3 Reasons to Open a High-Yield Savings Account Immediately

As the name implies, a high-yield savings account pays you more. But that's not all.

Ever since the financial crisis and subsequent low-interest environment, savings accounts acquired an awful reputation. This certainly makes sense -- many bank savings accounts have been paying interest rates of just 0.01% and continue to do so although market interest rates for virtually every other financial product have increased in recent years.

However, online-based savings accounts have become much more popular, and for good reason. Because of their lower-cost business model of having no physical branches, online banks can pass some of their savings on to the customer in the form of higher interest rates, lower fees, and some pretty nice features. Here's a rundown of why you might want to switch to a high-yield savings account right now.

1. Higher yield

This is perhaps the best and most obvious reason to open a high-yield savings account. According to the FDIC, the U.S. average savings account yield is a paltry 0.46%.

Meanwhile, some of the best online savings accounts (note: The highest-yielding savings accounts are generally offered by online-based banking institutions) pay upward of 2%. For example, one of the highest-yielding savings accounts offers a 4.76% APY as of June 4, 2024 -- that's 10X the national average.

Our Picks for the Best High-Yield Savings Accounts of 2024

American Express® High Yield Savings APY 4.10% Rate info 4.10% annual percentage yield as of October 14, 2024 Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	APY 4.10% Rate info 4.10% annual percentage yield as of October 14, 2024	Min. to earn $0
Capital One 360 Performance Savings APY 4.10% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Sept. 27, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	APY 4.10% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Sept. 27, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
CIT Platinum Savings APY 4.70% APY for balances of $5,000 or more Rate info 4.70% APY for balances of $5,000 or more; otherwise, 0.25% APY Min. to earn $100 to open account, $5,000 for max APY Open Account for CIT Platinum Savings On CIT's Secure Website. Member FDIC.	APY 4.70% APY for balances of $5,000 or more Rate info 4.70% APY for balances of $5,000 or more; otherwise, 0.25% APY	Min. to earn $100 to open account, $5,000 for max APY

Here's why this matters so much. Let's say that you maintain a $10,000 savings account to cover unforeseen expenses and such. In an average-yielding savings account, you can expect your account balance to rise to about $10,230 after five years. With a 4% yield, you'd have $12,166 after the same time period. That's an additional $1,936 just for moving your savings to another FDIC-insured savings account.

2. Lower fees

In addition to paying more, high-yield savings accounts often charge fewer fees than traditional savings accounts, and in some cases, none at all. With many online-based high-yield savings accounts, there are no service charges or transaction fees for transferring money, nor is there a monthly service fee. Some don't even charge customers a fee for sending a wire transfer.

There are several excellent options if you're looking for low fees in addition to a high APY. So, take a look at the best online savings accounts and compare the current rate and fee structures, as well as the features of each, to see which might be the best choice for you.

3. ATM access can be better than a traditional bank

Here's one that really surprised me when I first signed up for a high-yield savings account online. I was worried that it would be difficult to access my money, and that I'd have to pay a fee every time I wanted to make a withdrawal.

Just to be clear, online-based savings accounts have the same general rules when it comes to withdrawal frequency that traditional savings accounts do. You're generally allowed up to six withdrawals per month -- after all, it's a savings account, not a checking account.

However, there are some online savings accounts that not only allow you to use any ATM without charging you a fee, but will also reimburse you for any fees charged by the ATM you choose. To be sure, the majority of high-yield savings accounts don't offer this, but some do -- you just need to look. Even some that don't offer reimbursement offer broad networks of ATMs that are completely free to use.

My savings account doesn't pay the absolute tip-top interest rates, but it does offer ATM fee reimbursement, which I've found to be a convenient and valuable perk. I even tested this out in Las Vegas last year, where ATMs charge $9.99 fees. Sure enough, this huge ATM fee showed up as a credit in my account the next day!

The bottom line is that online high-yield savings accounts may not be as inconvenient as you may think, and the higher yield and lower fees can result in significant savings. If you're still keeping your rainy day cash in a traditional savings account earning next to nothing, you owe it to yourself to take a closer look at the high-yield alternative.