Is a high-yield savings account really high-yield?

Find out if a high-yield savings account is worth opening

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A high-yield savings account (HYSA) is a type of savings account that offers higher interest rates than traditional savings accounts. HYSAs can be useful for people looking for a way to safely save and grow their money faster than they would in a traditional savings account.

Key insights 

  • Online banks usually offer better interest rates than brick-and-mortar banks and have lower fees.
  • HYSAs can have rates many times the national average for savings accounts, making them a powerful tool to safely grow your money.
  • Like traditional savings accounts, HYSAs are susceptible to interest rate fluctuations, as well as a general erosion of value by inflation.

How much do high-yield savings accounts earn?

According to the Federal Deposit Insurance Corporation (FDIC), an agency created by Congress to maintain stability and safety in the banking system, the average savings account pays a 0.35% interest rate (as of February 2023). However, high-yield savings accounts offered by online financial institutions pay significantly more.

For instance, online banks Marcus by Goldman Sachs and SoFi pay a 3.75% annual percentage yield (APY) while UFB Direct pays 4.55% (as of publication). These APYs are substantially higher than the current average rate.

As an example of how much money you could earn in a high-yield savings account, let’s say you deposited $1,000 into two separate accounts, one that paid the national average of 0.35% and another that paid 3.75%, with both accounts compounding daily. After one year, the first account would have a balance of $1,003.51, and the second account would have a balance of $1,038.21.

While that may not seem like a lot, after 10 years, the first account would be worth $1,035.62, while the second would be worth $1,454.96. That’s a nice chunk of change in the second account. 

» MORE: Best online savings accounts

How does inflation affect high-yield savings rates?

Inflation refers to the price increase in goods and services. Inflation lowers your purchasing power and the overall value of your money. If the rate of inflation outpaces the interest rate you receive in your savings account, the overall value of your money decreases.

In order to combat the effects of inflation, many banks will choose to raise rates in savings accounts. This action attempts to ensure that the value of your money remains relatively constant, though a rapid rise in inflation could negate a portion of interest rate increases.

While the impact of inflation might make the high-yield savings rate seem low, it will still be higher than traditional savings account rates.

Pros and cons of a high-yield savings account

Before opening a high-yield savings account, it’s important to understand the pros and cons of the account.


  • Higher yields: Since the APY is high compared with a traditional savings account, you’ll earn more on your deposits, which may help you reach your financial goals sooner.
  • Liquidity: A high-yield savings account is more accessible than many market investments, giving you the ability to access the funds when you need them.
  • Safety: Most deposits made into a high-yield savings account will be federally insured. Deposits at FDIC-insured banks are protected up to $250,000 per account holder, giving you peace of mind that your money is safe.


  • Withdrawal limits: Some banks limit the number of withdrawals that clients can make in a month. If you anticipate needing to access funds frequently, this can be a potential issue.
  • Higher minimums: In exchange for the higher rates, many banks require high initial deposits and ongoing balances compared with traditional accounts.
  • Interest rates: Fluctuations in market interest rates, influenced by the Federal Reserve, will affect all savings accounts. An increase in market rates may lead to an increase in savings account rates, whereas a decline may lead to a decrease in account rates.

» MORE: What is a savings account and how does it work?


What is a good rate on a high-yield savings account?

It’s difficult to definitively state what a good rate is for a high-yield savings account, as market conditions can cause the account’s APY to fluctuate. That said, the average rate on traditional savings accounts tends to hover well below 1%. So, savings accounts with interest rates above this threshold may still be better than the alternatives.

What are some of the best high-yield savings accounts?

There’s no single best savings account for everyone. The best savings account for you depends on your specific needs. Many high-yield accounts offer no fees, an easy sign-up process and an interest rate well over the national average. Some of the best high-yield savings accounts are offered by online banks such as Marcus by Goldman Sachs and SoFi.

What are some alternatives to high-yield savings accounts?

Some alternatives to high-yield savings accounts include cash management accounts, certificates of deposit (CDs) and Treasury bonds.

Bottom line

When it comes to banking, it’s important to understand your options. If you’re interested in opening a high-yield savings account, be sure to research the best one specifically for your needs. Look into account minimums, deposit requirements, monthly fees and other expenses you may incur. Then check to see if the interest rate being offered is competitive compared with what other banks are offering.

You can also opt for an alternative to high-yield savings accounts, such as CDs or other investments, especially if your financial goals require more capital growth.

Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
  1. Federal Deposit Insurance Corporation, “ National Rates and Rate Caps .” Accessed Feb. 15, 2023.
  2. Investor.gov, “ Compound Interest Calculator .” Accessed March 10, 2023.
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