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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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.
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 Bank, N.A., Member FDIC
- VIDEO: Get PAID more for SAVING MONEY by using a high yield savings account in 2023!Dyana Marie
- VIDEO: The BEST ACCOUNTS To Save Your Money (High Interest & Great Benefits) | Wealth NationWealth Nation
No minimum balance requirement after $100.00 to open the account
- VIDEO: Know THIS Before You Open a High Yield Savings AccountMatt from Habesha Finance
- VIDEO: What Is A High-Yield Savings Account? | 2021 Bank Account To OpenMrs Dow Jones
- VIDEO: High Yield Savings Accounts vs Brokerage Accounts: Where Should Your Money Go?Wealth Twins
- VIDEO: Regular Savings vs High-Yield Savings vs Money Market vs CD⎟4 Types of Savings Accounts (explained)THE BROKEN WALLET
- VIDEO: Top 5 BEST Savings Accounts of 2023 (SUPER HIGH YIELD)Investing Simplified - Professor G
- VIDEO: 8 Best Compounding Assets to Start Investing In NowFirst Self-educate
See , terms apply.
UFB Secure Savings is offered by Axos Bank, a Member FDIC.
- VIDEO: *not sponsored* CIT Bank High Yield Savings Account Review | Is It Worth It?Marissa Lyda
Earn up to 5.25% APY
- VIDEO: 4 Surprising Facts About High-Yield Savings Accounts (Strategies & Traps To Avoid!)Nikki Dunn, CFP®
- VIDEO: High Yield Savings Account vs. Money Market Mutual FundRob CPA | Personal Finance & Tax Planning
- VIDEO: I've Got $37,000 In Savings, What Should I Do With It?The Ramsey Show Highlights
No max number of transactions; max transfer amounts may apply
- VIDEO: No Penalty CD vs High-Yield Savings Account: Earn A Higher Return On Your Cash | NerdWalletNerdWallet
- VIDEO: Why Should I Use a Health Savings Account (HSA)?The Ramsey Show Highlights
Overdraft fees may be charged, according to the terms, but a specific amount is not specified; overdraft protection service available
- VIDEO: The Top 5 Savings Accounts to Generate Profits (High Yield Savings)Humphrey Yang
- VIDEO: What Should I Do With My Savings?The Ramsey Show Highlights
Goldman Sachs Bank USA is a Member FDIC.
- VIDEO: I found the 5 BEST saving accounts (FOR 2024)Dalton Ray
- VIDEO: What Is A Money Market Account?The Ramsey Show Highlights
- VIDEO: When Should You Use a High Yield Savings Account?The Money Guy Show
- VIDEO: UPDATE!! 2023 Top Savings Accounts: High Interest and Great BenefitsThe 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
- VIDEO: High-Yield Savings Accounts | Easiest Passive Income Stream for BeginnersErika Kullberg
- VIDEO: My favorite High Yield Savings Accounts (easy way to grow your mine)Steve | Call to Leap
- VIDEO: Top High Yield Savings Accounts 2023 (Q3)John Liang
- VIDEO: Use THESE High Yield Savings Accounts To Earn More MoneyPennies Not Perfection
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.
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.