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High-yield savings accounts: When does it make sense?

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As you consider places to grow your money, the usual suspects may come to mind, like a regular savings account, a certificate of deposit (CD) or a money market fund. These are sound options, but there are more to explore when you're hoping to get the most out of your finances.

A high-yield savings account can offer higher returns than a traditional savings account and is more accessible than a CD. It's another place to consider keeping your mid-term cash.

To learn more about how high-yield savings accounts work, you'll want to compare them with traditional savings accounts, understand their advantages and drawbacks, and consider how they affect your overall financial goals.

What is a high-yield savings account?

In simple terms, a high-yield savings account offers a higher interest rate than traditional savings accounts. That higher interest rate with the power of compounding interest work together to help your savings grow at a faster pace, offering a higher annual percentage yield (APY). This measurement is the percentage rate that reflects the total amount of interest/dividends to be paid on an account based on the interest/dividend rate and frequency of compounding.

Typically, online banks or credit unions that operate primarily through digital platforms offer these accounts. As such, you'll usually have online and mobile-friendly banking options with 24/7 access to your accounts.

You may need to keep a minimum balance to avoid certain fees or to earn interest, but some providers offer accounts with no or low minimum balance requirements.

High-yield vs. traditional savings accounts

Unlike high-yield accounts, traditional savings plans are usually run by banks with physical locations. Traditional savings accounts almost always require a minimum balance, another distinction from high-yield plans.

But the big difference is the interest rate—some high-yield accounts offer 10 times the return of a standard savings account. As of January 2024, the national average APY for a standard savings account was 0.47%. This compares to the 4.00% or 5.00% APY possible with some high-yield savings accounts.

To put those numbers in perspective, let's look at a hypothetical example:

  • If you deposit $10,000 in a standard savings account with a 0.50% APY, you'd have about $10,050 one year later.
  • If you deposit $10,000 in a high-yield savings account with 5.00% APY, you'd have about $10,500 one year later.

Pros and cons of high-yield savings accounts

For all its attractive features, a high-yield savings account isn't the right fit for every saving situation. Bear these factors in mind:


  • Higher interest rates: The primary advantage of high-yield savings accounts is the potential to earn a higher interest rate compared with traditional savings accounts.
  • Accessibility: High-yield savings accounts give you easy access to your money through online and mobile banking platforms. Unlike a CD or retirement assets, these accounts let you get your cash when you need it. You can conveniently make withdrawals, transfer money and track your balance.
  • Safety: Just like traditional savings accounts, but unlike market-based investments, high-yield savings accounts offered by reputable banks come with FDIC protection. Even if the bank fails, your deposits are insured up $250,000 per depositor, per insured bank.


  • Potential for rate changes: While high-yield savings accounts may offer appealing interest rates initially, the rates could change over time. Rates are influenced by market conditions and the policies of the financial institution.
  • Online limitations: If your high-yield savings account is offered by an online bank with limited or no physical branch locations, you could be disappointed if you prefer in-person banking services, have limited internet connectivity or need assistance with transactions.
  • Possible account restrictions: Some high-yield savings accounts require you to keep a minimum balance or limit the number of transactions you're allowed per month or year. It's essential to review the account terms to ensure they align with your needs.

Where should you hold cash?

There are several types of accounts to consider where to keep cash.
Learn more about Thrivent Credit Union cash options

How high-yield savings accounts fit your goals over time

Generally, high-yield savings accounts are better for short-term goals, letting you boost your current savings while still giving you easy access to your money. For long-term savings, investments like retirement-specific accounts generally hold up better against inflation over time. Let's dig deeper.

Short-term savings considerations

  • Easy access to your cash: If you're saving for an upcoming vacation, starting an emergency fund or making a down payment on a home in the near future, a high-yield savings account can provide the flexibility to withdraw your money easily when needed. You'll just need to keep any withdrawal limits in mind and plan strategically.
  • Stable returns: High-yield savings accounts typically offer a stable and predictable interest rate, providing a secure environment for short-term savings. This can be reassuring when you want to protect your principal.

Long-term savings considerations

  • More time could equal more money: For long-term savings goals, such as retirement planning, saving for a child's education or building wealth over time, high-yield savings accounts can help you accumulate more money.
  • Stay wary of inflation: Be aware that interest rates on high-yield savings accounts may not always keep up with inflation, limiting their long-term utility.
  • Diversify your savings: High-yield savings accounts can offer solid returns, but it's important to consider diversifying your long-term savings. Exploring additional investment options like CDs, stocks, bonds or retirement accounts can help optimize your long-term savings strategy.

What to look for in a high-yield savings account

You'll want to consider your personal banking preferences, financial goals and the services of different institutions before deciding to use a high-yield savings account. But generally, keep an eye out for these considerations during your search:

  • High interest rate: Seek an account that offers competitive interest rates compared with other financial institutions.
  • Low fees: Look for accounts with minimal or no fees, such as monthly maintenance or transaction fees.
  • Little or no minimum balance requirement: If you prefer flexibility, look for accounts with low or no minimum balance requirements.
  • Easy account accessibility: Determine if the bank offers a user-friendly online and mobile banking platform that allows you to easily manage your account.
  • Solid reputation of the financial institution: Research the credibility of the bank. Look for a well-established institution with a strong track record and FDIC insurance.
  • Additional account features: Consider perks that might enhance your experience, such as automated savings tools, goal tracking, a budgeting app or joint account options.

Should I open a high-yield savings account?

A high-yield savings account can offer tremendous growth potential. But it's likely just one part of an overall financial strategy. A local financial advisor can help you shape a plan that aligns with your personal values and goals while it makes the most of your money.

Hypothetical examples are for illustrative purposes. May not be representative of actual results.

CDs offer a fixed rate of return. The value of a CD is guaranteed up to $250,000 per depositor, per insured institution, by the Federal Deposit Insurance Corp. (FDIC). An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. A money market fund seeks to maintain the value of $1.00 per share although you could lose money. The FDIC is an independent agency of the U.S. government that protects the funds depositors place in banks and savings associations. FDIC insurance is backed by the full faith and credit of the United States government.

While diversification can help reduce market risk, it does not eliminate it. Diversification does not assure a profit or protect against loss in a declining market.
Investing involves risks, including the possible loss of principal.