Why I'm Keeping My High-Yield Savings Account Even as Rates Drop
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If you spotted a $5 bill laying on the ground, would you pick it up? Of course you would. It's not life-changing money, but it's better than the $0 you'd have if you just kept walking.
That's exactly how I feel about my high-yield savings account (HYSA). Every month, it pays me interest just for holding my cash. Last year I earned almost $800 in interest due to the high rates -- miles ahead of the pennies I was earning at my other big bank.
Yes, rates are starting to drop. But even as APYs slide, I'm keeping my HYSA open. Here's why.
Rates are dropping, but not to zero
The Fed controls short-term interest rates, and when those fall, banks usually follow suit. That means today's 4.00% APY might look more like 3.00% or 2.00% in the near future.
But here's the thing… even at 2.00%, my money is still earning exponentially more than the 0.01% big banks typically pay for checking and savings accounts. And I'd much rather earn something than nothing.
Personally I keep about $25,000 in cash for emergency funds and short-term savings. Here's what that cash would earn in a year at different rates:
| APY | Interest Earned |
|---|---|
| 4.00% | $1,000 |
| 3.00% | $750 |
| 2.00% | $500 |
| 0.01% | $2.50 |
I don't know about you, but I'd rather earn $500 than $2.50 -- especially when it requires no extra work.
One account that's turning heads is the LendingClub LevelUp Savings account. It not only offers a killer rate (4.20% APY with $250+ in monthly deposits) but also includes a debit card tied to your savings account. Read our full LendingClub LevelUp Savings review here for more details.
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LendingClub LevelUp Savings
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- Competitive APY
- No fees
- Easy ATM access
- Unlimited number of external transfers (up to daily transaction limits)
- Requires you to make monthly deposits to earn the best APY
- ACH outbound transfers limited to $10,000 per day for some accounts
- No branch access; online only
The LendingClub LevelUp Savings account has a lot to offer. At the top of the list is its high APY, though you must deposit monthly to earn the best rate. Next is zero account fees, a strong and straightforward perk. Finally, you get a free ATM card, which you can use to withdraw from thousands of ATMs nationwide. Interested? You can open an account with $0.
I'm less tempted to dip into savings
A cool side benefit I've learned since setting up my HYSA is that I'm way less tempted to dip into my savings when it's kept at a completely separate bank.
When all my money is piled together in one account, it's easy to blur the line between spending and savings. But with a dedicated HYSA, the barrier is enough to keep me disciplined. I know the cash is there if I really need it, but it's not staring me in the face every time I log into my regular banking app.
Plus, my high-yield savings account is FDIC insured up to $250,000. So I've got both mental security and financial security in one place.
It doesn't cost me anything to keep
Fintech banks are amazing these days. They don't nickel-and-dime you like traditional banks tend to do.
My HYSA has no monthly fees, no balance requirements, and no surprise charges that pop up randomly. So even if my bank balance drops to $0 for a few months, it won't cost me anything to keep the account open. And all the interest I earn is pure profit.
The tech is better, too. My bank's mobile app is super clean, simple, and doing transfers is really easy.
It's still the best home for short-term cash
At the end of the day, my HYSA is where I keep money I can't afford to risk. I don't want to invest it because I might need it in a pinch.
Since it's sitting idle most of the year, I want it earning the highest APY possible. Even if the Fed continues to drop rates and we get down to a measly 1.00%-2.00% APY in the next couple years, it's still better than earning almost zero in a checking account.
Check out today's best high-yield savings accounts and start earning more on your money.
Our Research Expert
Joel O’Leary is a full-time Personal Finance Writer at Motley Fool Money, covering credit cards, bank accounts, investing, mortgages, and other personal finance topics. Joel has been writing about personal finance since 2018, previously leading editorial content for the How To Money podcast and serving as a resident writer at Budgets Are Sexy. He bought his first rental property at age 18, funding the down payment with savings from his high school job at McDonald’s -- a testament to his lifelong passion for smart money decisions. His work aims to make personal finance accessible and actionable for everyday readers. When he’s not writing, Joel enjoys surfing and spending time with his family.