High-Yield Savings Accounts
Your bank is probably costing you money every month
The national average interest rate on a traditional savings account at a major bank hovers around 0.01 to 0.06 percent. On a $10,000 emergency fund, that earns you between $1 and $6 per year. It is not an exaggeration to say that most Americans are leaving hundreds of dollars per year on the table simply by keeping their savings at the wrong institution.
High-yield savings accounts — typically offered by online banks — currently pay 4 to 5 percent annual interest or more. On that same $10,000, that is $400 to $500 per year for doing absolutely nothing differently except where you keep the money.
Why online banks pay more
Traditional banks have enormous overhead — physical branches, large staffs, ATM networks. Online banks operate without those costs and pass the savings to customers in the form of higher interest rates. The money in an online high-yield savings account is just as safe as money in a traditional bank — it is FDIC insured up to $250,000 per depositor, per institution.
What to look for in a high-yield savings account
A competitive interest rate is the obvious starting point — compare current rates before choosing. Beyond rate, look for no monthly fees and no minimum balance requirements. Check how long transfers take — most online banks take one to three business days to move money to your checking account, which is fine for an emergency fund but worth knowing.
Well-regarded options include Ally Bank, Marcus by Goldman Sachs, Marcus, SoFi, and Discover. Rates change frequently so comparing at the time you open is more valuable than any specific recommendation here.
Moving your emergency fund to a high-yield savings account is one of the highest-return, zero-risk financial moves available to anyone.
What about money market accounts and CDs?
Money market accounts are similar to high-yield savings accounts and often pay comparable rates with slightly more flexibility. Certificates of deposit lock your money up for a fixed term — three months, six months, one year — in exchange for a guaranteed rate. CDs can make sense for money you know you will not need for a specific period, but are not appropriate for your emergency fund since accessibility matters there.
How to make the switch
Opening a high-yield savings account takes about ten minutes online. Once open, transfer your emergency fund balance there and update your automatic contribution to deposit directly into the new account. Keep your checking account at your regular bank for day-to-day spending — the high-yield account is specifically for savings that sit and grow.