What Is a High-Yield Savings Account?

March 11, 2025

Share this article

Whether you want to build your emergency fund or save for a down payment, having the right savings account can bring you one step closer to your financial goals. A high-yield savings account is where your deposits can earn a higher interest rate compared to a traditional savings account (hence the name “high-yield”). These accounts are often offered by online banks.

Because you can add and withdraw money with ease, high-yield savings accounts can be a great tool to support any short-term goals you have in mind. Let’s take a closer look at how they work.

How does a high-yield savings account work?

High-yield savings accounts work much like a traditional savings account, but they offer a higher interest rate (typically expressed as an annual percentage yield or APY).

A quick refresher on interest: When it comes to savings accounts, interest is the amount of money you earn for leaving your money deposited with a bank. It’s typically expressed as an annual percentage yield (APY), which is the amount of interest you could earn in a year, assuming that funds are not added or withdrawn. The APY also accounts for compound interest. The more often the interest compounds, the more money you could earn.

You can use a high-yield savings account for your everyday savings needs. Once you open an account, you can deposit money as often as you’d like. High-yield savings accounts also offer a great deal of flexibility when it comes to accessing your cash. Generally, you can take out money whenever you want. However, some banks may limit the number of withdrawals you can make each month.

Are high-yield savings accounts safe?

A high-yield savings account is generally considered a safe, accessible place to keep your cash and earn interest. If you’re ready to open an account, make sure that you do so at a FDIC member bank, where deposits are insured up to the maximum allowable by law. Currently, the standard insurance amount is $250,000 per depositor, per FDIC-insured bank, for each account ownership category.

Good to know: If you’re not sure if your bank is a member of the FDIC, you can use the FDIC’s BankFind tool to look up the financial institution and its membership status.

Also, because savings accounts typically have low to no risk and are more liquid than investment accounts, they can be a good place to park any cash you’ll need in the short term (e.g., for an upcoming vacation, holiday purchases, etc.).

How to choose the best high-yield savings account

You can open high-yield savings account at a variety of financial institutions such as banks or credit unions. To choose the right account for you, it’s a good idea to do a little bit of research and comparison shopping.

Here are a few questions to consider:

What is the APY? When shopping for a savings account, take a look at the APY to see if you’re getting a competitive rate. Even small differences in APYs can make an impact when it comes to how much you earn on your savings. Also be aware that the APY on high-yield savings accounts is typically variable.
How frequently does interest compound? Compounding frequency is the time period at which the interest you earn is added to the balance. Not every bank or account compounds interest at the same frequency. Some may compound it monthly while others compound daily. All things being equal, if one account compounds daily and one compounds monthly, why not make money on your money every day? Read more about compound interest here.
Are there any minimum balance or opening deposit requirements? Some savings accounts require a minimum amount of money to open and maintain the account.
Are there any fees? Pay attention to fees because they could eat away at the interest you’re earning. For example, if your account has a $5 monthly maintenance fee, that’s $60 dollars you’re giving up every year. Some fees can be avoided if you meet certain account requirements (e.g., keep a minimum balance each month). As you explore your options, look for accounts with low or no fees.
Is your account FDIC insured? Before opening an account, make sure your bank is a member of the FDIC. It’ll give you peace of mind in knowing that your deposits will be insured up to the maximum allowable by law.

How to open a high-yield-savings account

Found an account you like? Next step is to open it, which you can do in person or online depending on the bank.

The financial institution will usually ask you for the following:

A driver’s license or passport
Your Social Security number
Primary bank information

If the account requires an initial deposit, you can typically fund your account with cash, a check, or wire transfer.

How much more interest could you earn?

The APYs on some savings accounts might not result in a lot of change to your balance. Check out this chart to see what we’re talking about.

Saving for the future starts today. See how Marcus can help.

See savings options

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this website were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.