A high-yield savings account, also known as a high-interest savings account, is a type of savings account that offers better-than-average interest rates on deposits
. These accounts can pay interest rates that are 10 to 12 times higher than traditional savings account returns
. Some key features of high-yield savings accounts include:
- Higher interest rates : High-yield savings accounts offer significantly higher interest rates than traditional savings accounts, allowing your money to grow faster over time
- Low risk : These accounts are federally insured up to $250,000 per depositor, making them a safe option for saving your money
- Easy withdrawals : Unlike CDs, high-yield savings accounts have no maturity dates, allowing you to withdraw money without penalty at any time
- Online-only banks : High-yield savings accounts are often offered by online banks and providers, which can provide greater returns to customers because they don't have to pay for operating costs associated with brick-and-mortar branches
High-yield savings accounts are ideal for short- or medium-term savings goals, such as funding a vacation, making a down payment on a house, or maintaining an emergency fund
. However, they may not be the best option for long-term financial goals, as the interest rates on these accounts may not keep up with inflation
. When shopping for a high-yield savings account, consider factors such as initial deposit requirements, interest rates, minimum balance requirements, and withdrawal/transfer limits
