Introduction
High yield savings accounts are deposit accounts similar to what you would open at a traditional bank, credit union, or online financial institution. Any interest earned in a high yield savings account is taxable to the owner, so long as the interest earned is more than $10 in a given calendar year. The difference between a high-yield savings account and a traditional savings account has to do with the interest rate and annual percentage yield you earn on your deposit.
For example, the average savings account offers an interest rate of around 0.06%. Meanwhile, a high interest savings account can offer rates of 0.40% to 0.50%. In fact, it’s not unusual for the best high yield savings account to offer rates that are 10 to 25 times higher than what you’d get in a traditional savings account.
Generally speaking, most people choose to open a high yield savings account to maximize earned interest while protecting their cash. The best high interest savings accounts offer not just a high rate of return, but also come with FDIC protection that acts as a hedge against a specific or system wide bank failure. With a mix of federal insurance protection and a higher than average yield on your deposit, a high interest savings account represents a relatively safe place to park some of your excess cash.
When choosing between high yield savings accounts, you’ll want to take time to compare the different features they offer. Some things to consider include APY, monthly fees, optional checking account, minimum balance requirements, maximum translation limits, overdraft fees, and the possibility of getting an ATM card.
Best High Yield Savings Accounts
Chime
Chime is an online financial app* that makes it easy to manage your spending and savings. With Chime, your deposits are FDIC insured thanks to its banking partners, The Bancorp Bank and Stride Bank, N.A.. Additionally, thanks to its mobile dashboard and availability at over 60,000 no-fee ATMs nationwide, Chime makes it simple to access your funds without ever having to step into a branch.
Chime offers both a traditional checking account, called a Spending account, as well as a high yield savings account. The Chime Savings account features a competitive 0.50% APY, and does not require a minimum initial deposit or balance. Nor does it come with any monthly or hidden fees.
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Axos
For over 20 years, Axos has provided digital-only banking services to people around the United States. It offers a number of financial products and services, including savings and checking accounts, certificate of deposit accounts (CDs), and loan programs. Axos positions itself as an option for people, small businesses, and institutional clients looking for an alternative banking experience with no fees.
Axos’s high interest savings account features a variable APY between 0.15% and 0.61%. Additionally, it offers dedicated accounts for teens and seniors, with APYs up to 0.10%. While it may be a digital bank, it does not scrimp on security, as it employs rigorous 128-bit SSL encryption, 2-step authentication, and FDIC insurance to protect your deposits.
Varo
Varo is an online bank** that features traditional checking and savings account while also providing cutting-edge financial management services. With its Save your Pay feature, Varo can automatically take a percentage of each deposit and transfer it into your savings account. Additionally, if you enable its Save your Change option, it can round up each transaction to the nearest dollar and transfer the remainder into savings. Along with offering FDIC insurance, it charges no monthly account maintenance fees, nor does it require a minimum balance to open an account. It also grants you access to paycheck deposits up to 2 days early, which gives you flexibility in terms of spending and saving.
Varo’s Savings account features a high APY ranging from 0.5% to 3.0% so long as you make at least 5 qualifying purchases and make a total direct deposit of $1,000 or more. In addition to its high rates, Varo allows you to access your funds at over 55,000 Allpoint ATMs worldwide for free. By making it easy to connect all your financial accounts and view them in a single place, Varo is your one-stop-shop for all your spending and saving needs.
Advantages and Disadvantages
One of the main advantages of high yield savings accounts is the high interest rate they offer compared to traditional savings or checking accounts. This allows you to achieve greater returns, all while keeping your money readily accessible with free access to ATMs and ease of use with mobile banking apps and dashboards. Compared to other investment products, such as bonds or CDs, high yield saving accounts offer greater liquidity and more flexibility, and come with fewer fees and penalties. They are also relatively safe, given that the best high interest saving accounts are protected by FDIC insurance and plenty of security.
That said, a high yield savings account is not the right choice for everyone or every situation. Even the best high yield savings accounts are susceptible to fluctuations in interest rate. Just because you’re getting a particular rate now doesn’t mean you’ll be getting the same rate forever. Additionally, the returns of high yield savings accounts pale in comparison with brokerage or mutual fund accounts, and are therefore not the best option for people trying to build long-term wealth. Finally, many accounts limit the number of transactions you can make, which restricts how and when you can access your funds.
Conclusion
If you want to create an emergency fund, but don’t want to just hide your cash under your mattress, then a high yield savings account might be the right choice for you. With high interest rates, low fees, and mobile and online accessibility features, the best high yield saving accounts combine many of the best aspects of traditional banks with cutting-edge financial services. Before choosing an account, make sure you do the appropriate research to ensure your money works for you and not the other way around.
Disclaimers
*Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank or Stride Bank, N.A.; Members FDIC. Chime Spending Account is required to be eligible for a Savings Account.
˜ Out-of-network ATM withdrawal fees may apply except at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM. Cash deposit or other third party fees may apply.
The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is effective as of November 1, 2021. No minimum balance required. Must have $0.01 in savings to earn interest.
FDIC deposit insurance limit to $250,000 per depositor, per insured bank, per ownership category. For Stride Savings Account depositors, funds are eligible for FDIC insurance when it arrives at the bank. Please visit www.chime.com/savings-apy-and-program-banks/ for more details on FDIC insurance.
**Bank Account Services provided by Varo Bank, N.A. Member FDIC. Visa® Debit Card is issued by Varo Bank, N.A. pursuant to a license from Visa U.S.A. Inc and may be used everywhere Visa debit cards are accepted.
To qualify, you’ll need to have at least $1,000 in direct deposits to your Varo Bank Account or Varo Savings Account combined within the last 31 days. Your Varo Bank Account must be open and active, and the daily balance at close of business must be equal to or greater than $0.00. You are limited to taking out one Advance per calendar day, even if you repay in full on the same calendar day.
Early access to direct deposit funds depends on timing of the payer’s submission of deposits. We generally post such deposits on the day they are received which may be up to 2 days earlier than the payer’s scheduled payment date.
Annual Percentage Yield (APY) is accurate as of Oct 1, 2021. All Varo Savings Accounts earn 0.50% APY beginning on that date. APY is variable and is subject to change. No minimum balance required to open an account. Balance in Savings must be at least $0.01 to earn interest. To earn 3.00% APY, the Varo Savings Account must meet these requirements: Account Holder must 1) receive total qualifying direct deposits of $1,000 or more to a Varo Bank Account or Varo Savings Account in the same qualifying period. 2) The daily balance in the Varo Savings Account must not exceed $5,000. 3) Keep your Bank Account and Savings Account balances above or equal to $0.00 the entire calendar month. If these conditions are not met, you will earn 0.50% APY on the Savings Account balance for that period. The Qualifying Period is defined as the first day of the calendar month through the last business day of the calendar month.
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