As the Federal Reserve (Fed) continues to increase interest rates, a High-Yield Savings Account (HYSA) can add value to cash you have on the sidelines for emergencies or other financial goals. For those who don’t know what a HYSA is, it is a savings accounts that rewards you with a higher interest rate than a traditional savings account. The interest rate that these accounts offer is noted as APY, or annual percentage yield. It’s important to note that the APY can change at any time. These rates are variable and often go up or down in accordance with the Federal Reserve changing interest rates.
As of the time of this blog post, the Fed has increased interest rates to 4.5%. In tandem, the average APY for a HYSA is hovering around 3.3%. As for the other big banks such as Chase and Bank of America, they are only offering 0.01%. That is a huge difference! This shows how having cash in a HYSA can help your money grow faster than a traditional savings account. If interest rates start to go down in the future, you can expect to see the APY drop as well.
Some notable banks that offer High-Yield Savings accounts are:
- SoFi Bank offering 3.75%*
- Marcus by Goldman Sachs offering 3.3%*
- American Express National Bank offering 3.3%*
- Ally Bank offering 3.3%*
Note: all banks listed above are FDIC insured. There are financial technology (fintech) companies who partner with FDIC insured banks to offer high yield savings accounts as well.
How much interest will I get on $10,000 after a year in a High-Yield Savings account?
If your money is held in a HYSA that earns 3.3% APY for a full year and the APY doesn’t change, you can expect to earn a bit more that $330. Though it may not make you rich, it is definitely more that what you would earn if you left that same $10,000 in a traditional savings account, which would be $24, with an APY of 0.24%.
How do I choose the best High-Yield Savings Account?
I would recommend to look for accounts with high APY and low service charges. You want to make sure that the costs (if any) of having your money in the account doesn’t eat too much into what you will be earning. Some costs to look out for are monthly fees, though they can be waived if you meet a balance minimum.
Will I have access to my money?
Great question! Since it is a savings account, it is still a liquid pot that you can deposit and withdrawals from when needed. You can link different bank accounts with each other and send money to each other within a couple of business days. Remember though, you are usually limited to a certain number of withdrawals each month before you are hit with a fee.
Can I lose money in a High-Yield Savings Account?
No, you will not lose money in a savings account; however, you might lose value if the inflation rate is higher than your APY. In terms of safety, there is no difference between a traditional savings account and a High-Yield Savings Account.
I hope you learned more about High-Yield Savings Accounts and how they operate. If you need help figuring out if a HYSA is right for you, set a meeting with me by CLICKING HERE.
Best,
Brandon
*rates subject to change in tandem with the interest rates set by the Federal Reserve