How to Open a High-Yield Savings Account

How to Find and Open the Best High-Yield Savings Account

To choose and open a high-yield savings account that fits your needs, begin by researching rates, terms, and features offered by different accounts. Utilize our daily rankings of the top high-yield savings account rates to give yourself an advantage. Opening a new account is a straightforward process that can be completed online or in person at a bank or credit union.

Below, you’ll find highlighted savings and cash management accounts from various banks, credit unions, and other financial institutions that partner with banks. This is followed by guidance on how to find the highest savings account rates available nationwide.

Key Takeaways

• Opening a high-yield savings account online usually takes around 10 minutes.
• These accounts can offer interest rates 10 to 12 times higher than the national average.
• Online-only banks typically offer the most competitive rates due to lower overhead costs.
• While interest rates are crucial, other factors such as fees, account requirements, and additional features should also be considered.
• Opening a savings account with a different institution from your primary bank may allow you to earn significantly more.

Step-by-Step Guide to Finding and Opening a High-Yield Savings Account

Shop for the Best Rates

Hundreds of savings accounts are available online from both banks and credit unions. If you want to beat inflation, transferring your funds into a high-yield savings account outside your central bank may be necessary. You can hold multiple checking and savings accounts across various banks without limitations.

That being said, your current bank may offer competitive rates. Start by checking the rates at your existing bank or credit union, then compare them with the top national high-yield savings account rates.

Most of the best rates are found at online banks. Since these internet-only banks don’t have the overhead costs of physical branches, they often provide the highest deposit rates in the country. However, many traditional banks have also launched separately-branded online banks that offer competitive rates.

When comparing rates, pay attention to the details, such as:

• Rate: Is it an introductory or promotional rate only available for a limited time?
• Compounding: How frequently is the earned interest added to your balance?
• Minimum requirements: Is a minimum balance needed to earn the high-yield Annual Percentage Yield (APY)?
• Maximum requirements: Is the high-yield interest rate only applicable to a certain balance?

Storing your savings at a different institution, where they might require more effort to access, can help you avoid the temptation to withdraw funds and could help you reach your savings goals faster.

Select the Right Institution for You

After identifying the top-paying savings accounts, it’s time to choose the one that best meets your needs. If your current bank’s savings rate is competitive, consider opening a new account there. This will allow you to manage all your finances through a single login, enabling instant transfers between your checking and savings accounts and making the signup process more convenient.

However, it’s often worth switching if you find a better rate at a new institution. The top national rates can be 10 to 12 times higher than the national average.

If the best rate is from a credit union, ensure you qualify for membership. To bank with a credit union, you must become a member first. All credit unions listed in Investopedia’s rankings of top savings accounts accept nationwide members, though some may require a small membership fee as a charitable donation.

Additionally, review any fees that the institution might charge. Common fees include:

• Inactivity fees
• Account closing fees
• Paper statement fees

Research the institution by checking for complaints about high-yield savings accounts in the Consumer Financial Protection Bureau’s (CFPB) Consumer Complaint Database. However, complaints about high-yield savings accounts are rare—only 53 out of over 5 million complaints in total—the CFPB has taken action against companies that misrepresented these accounts.

Ensure that any institution you choose is insured by the FDIC or NCUA, providing federal protection of up to $250,000 for your deposits.

Complete the Account Application

Once you’ve selected your high-yield savings account, complete the application process, which is usually done online and typically takes about 10 minutes.

You will need to provide the following information:

• Full name
• Address
• Telephone number
• Email address
• Identification number: Such as your Social Security number (SSN) or Taxpayer Identification Number (TIN)
• Government-issued photo ID, Such as a driver’s license or passport

If you are opening a joint account, you must also provide the information for the second applicant.

Those opening an account at a physical bank can visit a branch. Still, even local institutions often allow you to open accounts online, saving you a trip and speeding up the process.

Your Social Security number is required because interest earned in your savings account is taxable.

Fund Your New Account

Some institutions require an electronic transfer of funds from another account to fund the new account. You should do this immediately to meet the minimum initial deposit, though some institutions provide time or don’t have minimum deposit requirements.

Ways to fund a new savings account include:

• Electronic transfer from another bank
• Sending a paper check
• Performing a mobile check deposit

If you fund your new account from an existing one, you must provide your bank’s routing and account numbers. Some online applications may ask for your bank’s login credentials to instantly verify the account.

If this isn’t possible, your new account may send two trial deposits to the account you’re linking, which you will use for account verification over the next few days.

Enroll in Online Banking and Download the App

Once your account is open, enrolling in online banking is advisable. This can often be done immediately after the online application. Some banks and credit unions may require a few days before sending you account information for online enrollment.

As you set up online banking, securely record your username and password, physically or with password storage software. Next, download the bank’s app to your smartphone or tablet. Bank apps are free, and you’ll use your online banking credentials to access your accounts through the app.

Designate Beneficiaries

If you didn’t designate beneficiaries during the application process, log in to your account and do so now. Beneficiaries are individuals you name to inherit your account balance in the event of your death.

Most accounts allow you to establish a primary beneficiary, and many also permit secondary beneficiaries, who will inherit the account balance if the primary beneficiary isn’t alive.

Commonly, people designate their spouse as the primary beneficiary (if they aren’t joint account holders) and their children as secondary beneficiaries. However, your beneficiary choices depend on your situation.

Enable Alerts and E-Statements

Review your account’s alert options. You may want to receive notifications about deposits or withdrawals over a certain amount or if your balance falls below a set threshold. Alerts can typically be sent via email, text, or app notifications.

Additionally, consider opting for electronic statements. E-statements often offer better security against identity theft, and some online-only banks may require you to opt into e-statements or charge a monthly fee for paper statements.

Link Additional Transfer Accounts

You can link additional external accounts if you linked an external bank account during your initial deposit. This is useful if you have accounts at multiple institutions or regularly transfer funds to others, such as your children.

Start this process early, as linking accounts can take several days.

Follow Your Account’s Rules

Lastly, familiarize yourself with your account’s rules and requirements to avoid incurring fees. Fees can quickly reduce any interest you earn.

While some accounts have no monthly fees, others do, but these fees can usually be avoided by taking specific actions. These might include:

• Maintaining a minimum balance
• Setting up a direct deposit
• Establishing a recurring transfer
• Having a linked account at the same institution

Frequently Asked Questions (FAQs)

What Is a High-Yield Savings Account?

A high-yield savings account offers significantly higher interest rates than a regular savings account. Online-only banks often offer these higher rates due to their lower operational costs. Some brick-and-mortar banks and credit unions also offer high-yield accounts, but they are more common among online institutions.

How Does a High-Yield Savings Account Work?

A high-yield savings account pays interest on the deposited funds. However, institutions offering the highest rates may need other standard banking features so that you may need a checking account elsewhere. Most high-yield savings accounts don’t include ATM cards, so transfers usually occur through electronic means or mobile check deposits.

Who Should Open a High-Yield Savings Account?

Consider opening a high-yield savings account if you find the account rates and terms appealing and are comfortable with the bank’s limitations. These accounts are ideal for those who don’t need immediate access to their funds and prefer to keep extra money in the bank. They can be used to build an emergency fund or save for a significant purchase.

Is a High-Yield Savings Account Worth It?

Typically, high-yield savings accounts come with minimal costs as long as you meet the minimum balance requirements and follow the account guidelines. They offer higher interest rates than traditional savings accounts and are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000.

Conclusion

High-yield savings accounts are an excellent way to accumulate funds for future purchases or emergencies, and they’re usually easy to open. Often, your primary bank won’t offer the best rates, so opening a new account at a different institution may be wise. Online-only banks generally offer the best rates, but this is sometimes true. While you’ll earn more than a typical savings account, monitoring any fees that could reduce your interest earnings is essential.