Whether you are stashing away money for a rainy day or your next big splurge, a savings account can be a smart option for reaching your goals. But not all savings accounts are equal.
The national average annual percentage rate (APY) for a standard savings account is about .06%,* but a high-yield savings account offers a much higher APY–sometimes more than 20 times the national average.
Benefits of high-yield savings accounts
Below are five key reasons to consider a high-yield savings account.
Grow your money faster – High-yield savings accounts offer higher interest rates than standard savings accounts
Maintain access to your funds – Withdraw money without penalty up to six times per month
Enjoy peace of mind – High-yield savings accounts are insured by the federal government up to $250,000
Make unlimited deposits – Add money to your account whenever you want
Save consistently – With a high-yield savings account it is easy to set up automatic transfers from your checking account to keep your savings growing at a steady pace
How do high-yield savings accounts work?
High-yield savings accounts work the same way as standard savings accounts:
- Open an account at a bank, either an online bank or a brick-and-mortar bank. The bank may require a minimum deposit.
- Maintain the minimum balance required to earn interest and avoid account maintenance fees. Some banks, such as CIT Bank, do not charge any monthly maintenance fees.
- Earn interest on your balance. High-yield savings accounts feature competitive variable interest rates. They give you an opportunity to earn more for your money so that your funds grow faster. Banks such as CIT Bank help maximize your earning potential by compounding interest daily. That means your interest is calculated on your principal balance plus any accumulated interest earned during that time period. Interest is posted to your account monthly.
- Withdraw or deposit money as needed. You can make unlimited deposits to your account; however, federal regulations limit savings account withdrawals and transfers to six transactions per statement cycle. Depending on your financial institution, you may be charged a fee if you go over the transaction limit. The following do not count toward the limit:
- Transactions made in person at your bank
- ATM withdrawals or transfers
- Telephone withdrawals if the check is mailed to the depositor
- Keep track of your account through online or mailed monthly statements. Some banks may also provide savings account customers with a passbook, which is a physical book that is presented to the bank in person when making transactions. Due to the growth of digital banking, passbook savings accounts have become less popular.
Why open a high-yield savings account?
A high-yield savings account is a secure place to set aside money for emergencies, unexpected expenses or long-term goals. It earns interest and is an important complement to a checking account.
How do high-yield savings accounts differ from CDs?
While CDs are a great choice for saving money and earning interest, high-yield savings accounts are more liquid. You’ll still receive a competitive APY, but your funds are not locked into a specified term. You can withdraw funds if you need to and deposit money into your account at any time.
How to choose a high-yield savings account
Not all savings accounts are the same, and not all banks offer a high-yield savings account. When you are considering opening a high-yield savings account, it pays to compare your options. Here are some things to look for:
- Low minimum deposit
- No account opening or maintenance fees
- Daily compounding interest
- Free online banking
- A bank that is known in the industry and offers excellent customer service
CIT Bank offers a high-yield savings account that has been honored by GOBankingRates.com as being one of the "Best Savings Accounts of 2017."1 Make a move toward your savings goals and learn about our high-yield savings account today.