How to Choose the Best High-Yield Savings Account for You

If you search for the best available high-yield savings offers, it can be hard to tell whether what you see advertised is being offered by an actual bank. Along with traditional lending institutions, you’ll see offers from apps that work in conjunction with banks, from different kinds of financial service companies that partner with banks, or from entities that aren’t banks at all. And you’d be right to wonder: Which of these is a safe place for my savings? 

“Given there are so many financial products and services available these days, it may be confusing for consumers to know for certain whether their money is protected,” says Martin Becker, chief of deposit insurance for the Federal Deposit Insurance Corp. 

What actually is a high-yield savings account?

High-yield savings accounts offer a much higher return for customers on savings than the national average, although there’s no fixed scale. When most banks are offering a rate like 0.5%, a competitive high-yield account looking to entice customers could be offering more like 1% and upward. Savings rates are so variable because, while they are loosely correlated to the actions of the Federal Reserve, they are not set by a regulatory agency. So the offers that you see are driven by banks and financial institutions competing with each other for your business. 

That’s why even as the Fed moves its benchmark federal-funds rate, big banks might not move their rates as aggressively, as The Wall Street Journal newsroom has reported. But savers still could be in for something of an arms race on savings offers for the foreseeable future from financial institutions looking to gain market share. 

What should you look for in a high-yield savings offer?  

Surprisingly, rates aren’t the top priority for a lot of banking customers. “People are more attuned to fees, the capabilities for online banking and the frictionless ease of use,” says Deron Weston, a principal at Deloitte, a financial consulting firm. 

So you’ll see that some offers emphasize high rates, while others differentiate by going after new customers who don’t have a primary banking relationship or are looking for some kind of niche service. 

Bask Bank, which launched a new online high-yield savings account in 2022, offers its interest payment as either cash or rewards miles on American Airlines, notes Matt Quale, president of Bask Bank. 

Because banks and companies use search-engine marketing to find customers who are searching for savings offers online, you need to be especially careful to look at all the terms and conditions. That’s because in order to make it to the top of search results pages with the top interest rate, many offers come with minimum or maximum balances, caps on annual interest, monthly fees, bill-pay or direct deposit requirements and so forth. 

For instance, Varo Bank—which received its bank charter in 2020 after starting as a fintech that partnered with a bank—offered a 5% annual percentage yield, or APY, interest rate in spring 2022, but that was capped at a balance of $5,000, and only available if you set up direct deposit of at least $1,000. So the maximum you could earn in a month is roughly $20; otherwise, you’d only earn the base rate, which was 1.2% APY in early June 2022. 

“It’s a relatively small dollar amount, but for those just forming savings habits, it’s very meaningful,” says Colin Walsh, founder and CEO at Varo Bank. 

What is FDIC insurance and why is it important for high-yield savings accounts? 

The most essential factor to consider when you pick a high-yield savings account is if the account is insured by the Federal Deposit Insurance Corp., either directly by a member bank or in partnership with one. This means that the financial institution that is actually holding your savings is registered with the government and closely regulated. Most importantly, if the bank fails, your deposits are guaranteed up to $250,000 per bank, per deposit type and per account holder. So if you have $500,000 in cash, for instance, you would want to split that between two banks. Credit unions have similar insurance under the National Credit Union Administration.

Banks still fail. There have been four failures since 2020. So this is not as remote a possibility as you might think. Also, financial institutions that aren’t banks can fail too, so if you hand over money to a company that seems like a bank, but is not, you have no recourse if that entity fails.

You can figure out if an institution is FDIC-insured with a little research on the FDIC website or its 877-ASK-FDIC number, but most banks will clearly state they are FDIC members, usually at the bottom of their websites. 

It can be a little harder to figure out the specifics with fintech companies that are partnered with banks. Betterment, for example, says it sweeps customer deposits into accounts at a small number of FDIC-insured bank partners. As a customer, you see where your cash is actually deposited on your statements.

In a worst-case scenario where the fintech entity fails, the money that is deposited in an FDIC-insured account would be insured. 

How high a yield is too high?

To know if an offer is competitive and good for you, first make sure it’s easy to both put your money in and take it out, says Stefano Bonini, associate professor of finance at Stevens Institute of Technology in Hoboken, N.J. That should also lead you to ask: How much should I be keeping in cash anyway? 

People tend to keep more cash in savings, and fail to appropriately put money away for the future in investments that can keep up or outpace inflation. In this way, you can “fairly easily fall prey to teaser rates or flashy ads that promise extremely high yield without looking at the red flags,” says Bonini. 

Some of what you may see offered from financial technology companies are not deposit accounts but actually investing products. You’re essentially loaning money to these companies in exchange for a stated return, but that return is not guaranteed or regulated the way bank interest is by the government. 

Most banks keep rates as low as they can, and edge just above the competition if they want to be first. So if the top rate is 0.8% and you see an offer for 10% that looks too good to be true, it probably is.

Which banks can I trust for a high-yield savings account?

It may feel most secure to park your savings with a big bank with a recognizable name, but if you’re looking for a high-yield savings account, you may want to explore opening a new account with a hungrier financial institution, as they generally offer better rates.

Just know your terms. Some of the nonbanks, sometimes called neobanks, fintechs or challenger banks, can be hard to distinguish from actual banks or even investing platforms. Digital banks, or online banks, are simply banks that don’t have many storefront branches and tend to operate nationally. But this can also refer to the online or app-based interface of any bank. 

Seashell, for example, is a fintech rather than a bank and offers an investment product rather than a true deposit account. Its website touts its “bank-like security,” a reference to its encryption process.

Betterment, meanwhile, isn’t a bank but a registered investment firm that partners with banks to offer savings accounts and other products. Robinhood and Wealthfront fall into a similar category. Chime is a fintech company that also partners with banks to offer online services to customers. Acorns, Stash and Upgrade are other similar examples.

And sometimes fintechs become banks: Varo Money Inc. used to be a fintech offering banking services, and is now a full bank with its own charter and operating under the rules for new banks under the FDIC. 

You may, unfortunately, come across fraudulent offers “created by entities misrepresenting themselves as an FDIC-insured institution with the intent to have you send them your funds,” says the FDIC’s Becker. 

The best way to distinguish these from solid offers is always to see if your account is held directly at the named institution or if there is a partner bank listed—it may say “banking services provided by,” for example. And of course the safest place for your savings is in an account that is insured by the FDIC. 

The advice, recommendations or rankings expressed in this article are those of the Buy Side from WSJ editorial team, and have not been reviewed or endorsed by our commercial partners.