What is a High-Yield Savings Account?

It’s a savings vehicle that functions similarly to a traditional savings account. These accounts, however, typically pay considerably higher interest rates than traditional savings accounts and almost always offer better returns than traditional checking accounts.

How Do High-Yield Savings Accounts Compare to CDs?

Interest rates offered by CDs are typically tied to the length of time you agree to keep your money in the account. If you want to withdraw money from a CD before it comes due, you will typically have to pay a penalty (ouch).

Can you lose money in a high-yield savings account?

As long as you put your money in an account that has FDIC or NCUA coverage, you are protected for up to $250,000.

Is a high-yield savings account a good idea?

A high-yield savings account can be a good idea if you want to earn more than the current interest rate on a standard savings account and don’t want to tie your money up for too long (as with some CDs) or take on risk (as with stocks and mutual funds).

How much interest will I get on $1,000 a year in a savings account?

Your interest will depend on where you stash the $1,000. If you put it in an account that gets only 0.01% APY, your earnings after a year would be 10 cents. In a high-yield savings account that earns 1.25% APY, you’d earn $12.50.

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