High-yield savings accounts

There is no definition

No regulation defines "high-yield". Any bank may use the phrase for any account, at any rate. It is a marketing description, not a category.

What it usually describes is an online-only savings account. Without branches to staff and maintain, those providers can pass more of the return to depositors — which is why the gap between an online savings APY and a large branch bank's savings APY is often several percentage points rather than a fraction of one.

The FDIC publishes weekly national average deposit rates. Comparing an advertised APY to that average tells you far more than the word "high-yield" does.

What the advertised APY might not be telling you

Tiering. The headline rate may apply only above a threshold — or only below one. Some accounts pay their best rate on the first $10,000 and much less on the rest, which means your blended return is nowhere near the number advertised.

An introductory period. A promotional APY for three or six months, then a materially lower ongoing rate. Worth taking if you will actually move the money afterwards; a poor deal if you will not.

Activity requirements. Some accounts require a monthly direct deposit, a number of debit transactions, or an enrolled linked account to earn the advertised rate. Miss the requirement and you get the base rate for that cycle.

Monthly fees. A $10 monthly maintenance fee costs $120 a year. On a $5,000 balance that is more than the entire yield advantage of moving from a poor account to a good one.

Withdrawal limits. Some savings accounts still limit the number of certain outbound transfers per cycle and charge a fee beyond it. Check before you rely on the account for anything frequent.

Savings account or CD?

Money you might need without warning belongs somewhere you can reach it. That is the emergency fund argument for a savings account even at a slightly lower APY — a penalty on early CD withdrawal can erase the rate advantage several times over.

Money with a date on it — a deposit you will need in eighteen months — is a better fit for a term that matches.

Before you move money

1. Check FDIC insurance. Look the institution up in BankFind. If it is an app rather than a bank, find out which bank actually holds the deposits.
2. Read the fee schedule and the rate sheet, not the landing page.
3. Work out the actual difference. On $5,000, one percentage point is about $50 a year. Use the compound interest calculator with your real balance before deciding whether the switch is worth the paperwork.
4. Diarize a review. Variable means variable. An account that was market-leading eighteen months ago frequently is not now, and providers rely on inertia.