A savings account is a savings account, right? Actually, no. There can be big differences between the account you open with a big national bank (usually a traditional savings account) and a high-yield savings account.
With a traditional savings account, you’ll get a very low rate — 0.01% is a common offer. That’s far less even than the average savings account interest rate (0.45%, according to the FDIC).
Open a high-yield savings account, on the other hand, and you could make 10 times that — or more. Here’s why I started using a HYSA a little over two years ago — and why you should, too.
1. I needed a place to keep tax money
I first opened my high-yield savings account in spring 2022, after I started freelancing right here at The Ascent. My financial planner recommended it, as it would give me a place to keep money for my tax payments safe and also separate from money I’d use to pay other bills.
Our Picks for the Best High-Yield Savings Accounts of 2024
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Capital One 360 Performance Savings  APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY)Â is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Member FDIC. |
APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY)Â is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening. |
Min. to earn $0 |
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American Express® High Yield Savings  APY 4.25% Rate info 4.25% annual percentage yield as of July 7, 2024 Min. to earn $1 Member FDIC. |
APY 4.25% Rate info 4.25% annual percentage yield as of July 7, 2024 |
Min. to earn $1 |
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Citizens Access® Savings  Min. to earn $0.01 Member FDIC. |
Min. to earn $0.01 |
As a freelancer, I’m required to pay both the IRS and my state government four times a year, in January, April, June, and September — if I miss those payments, I can be penalized (and who wants to pay any more than necessary to the IRS?). Since I end up sitting on a sizable chunk of money over a period of several months, it’s nice to earn interest on it.
So initially, opening the HYSA was a means to an end. And then, after I opened it, I got to watch the APY (annual percentage yield) on the account climb to an eventual peak of 4.35% (it has since come back down a little, to 4.20%). And this perk brings me to the second reason I moved the bulk of my savings to this type of account.
2. Inflation was eating away at the value of my savings
For the first seven months of my freelance efforts, the entirety of my earnings (minus taxes) was going toward debt payoff, so I wasn’t adding any extra money of my own to the HYSA, other than my required tax payments. But once I got out of debt, my next mission was saving to buy a house. Thankfully, I already had the HYSA ready to go.
By this time (in October 2022), the Consumer Price Index showed that inflation was up 7.7% from the previous year — ouch. When inflation is this high, your money loses buying power that much more rapidly. The rate on my HYSA was 2.25% at that time, but that’s still a lot better than the 0.01% APY I was earning on my big bank savings account.
And inflation has slowly come back down since then. It’s still higher than the Federal Reserve’s target of 2% — as of the most recent CPI report, inflation stood at 3.3% in May 2024. So since I’m currently earning 4.20% on my savings, I’m beating inflation.
3. I wanted the perks of an online-only bank
Finally, one last reason I started saving money in a high-yield savings account was because I was excited to take advantage of its features. My big bank savings account is…fine. The APY is criminally low, as you already know, and I’m required to keep at least $300 in it at all times, lest I be charged a $5 monthly maintenance fee.
One cool feature of it is that my bank rounds up checking account purchases to the nearest dollar and funnels the extra to savings. I don’t use my debit card to buy things these days, but I do pay some bills from the checking account.
But the features of my HYSA absolutely blow it out of the water. I can create sub-accounts (“buckets”) within the main savings account so I can save for different goals — this is how I kept my house savings separate from money for my taxes, travel I was saving for, and even money for dental surgery.
My interest is compounded daily and paid to me monthly (and you better believe that I get excited on that date every month to see how much I earned). And there are no fees of any kind. (Online banks are usually light on fees, as they don’t have the overhead costs of brick-and-mortar banks.)
It’s a fabulous bank account, in short, and has made my financial life that much better. How often can you say that a bank account makes you happy?
Yes, you should open a HYSA
If you haven’t explored your options for high-yield savings accounts, what’s stopping you? They’re incredibly easy to open and fund, most are without fees (at least, if you open one with an online bank), and many come with neat features and stellar mobile apps. Have a look at The Ascent’s list of the best high-yield savings accounts available right now and choose one — you won’t regret getting to watch your money grow with interest.
These savings accounts are FDIC insured and could earn you 11x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.
