What's a good rate for a high-yield savings account?
High-yield savings accounts are similar to standard savings accounts, but they reward you with substantially higher interest rates. As a result, your money grows faster, making it a better vehicle to save for an emergency fund or long-term savings. Interest rates for these accounts are expressed as an annual percentage yield (APY).
In the recent past, rates for savings accounts have been laggard, as interest rates hovered at record lows. However, the Federal Reserve's recent aggressive schedule for rate hikes has given a lift to yields on savings accounts. As such, account holders may need to recalibrate their idea of a good rate for a high-yield savings account.
You can easily explore your local high-yield savings options here to see how much you could be making or use the table below to get started.
What's a good rate for a high-yield savings account?
A good rate for a savings account is any rate higher than what you're currently earning on your savings. Specifically, a good rate for a high-yield savings account is over 4%, as many banks now offer. That's nearly 12 times higher than the current average savings rate of 0.35%, according to Federal Deposit Insurance Corporation (FDIC) data.
A 4% yield on a $5,000 deposit would earn you $200 in interest over a year. By contrast, a similar deposit into a traditional savings account with a 0.35% rate would deliver only $17.50 in annual earnings. As this example illustrates, you may be leaving money on the table if your savings are in a standard account at the national average rate rather than a high-yield savings account.
What's the current rate for a high-yield savings account?
At the time of this writing, the average interest rate for high-yield savings accounts is around 3.90%, with a typical range of 3.40% to 4.55% APY. With average earnings, here's what you might earn on a single deposit in a high-yield savings account compared to a traditional savings account interest rate of 0.35% APY.
$1,000 deposit
- Potential earnings of $3.50 in a traditional account with a 0.35% APY
- Potential earnings of $39 in a high-yield savings account with a 3.90% balance.
$5,000 deposit
- Potential earnings of $17.50 in a traditional account with a 0.35% APY.
- Potential earnings of $195 in a high-yield savings account with a 3.90% APY.
Improve your odds of getting the best available yield on your account by shopping and comparing rates for multiple banks, credit unions and online lenders. Ideally, you'll select a savings account with the best combination of low-interest rates and minimal fees and other benefits. You can start shopping for an account with the highest interest rate here now or use the table below to explore your local options.
High-yield savings account rates are likely to remain strong
There's no telling where rates will go in 2023, as world events and other economic influences are unpredictable. However, financial experts can make predictions based on specific indicators.
One of those indicators is interest rates. In 2022, yields for savings accounts across the board benefited from the Federal Reserve's consistent rate increases. After seven rate hikes in 2022, the Fed continued the upward trend with a quarter-point raise in February, bringing its target rate to a range of 4.5% to 4.75%, the highest rate in over 15 years.
While inflation rates may cool, there isn't any indication from the Fed that lower interest rates are on the horizon. After the most recent rate lift, Federal Reserve Chair Jerome Powell foreshadowed additional rate hikes, saying, "I just don't see us cutting rates this year." Given the Fed's outlook, high interest rates figure to continue, which is a good sign for high-yield savings rates in 2023.
How to open a high-yield savings account
While some traditional banks offer high-yield savings accounts, you'll usually find your best rates with a credit union or online lender. Online banks have streamlined the process so you can open an account in minutes on your desktop or mobile phone.
It doesn't hurt to check with your current bank to see what yield you could receive. But it's wise to compare offers from multiple financial institutions to identify the best rate. As you investigate offers, ensure you understand the fees associated with an account and look for a low- or no-fee account.
Check minimum balance requirements
Be cautious of minimum balance requirements, which are often associated with high yields. Don't be duped by high yields that require you to deposit $25,000 to receive the exceptional rate. By comparing several bank offers, you should be able to find a suitable high-yield savings account with a strong rate, low fees and reasonable minimum balance requirements. Use the table below to find an account that's right for you and start earning more interest!
