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APY = Annual Percentage Yield.
When it comes to saving money, you've probably heard the term "APY" tossed around a few times. But what does it actually mean? With all the financial jargon out there, it's easy to feel like you need a degree in economics just to understand how your money is growing.
I'm here to simplify things for you. After working with Motley Fool Money's savings account picks for years, plus my own high-yield savings account journey, I've learned a lot about making your money work harder.
In this guide, I'll break down what APY is, how it affects your savings, and how to find the best APY for your money. Ready to make your savings work harder for you? Let's dive in.
What is APY?
Annual percentage yield (APY) is the rate at which your savings will grow over the course of a year. It's a key number to understand when choosing a savings account because it tells you how much interest you'll earn on your balance over time.
APY isn't directly tied to the federal funds rate, but it typically moves in sync with it, which means it's influenced by the broader economy and inflation. Since APYs can change anytime based on these factors, it's a good idea to keep an eye on the rate your bank is offering.
What is considered a "good" APY?
Because APYs fluctuate with the economy, what counts as a "good" APY also changes.
In spring 2024, high-yield savings accounts (HYSAs) were offering up to 5.00%. By spring 2025, with the Fed finally lowering the federal funds rate, a solid HYSA APY is closer to 3.70%-4.00%. For traditional savings accounts, a good APY is typically around 1.00%.
I've seen this firsthand with my own account. When I opened my LendingClub high-yield savings account in 2022, my starting APY was 4.00%. Over time, it climbed to 4.65% before settling currently at 4.40% APY with $250+ in monthly deposits. It's a perfect example of how APYs constantly shift and why what's considered a "good" rate depends on when you're looking.
Compare savings rates
Make sure you're getting the best account for you by comparing savings rates and promotions. Here are some of our favorite high-yield savings accounts to consider.
4.50/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor
up to 3.80%
Rate info
SoFi members who enroll in SoFi Plus with Eligible Direct Deposit or by paying the SoFi Plus Subscription Fee every 30 days or SoFi members with $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. Members without either SoFi Plus or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. If you have satisfied Eligible Direct Deposit requirements for our highest APY but do not see 3.80% APY on your APY Details page the day after your Eligible Direct Deposit arrives, please contact us at 855-456-7634. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. See the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.
Min. to earn: $0
New customers can earn up to a $300 bonus with qualifying direct deposits!
4.50/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor
3.60%
Rate info
See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 8, 2025. Rates are subject to change at any time before or after account opening.
5.00/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor
4.00%
Rate info
Balances less than $250,000 earn 4.00%, and balances greater than $250,000 earn 4.20%.
A high-yield savings account will always offer higher APYs than a traditional savings account. In fact, most of the time, you'll see an HYSA offering up to 10 times the APY of a traditional savings account. Yes, you read that right -- 10 times higher!
Traditional savings accounts are generally best for those who frequently transfer money in and out for day-to-day expenses. But if you're looking to park emergency savings, a down payment, or a vacation fund somewhere safe and let it grow, a high-yield savings account is exactly what you need. Think of it as a more long-term, hands-off place for your money to work harder for you.
Why APY matters more in a high-yield savings account
When you're comparing the APYs of traditional savings accounts, say 0.01% vs. 0.05%, the difference is so small it's almost irrelevant. But when it comes to a high-yield savings account, APY becomes a big deal.
The reason you're putting your money into a HYSA is to let it grow over time. And the higher the APY, the more it's going to grow. So, when you're choosing a HYSA, you want to maximize that growth potential. That means finding the highest APY possible for your money.
How to choose the best high-yield savings account
Now that we know APY is important, let's talk about how to choose a high-yield savings account. Yes, the APY is a major factor, but it's not the only one. What good is a sky-high APY if the bank isn't reliable or the fees eat up all your hard-earned interest?
Here are a few more things to consider when shopping for an HYSA:
Bank reputation and safety: Make sure your bank is FDIC insured, which means your money is protected up to $250,000 per depositor, per account ownership category. Then check out the bank's reputation -- go with one that has a solid track record and a reliable history. Bonus points if it's a bank you already bank with, because opening an account is a lot easier that way.
Account fees: Fees can kill your earnings. Look for accounts with low or no fees -- especially those pesky maintenance fees, account opening fees, and anything else that might sneak up on you. The fewer fees, the more of your money stays where it belongs: in your account.
Minimum balances or deposits: Some accounts require a minimum balance to earn the highest APY, or a minimum deposit to open the account. These aren't dealbreakers, and often these restrictions come with the best APYs. But make sure you can keep up with the minimums or you'll want to consider an account that doesn't have them.
Withdrawal limits: Some HYSAs limit the number of withdrawals you can make each month, or they may place limits on the amount or location where you can access your money. It's important to make sure the account's limits fit your needs. If you're comfortable leaving your money alone and letting it grow, these limits won't be an issue. But if you plan on tapping into your savings more often, make sure those rules align with how you want to access your funds.
Find the right high APY account for you
Now that you've got a solid understanding of what makes a good APY, it's time to put that knowledge to work. With your baseline for a good APY, you're ready to start comparing different high-yield savings accounts and find the one that's right for you. Remember, it's all about getting the most out of your money while keeping it safe.
APYs are influenced by the federal funds rate, inflation, and overall economic conditions. When interest rates rise, banks usually offer higher APYs, and when rates drop, APYs tend to follow.
APY accounts for compound interest, meaning it reflects how much your money will grow over a year, including interest on your interest. A basic interest rate doesn't include compounding.
There's no set schedule -- banks adjust their rates based on market conditions. Some change monthly, while others adjust more frequently in response to Federal Reserve decisions.
Yes, banks can lower APYs at any time, especially if interest rates in the broader economy fall. That's why it's smart to check your rate regularly and compare other options.
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APYs are subject to change at any time without notice.
