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What is and how to grow your money in a high-yield savings account


Editor's Note: APYs listed in this article are up-to-date as of the time of publication. They may fluctuate (up or down) as the Fed rate changes. CNBC will update as changes are made public.

If you have a checking account at your local bank, you likely have a savings account there as well.

Many people store their money in a savings account to earn interest and watch their money grow over time. But some savings accounts offer a much higher return than others  — which is where high-yield savings accounts come into play.

While the national average return on a traditional savings account is just 0.33%, a high-yield savings account applies much higher interest earnings to your savings. In 2023, many of these accounts offer interest rates over 4%.

For this reason, people store their cash in a high-yield savings account to reach their goals more quickly — whether it's saving up for something in the short term, like a vacation, or planning to make a large expense down the road, such as a down payment on a home.

Below, CNBC Select takes a look at what high-yield savings accounts are and how they work.

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What are high yield savings accounts?

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High-yield savings accounts stand out from traditional savings accounts in that they reward you with a higher interest rate, allowing your money to grow even faster as it sits in your account. 

The interest rate that these accounts offer is noted as APY, or annual percentage yield. The higher your APY on a particular savings account, the faster your money grows.

It's important to note, however, that the APY that savings accounts offer when you sign up can change at any time. These rates are variable and often go up or down in accordance with the Federal Reserve changing its benchmark interest rate.

Though the current economic climate has caused savings rates to drop lately, the highest-yielding accounts can still earn you over 12X more money than regular savings accounts. With the national average APY on savings accounts at just 0.33%, it's very likely that no matter what your high-yield account offers, it will still earn more than a normal savings account. As the Fed continues to raise interest rates, APYs on savings account will follow suit.

Not only does your money earn a better return in a high-yield savings account, but you still have access to your cash when you need it as you would in a normal savings account. Your money in a high-yield savings account should be federally insured by the Federal Deposit Insurance Corporation (FDIC), which means that deposits up to $250,000 are protected if the bank were to suddenly collapse.

How high-yield savings accounts work

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Compound interest allows your savings to grow quickly in a high-yield savings account.

Compared to simple interest, compound interest means you earn interest on both your principal balance and the interest it earns. With simple interest, it is just calculated based on your principal, or the balance you have in your savings minus interest.

How often your interest is compounded depends on the savings account. Some compound daily, while others compound monthly. The more your interest compounds, the greater your return.

With a high-yield savings account, you can withdraw or transfer money (including electronic transfers, checks and wire transfers) out of your account up to six times per month without having to pay a penalty fee or risk having your account closed.

While a strong APY is a big factor in choosing a high-yield savings account, you will also want to look at the fine print. Because online banks don't have the overhead costs that brick-and-mortar banks have to account for, they may offer a higher APY. But it could come with starting deposits, minimum balance requirements and monthly fees, so be sure to read closely.

Below are some of Select's top picks, considering the above qualifications, as well as accounts' ease of use and accessibility:

LendingClub High-Yield Savings

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LendingClub Bank, N.A., Member FDIC

  • Annual Percentage Yield (APY)

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    Dyana Marie

    4.65%

  • Minimum balance

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    Wealth Nation

    No minimum balance requirement after $100.00 to open the account

  • Monthly fee

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    Matt from Habesha Finance

    None

  • Maximum transactions

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    Mrs Dow Jones

    None

  • Excessive transactions fee

    VIDEO: High Yield Savings Accounts vs Brokerage Accounts: Where Should Your Money Go?
    Wealth Twins

    None

  • Overdraft fees

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    THE BROKEN WALLET

    N/A

  • Offer checking account?

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    Yes

  • Offer ATM card?

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    Yes

See , terms apply.

UFB Secure Savings

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UFB Secure Savings is offered by Axos Bank, a Member FDIC.

  • Annual Percentage Yield (APY)

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    Marissa Lyda

    Earn up to 5.25% APY

  • Minimum balance

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    Nikki Dunn, CFP®

    None

  • Monthly fee

    VIDEO: High Yield Savings Account vs. Money Market Mutual Fund
    Rob CPA | Personal Finance & Tax Planning

    None

  • Maximum transactions

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    No max number of transactions; max transfer amounts may apply

  • Excessive transactions fee

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    NerdWallet

    None

  • Overdraft fee

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    Overdraft fees may be charged, according to the terms, but a specific amount is not specified; overdraft protection service available

  • Offer checking account?

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    Humphrey Yang

    Yes

  • Offer ATM card?

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    The Ramsey Show Highlights

    Yes

  • Terms apply.

Marcus by Goldman Sachs High Yield Online Savings

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BWB - Business With Brian

Goldman Sachs Bank USA is a Member FDIC.

  • Annual Percentage Yield (APY)

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    Dalton Ray

    4.40% APY

  • Minimum balance

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    The Ramsey Show Highlights

    None

  • Monthly fee

    VIDEO: When Should You Use a High Yield Savings Account?
    The Money Guy Show

    None

  • Maximum transactions

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    The Table With AO

    At this time, there is no limit to the number of withdrawals or transfers you can make from your online savings account

  • Excessive transactions fee

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    Erika Kullberg

    None

  • Overdraft fee

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    Steve | Call to Leap

    None

  • Offer checking account?

    VIDEO: Top High Yield Savings Accounts 2023 (Q3)
    John Liang

    No

  • Offer ATM card?

    VIDEO: Use THESE High Yield Savings Accounts To Earn More Money
    Pennies Not Perfection

    No

Terms apply.

Bottom line

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Before you put all your savings into one place, consider what a high-yield savings account can do for you. When it comes to growing your money over time, choosing an account with a higher return is a no-brainer.

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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