Banks and credit unions offer the highest rates right now

You can open a high yield savings account at an online bank, a traditional bank with an online option, or a credit union. Online banks typically offer the highest rates because they have lower overhead costs than brick-and-mortar branches. Traditional banks and credit unions often pay less, but some have competitive rates if you meet account requirements like maintaining a minimum balance or setting up direct deposit.

The rate you earn changes frequently — sometimes weekly — so the "best" account today may not be the best next month. What matters more is choosing a bank you trust and understand, then checking your rate once or twice a year to see if you should move your money elsewhere.

Key Takeaways

  • Online banks usually pay the highest rates because they operate without physical branches, but you cannot deposit cash in person.
  • Traditional banks and credit unions let you visit a branch and deposit cash, but their rates are often lower than online options.
  • Your money is insured up to $250,000 per account at FDIC-insured banks or NCUA-insured credit unions, regardless of the rate.
  • You can move money between banks without penalty, so switching to a higher rate later does not lock you in.
  • Check the current rate before opening, but also look at withdrawal limits, monthly fees, and whether the bank requires a minimum balance.

Online banks with competitive rates

Online banks have no physical locations, so you manage everything through a website or app. You can transfer money in and out, but you cannot walk in to deposit a check or cash. Most online banks now offer mobile check deposit, which lets you photograph a check and deposit it through the app.

Online banks that have historically offered high rates include Marcus by Goldman Sachs, Ally Bank, American Express Personal Savings, Capital One 360, and Discover Bank. Rates vary, and new banks enter the market regularly. Before opening, visit the bank's website to see the current rate, any monthly fees, and whether there is a minimum balance requirement.

The main trade-off is convenience: you give up the ability to handle cash in person in exchange for a higher rate. If you rarely use cash and do most banking online anyway, this is usually not a problem.

Traditional banks with online high yield options

Large banks like Chase, Bank of America, and Wells Fargo offer high yield savings accounts online, though their rates are typically lower than pure online banks. The advantage is that you can visit a branch to deposit cash, get a cashier's check, or speak to someone in person if you need help.

If you already have a checking account at a traditional bank, opening a savings account there takes minutes. You may also may have access to for a higher rate if you maintain a certain balance or set up direct deposit to the account. Check your bank's website or call a branch to see what rates and requirements apply to you.

The trade-off is rate: you usually earn less at a traditional bank than at an online bank, but you keep the convenience of a physical location.

Credit unions

Credit unions are member-owned financial institutions that sometimes offer competitive high yield savings rates. Your money is insured the same way as at a bank — up to $250,000 per account through the National Credit Union Administration (NCUA). Some credit unions have higher rates than traditional banks but lower than online banks.

To open an account at a credit union, you must become a member, which usually means living or working in a certain area or belonging to a specific group. Some credit unions have relaxed membership rules in recent years. Search for credit unions in your area or check if you may have access to for membership through your employer, school, or professional association.

Credit unions often have lower fees and more personalized service than large banks, but their rates and features vary widely. Call or visit a local credit union to compare what they offer.

What to check before opening an account

Before you open any high yield savings account, look at four things: the current rate, any monthly fees, the minimum balance requirement, and how you deposit money. The rate is what you earn on your balance, but a high rate with a $25 monthly fee might cost you more than a lower rate with no fee.

Check whether the bank requires a minimum balance to earn the advertised rate. Some banks pay the high rate on any balance; others only pay it if you keep $1,000 or $10,000 or more in the account. If you fall below the minimum, your rate may drop to nearly zero.

Look at how you can deposit money. Online banks usually accept transfers from other banks and mobile check deposit, but not cash. If you receive cash regularly and need to deposit it, a traditional bank or credit union may be more practical, even if the rate is lower.

FDIC and NCUA insurance protects your money

Your money is insured up to $250,000 per account at any FDIC-insured bank, regardless of the rate or the bank's size. If the bank fails, the Federal Deposit Insurance Corporation (FDIC) guarantees you get your money back. Credit unions offer the same protection through the NCUA up to $250,000 per account.

This means you do not have to worry about losing your savings if you choose a smaller online bank or a local credit union. The insurance is automatic — you do not have to do anything to activate it. If you have more than $250,000 to save, you can open accounts at multiple banks or credit unions to keep all your money insured.

You can move your money without penalty

High yield savings accounts have no early withdrawal penalty, so you can move your money to a different bank whenever you want. If the rate drops or a competitor offers something better, you can transfer your balance and close the account. This flexibility means you are not locked in.

Moving money between banks takes a few days. You can initiate an external transfer through your new bank's website, and they will pull the money from your old account. Or you can transfer money from your old bank to your new one. Either way, there is no fee and no penalty.

Frequently Asked Questions

Can I open a high yield savings account if I have bad credit?

Most high yield savings accounts do not require a credit check. Banks look at your banking history through ChexSystems, a system that tracks overdrafts and fraud, but not your credit score. If you have been denied a bank account before, call the bank first to ask about their specific requirements.

How long does it take to open an account?

Online accounts usually take 5 to 10 minutes. You provide your name, address, Social Security number, and initial deposit information. At a traditional bank or credit union, it may take longer if you visit in person, but you can also open many accounts online in the same timeframe.

What happens to my rate if the Federal Reserve changes interest rates?

Banks set their own rates based on what the Federal Reserve does, but they do not have to match it exactly. When the Fed raises rates, banks usually raise savings rates within days or weeks. When the Fed cuts rates, banks often cut savings rates more slowly. Your rate can change at any time, so check it periodically.

Can I have high yield savings accounts at multiple banks?

Yes. You can open accounts at as many banks as you want. Each account is insured separately up to $250,000, so if you have more than $250,000 to save, spreading it across multiple banks keeps all of it insured. Some people open accounts at different banks to take advantage of promotional rates.

Do I need a checking account to open a savings account?

No. You can open a high yield savings account on its own at most banks and credit unions. You do not need to have a checking account with the same institution. Some banks offer small bonuses if you open both at the same time, so it is worth asking.