These days, high-yield savings accounts can yield returns of up to nine times what they did a few years ago. Because of these high rates and federal deposit insurance, a savings account may be the greatest option for earning interest on money set aside for short-term financial objectives like emergencies.
What is a good savings account interest rate?
Currently, high-yield savings accounts are available with APYs (annual percentage yields) as high as 5.35 percent. Banks and credit unions that only operate online frequently offer these kinds of accounts.
Given that savings accounts frequently earn significantly lower rates, it becomes sense to browse around for an account that earns a high yield. In contrast, many physical banks provide savings accounts earning as little as 0.01 percent annual percentage yield (APY), which is at least 500 times lower than the highest accessible rates. For example, the national average APY is only 0.58 percent.
Many high-yield savings accounts are earning a rate that is exceeding inflation, which is now at an annual rate of 3.5 percent, in contrast to accounts that earn ordinary or extremely low yields. Money loses purchasing power if inflation is not kept up with.
How much would a 5% APY savings account earn?
A simple approach to increase your retirement egg is to deposit money into a high-yield savings account now and leave it there for a year. Although the bank has the ability to increase or decrease savings account annual percentage rates (APYs) at any time, the following represents the approximate interest amounts that different amounts could earn in a savings account with a 5 percent APY over the course of a year:
$5,000 = $256
$10,000: $512
$15,000 = $767
$20 000: $1,023
Where to go for a high-yield savings account with the best interest rate
Several banks presently offer savings account rates as high as 5.35 percent annual percentage yield (APY). These banks include:
| Savings account | APY | Required minimum deposit |
|---|---|---|
| BrioDirect High-Yield Savings | 5.35% | $5,000 |
| TAB Bank High Yield Savings | 5.27% | $0 |
| UFB Direct Secure Savings | 5.25% | $0 |
| EverBank Performance Savings | 5.15% | $0 |
| CIBC Bank USA Agility Account | 5.01% | $1,000 |
What savings accounts can expect from the present rate environment
High-yield savings account rates typically follow changes in the federal funds rate exactly. After being hiked eleven times by the Federal Reserve in 2022 and 2023, this important benchmark rate is currently at a 23-year high. The Fed, however, has not lowered interest rates since July 2023 and may wait to do so in the foreseeable future because of increasing inflation.
While several high-yield savings accounts have seen a modest decline in annual percentage yield (APY) recently, it is still simple to locate an account with an interest rate that beats inflation.
Do CDs make a good alternative for savings accounts?
Since the annual percentage yield (APY) on savings accounts is unpredictable, many savers who anticipate a decline in savings account rates opt for a high-yielding certificate of deposit (CD). Right now, top-yielding CDs can earn up to 5.36 percent annual percentage yield. Typically, a CD offers the same rate for the whole time of the guarantee.
Locking in a high yield can be beneficial, but keep in mind that most CDs have early withdrawal penalties if you take money out before the term expires. Because of this, storing your emergency fund or other funds that you might require access to temporarily should not be done in a CD.
In conclusion
These days, it’s easy to discover high-yield savings accounts with annual percentage yields (APY) of up to 5%. It’s worth your time to look around for an account that earns a highly competitive rate because conventional savings accounts often earn the national average of 0.58 percent APY or less.