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High-yield savings accounts: 3 things to know now

If you're looking for a high-yield savings account with a high APY, consider looking for an online lender.  Getty Images

With inflation, market uncertainty and new concerns over the banking sector all top of mind, many Americans find themselves taking a closer look at their financial situations. Investments that once seemed secure may not be so safe anymore - and the prospect of relief seems murky. 

In this environment, new ways to save and protect your money need to be explored. Thankfully, the recent interest rate hikes haven't been all bad - they've actually helped grow the appeal of high-yield savings and certificate of deposit (CD) accounts. Interest rates on these accounts are higher than in recent years and exponentially higher than what you can earn if you leave your money in a regular savings account.

But that's not the only thing prospective account holders should know. As with all financial products and services, it pays to understand the intricacies before opening an account. While high-yield accounts are generally easy to operate, there are still some things to consider to make a fully informed decision. We will explore three of these items in this article.

You can easily explore your high-yield savings account options to see how much more you could be earning.

3 things to know about high-yield savings accounts

Here are three helpful things to know about high-yield savings accounts.

Interest rates are higher

High-yield savings accounts are most popularly known for their high annual percentage yield (APY). Interest rates on regular accounts currently hover around 0.33% (depending on the institution used). Interest rates on high-yield accounts, however, are 3.5% to 4.5% or even higher. That means you could be earning significantly more money simply by replacing your current savings account with a high-yield one.

How much more could you be making? A regular savings account with a $5,000 balance will make around $16.50 after 12 months at a 0.33% APY. But a high-yield savings account with the same balance will make $175.00. The more you deposit, the more you will make - and the interest you accrue will compound over time, making this banking option particularly beneficial for those looking to grow their savings.

You can compare interest rates and high-yield accounts online now to find the best option.

Interest rates are variable

While interest rates on high-yield savings accounts are many times higher than those you can secure with a regular account, prospective account holders should go into the process clear-eyed. The interest rate on these accounts is variable and will fluctuate based on market activity. This could mean that interest rates rise again - and your APY will rise with them. But it could also mean that interest rates remain where they are, or even drop, limiting the amount you earn. 

This doesn't mean high-yield savings accounts aren't worth pursuing. Variable rates just need to be factored in when estimating how much money can be earned. If you're looking for an account where the rate will remain unchanged, a CD may be a better alternative

You may have more options online

If you're committed to opening a high-yield savings account, be sure to thoroughly research all of your options, both online and off. 

You may have a better chance of securing a higher interest rate with fewer fees by using an online banking institution than if you opened one of these accounts with a traditional institution with a physical location. Because online lenders generally have less overhead than those with in-person locations, they may be able to offer higher interest rates. That said, online lenders are precisely that - online. So you may not have the same experience or access that you would enjoy by using a lender with a branch in your neighborhood. 

Weigh the pros and cons and closely review your personal financial situation. If your main focus is just growing your savings, you may have higher interest rate options online. Learn more here now.

The bottom line

High-yield savings accounts offer prospective account holders a safe and secure way to grow their money. While these accounts may be particularly appealing in today's economic climate, prospective account holders should understand how much more interest they could potentially earn to get the most value out of them. They should also understand that the interest rate is variable and subject to change based on market conditions. Finally, to get the highest APY out there, consider online banking institutions versus those with physical locations. 

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