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Pros and Cons of High-Yield Savings Accounts

Updated
Joel O'Leary
Author: Joel O'Leary
Joel O'Leary
Joel O'Leary
Full-Time Personal Finance Writer

Joel is a full-time Personal Finance Writer at Motley Fool Money, where he brings a clear, approachable voice to topics ranging from credit cards to side hustles. He’s been writing about money since 2018, covering topics like credit cards, savings hacks, and the FIRE movement. Before joining the team, he managed editorial content for the How To Money podcast. When he’s not behind the laptop, Joel is likely at the beach surfing, or out and about with his family.

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Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures that our product ratings are not influenced by compensation. APY = Annual Percentage Yield.

Personally, I keep about $25,000 in a high-yield savings account (HYSA) for my emergency fund and short-term savings. But I don't keep all my money there.

HYSAs are perfect for some things, and not so great for others.

You might already know most HYSAs offer interest rates that blow traditional savings accounts out of the water. But let's dive deeper into all the pros and cons so you can figure out exactly what money you should (and shouldn't) keep in one.

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.

Account APY Promotion Next Steps
up to 3.80%
Rate info Circle with letter I in it. Earn up to 4.50% Annual Percentage Yield (APY) on SoFi Savings with a 0.70% APY Boost (added to the 3.80% APY as of 8/5/25) for up to 6 months. Open a new SoFi Checking & Savings account and enroll in SoFi Plus by 9/3/25. Rates variable, subject to change. Terms apply at sofi.com/banking#2. SoFi Bank, N.A. Member FDIC. 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
Earn up to $300 bonus with direct deposit. Plus, new customers earn an extra 0.70% APY on savings for up to 6 months with direct deposit (terms apply) -- that equals up to 4.50% APY! Circle with letter I in it. Earn up to 4.50% Annual Percentage Yield (APY) on SoFi Savings with a 0.70% APY Boost (added to the 3.80% APY as of 8/5/25) for up to 6 months. Open a new SoFi Checking & Savings account and enroll in SoFi Plus by 9/3/25. Rates variable, subject to change. Terms apply at sofi.com/banking#2. SoFi Bank, N.A. Member FDIC.
3.50%
Rate info Circle with letter I in it. 3.50% annual percentage yield as of August 11, 2025. Terms apply.
Min. to earn: $0
N/A
3.90%
Rate info Circle with letter I in it. Balances less than $250,000 earn 3.90%, and balances greater than $250,000 earn 4.10%.
Min. to earn: $0
N/A
Open Account for Barclays Tiered Savings

On Barclays' Secure Website.

The pros of high-yield savings accounts

Here are all the reasons HYSAs stand out, and why I believe every saver should have at least one high-yield account open.

1. Way higher interest rates

This is the main selling point. A competitive online HYSA can earn you 10 to 15 times more interest than the national average savings account rate (and sometimes 200 to 400 times more than big traditional banks offer -- not kidding!).

I'll share my personal story as an example:

  • Right now, my Chase savings account offers an interest rate of 0.01%.
  • But my high-yield savings account at Betterment is currently paying 4.00% APY.
  • That's a 400X increase in interest for keeping money in an HYSA vs. my traditional bank savings account.

And for what this means in dollars -- I'm earning about $83 per month in interest with my emergency fund in an HYSA, compared to the $0.20 I'd earn at Chase.

2. Guaranteed safety

All the top high-yield savings accounts are FDIC-insured (or NCUA-insured if you use a credit union), which means your deposits are protected up to $250,000 per depositor, per bank, per account ownership category.

If an FDIC- or NCUA-insured institution were to fail, balances up to that amount are guaranteed to be returned to you. For joint accounts with two owners, coverage doubles to $500,000.

That's why I never stress about the safety of my emergency fund -- no matter what happens in the banking world, my savings are safe and sound.

3. Low (or no) fees

I don't pay any monthly fees for my HYSA (and neither should you).

Many of the best HYSAs have no monthly maintenance fees and no minimum balance requirements. That's a refreshing change from old-school banks that try to nickel-and-dime you for just having an account open.

Oh yeah, transferring money in and out is typically free as well. When you're choosing an HYSA, make sure it offers easy and free transfers.

4. Easy mobile apps and online access

Most HYSAs are offered by online banks -- especially the ones with the highest APYs.

And online banks have the best tech. I'm talking about mobile apps that are super easy to use, and platforms that let you complete your banking tasks in seconds. No branch visits or tellers required.

You can do stuff like:

  • Open an account in minutes from your phone
  • Transfer funds to and from your checking account at another bank
  • Manage everything from an app

This is one of my favorite things about fintech HYSAs. I transfer money between my Chase checking account and Betterment HYSA all the time, quickly with a few taps on my cellphone.

5. Encourages saving discipline

This is more a byproduct than a feature. But let me explain why having an HYSA helps you save more.

Separating your savings from your everyday checking account means the money isn't staring at you every time you log in to pay bills. That little bit of friction needed to access your savings (transfer funds before you can spend them) can be just enough to stop impulse purchases.

Out of sight, out of mind. You'll naturally touch your savings less by keeping that money in a totally separate account. And with the higher interest growing the balance, you'll be encouraged to add more over time.

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The cons of high-yield savings accounts

Before you sign up for an HYSA and throw all your money into it, there are a few trade-offs you need to know about.

1. Interest rates can change anytime

HYSAs have variable interest rates, which basically means they can go up or down at any time, effective immediately.

The reason why HYSAs are offering such killer interest rates right now in 2025 is because APYs typically follow the federal funds rate. But if (when) the Federal Reserve lowers its key interest rate, HYSA rates will also be lowered.

A certificate of deposit (CD) is a better fit if you want to "lock in" an interest rate. These accounts also have high rates, but less flexibility because your money is locked in for a set term.

2. Some banks limit withdrawals

Most banks cap how much you can pull out at once (like, $1,000 from an ATM in a single day or maybe $20,000 max for an online transfer). Not a huge deal for everyday needs, but something to be aware of.

Also some HYSAs limit how many withdrawals you can make each month before fees kick in. For example, you might be limited to six withdrawals a month.

But don't freak out -- most of the best online HYSAs that we feature have unlimited withdrawal transactions so you can always access your money. It's just something to double-check and be aware of because it varies bank to bank.

3. Transfers can take one to three days

HYSAs don't come with debit cards or check-writing privileges. To spend the money, you'll usually need to transfer it to a checking account first, which can take one to three business days.

Whenever I move money, it usually happens in one business day. So if I need to pay a $2,000 bill, I just make sure I know a few days in advance so I've got time to move funds.

HYSAs are built for saving cash and letting it sit idle. Not everyday spending like a checking account.

4. Inflation can eat your returns

This is true with any checking or savings account. Basically, the rate of inflation can (and will sometimes) be higher than the APY you earn.

Even a 4.00% APY may not fully keep up with inflation in high-cost years (like back in 2022 when inflation was running wild).

While HYSAs preserve your purchasing power better than low-yield accounts, they're not like an investment account for growing long-term wealth.

5. No branch access (for most)

If you prefer in-person service or need to deposit physical cash regularly, an online-only HYSA isn't going to be a fit. Most online and fintech banks don't have physical bank branches.

There are a few exceptions though. For example Capital One 360 Performance Savings or Western Alliance Bank High-Yield Savings Premier, which have locations in several states.

The good news is that physical cash is becoming less of a need these days. And banks that only operate online typically have stellar customer service, web chat, and self-service abilities.

Is an HYSA right for you?

In my opinion, everyone should have an HYSA.

The real question to ask is, "What money (and how much) should you keep in an HYSA?"

These accounts serve a very specific purpose -- to pay you a high interest rate on cash that's sitting idle, waiting to be spent.

That makes them perfect for your:

  • Emergency funds. Keeping a few months worth of expenses on standby in case you run into money issues (like losing a job)
  • Short-term savings goals. If you're saving for a car or buying a house, you can build up your deposit in an HYSA. Or really any money you might need in the next year or two.
  • Funds waiting to be invested. It's OK to keep cash liquid for whatever reason. When it's in an HYSA it'll be earning maximum interest, and protected with FDIC insurance.

You don't need tens of thousands of dollars to keep in an HYSA. Even if you've just got a spare $500 that you want to set aside, it can be kept in a high-yield savings account.

The bottom line

A high-yield savings account is one of the best and safest ways to earn more interest on your cash savings.

It's not a get-rich-quick tool. Interest rates are great for the short term but will never replace long-term investments.

HYSAs are a perfect home for your emergency funds, short-term savings goals, and any idle cash you want to keep safe.

If you're still keeping your cash in a 0.01% savings or checking account, you're probably leaving money on the table. Open one of the top HYSAs today -- for no cost in less than 10 minutes -- and make your money work a little harder.

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.

Account APY Promotion Next Steps
up to 3.80%
Rate info Circle with letter I in it. Earn up to 4.50% Annual Percentage Yield (APY) on SoFi Savings with a 0.70% APY Boost (added to the 3.80% APY as of 8/5/25) for up to 6 months. Open a new SoFi Checking & Savings account and enroll in SoFi Plus by 9/3/25. Rates variable, subject to change. Terms apply at sofi.com/banking#2. SoFi Bank, N.A. Member FDIC. 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
Earn up to $300 bonus with direct deposit. Plus, new customers earn an extra 0.70% APY on savings for up to 6 months with direct deposit (terms apply) -- that equals up to 4.50% APY! Circle with letter I in it. Earn up to 4.50% Annual Percentage Yield (APY) on SoFi Savings with a 0.70% APY Boost (added to the 3.80% APY as of 8/5/25) for up to 6 months. Open a new SoFi Checking & Savings account and enroll in SoFi Plus by 9/3/25. Rates variable, subject to change. Terms apply at sofi.com/banking#2. SoFi Bank, N.A. Member FDIC.
3.50%
Rate info Circle with letter I in it. 3.50% annual percentage yield as of August 11, 2025. Terms apply.
Min. to earn: $0
N/A
3.90%
Rate info Circle with letter I in it. Balances less than $250,000 earn 3.90%, and balances greater than $250,000 earn 4.10%.
Min. to earn: $0
N/A
Open Account for Barclays Tiered Savings

On Barclays' Secure Website.

FAQs

  • Yes. As long as the account is with an FDIC-insured bank or an NCUA-insured credit union, it'll be protected up to $250,000 per depositor, per institution (or $500,000 for joint accounts).

    Even if the bank fails, your money is guaranteed up to those limits.

  • Not in the traditional sense, because it's not an investment account. The only "loss" you might see is if inflation grows faster than your interest rate, which means your money won't be able to buy as many goods or services later.

    Oh, and watch out for account fees. If you're paying monthly fees, your balance will go down over time. Make sure you're choosing a bank with no fees!

  • It's super easy! You can open an HYSA online, and most have mobile apps where you can sign up in less than 10 minutes.

    You'll need some personal info (like your Social Security number and ID), plus a way to fund the account from your checking or another savings account. Once it's set up, you can transfer money in and start earning interest right away.