at 0.01%
Minimum opening deposit $0 $0 $100 $25
Monthly service fee $0 $0 $8, can be waived $5, can be waived

Source: Author calculations. 

The truth is, traditional banks have higher overhead costs, so their savings accounts haven’t kept up with the high-yield accounts offered online. While their APYs may vary based on your location and savings account balance, none of them come close to the APYs offered by online banks. This isn’t to say that traditional banks don’t offer a range of useful services, from checking accounts to certificates of deposit to mortgages. However, they’re usually not the best option if you’re looking to make the most of your money with a savings account.

Ally Online Savings is great for people who want an easy online savings account with a high interest rate and no fees. Marcus by Goldman Sachs Online Savings offers an even higher interest rate with no fees, but they don’t allow mobile check deposit. Synchrony Bank High-Yield Savings is a wildly popular option because it has one of the highest APYs you can get with no fees and extensive mobile features, including mobile check deposit.

There are also a couple credit card issuers that offer competitive high-interest savings accounts. Discover Savings has an APY that’s on par with the accounts mentioned above, a fantastic mobile app, and minimal fees. They also offer cash bonuses for opening an account to people who use the correct offer code. Finally, American Express Personal Savings also has a high APY and low fees, although their mobile banking option leaves a bit to be desired.

The biggest differences between the high-interest savings accounts we’ve recommended boil down to mobile banking options, whether or not you get an ATM card, fees for surpassing the withdrawal limit, and welcome bonuses. In the end, they all offer high interest and low fees, so whichever one you choose, you’re getting a good deal.

Savings account rates are skyrocketing -- Earn 23x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2019.