High-Yield Savings Accounts Are All the Rage, but Here Are 4 Downsides You Should Know About

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 our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page. APY = Annual Percentage Yield

KEY POINTS

  • It's a bad time to keep too much money in your checking account.
  • High-yield savings accounts are easy to open and accessible for many people.
  • But they do have a few downsides, including a lack of ATM access, variable APYs, and withdrawal limits.

No bank account is perfect.

You've heard it here before: If you keep too much in your checking account, you're losing value to inflation. Per the Consumer Price Index Summary, inflation is up 8.2% between last year and this year, so right now is a great time to tighten up your checking account and move your excess cash to an interest-generating bank account, like a money market or certificate of deposit (CD) account. You might even consider opening or adding to an investment account (if you don't need that money for a long time and can leave it alone to let it grow).

You've also likely heard a lot about high-yield savings accounts, as they are one of the more accessible and easy-to-manage types of bank account. Many banks offer them, including online-only banks, and right now, you can score a pretty sweet APY (annual percentage yield) that might just keep climbing. With all this in mind, you might be sold on high-yield savings accounts. But there's no perfect bank account, as they all have drawbacks to consider. With this in mind, here are four possible downsides to opening a high-yield savings account.

1. Withdrawal limits

Savings accounts of all kinds (along with CDs and money market accounts) are subject to the Federal Reserve's Regulation D. This limits savings account holders to six or fewer "convenient" withdrawals per month (which includes debit card transactions, overdraft coverages, and transfers between accounts). This rule was temporarily suspended during the high point of the COVID-19 pandemic, but it is back now. If you go over your limit, your bank may assess you a fee or even convert your savings account to a checking account, so tread lightly. And ideally, money is going into your savings far more often than it is leaving it.

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2. Possible lack of ATM access

Another drawback of many high-yield savings accounts is that your access to an ATM may be limited, especially if you open an account with an online-only bank. These banks have a lot of pros, but one of their cons is that since they don't maintain physical branches, they often form partnerships with certain networks of ATMs you can use without being assessed a fee. If there aren't any of these ATMs in your area, that will be less convenient. Thankfully, many of these banks also refund ATM fees from out-of-network machines.

And another hurdle to ATM access is that your bank might not provide you with an ATM or debit card if you only have a savings account. To get a debit card for my savings account with an online-only bank, I had to also open a linked checking account (which was free and easy, and the card was also free). It wasn't a big hurdle but it was a few extra steps to ensure I could get cash from my account.

3. Variable APY

Do you love the APY on your high-yield savings account? Note that it may not last forever and can fluctuate at any time. Some banks only offer higher APYs on new accounts, so if you've been with the same bank for a long time, it's a good idea to check your account details (accessible in your bank's mobile app or on its website) to see what rate you're getting.

4. Transfer times

If you didn't get an ATM card with your high-yield savings account, you may wonder how to get money back out of it. You can transfer money from it to an account at another bank, but it isn't always instantaneous, and will depend on the banks involved. I do business with two banks, one that is online-only and the other is the big national bank I've been with for years. If I want to transfer money from my checking account at the big bank to my high-yield savings at the online bank, it happens in moments. But if I want to send money back the other way, it takes one to two business days. This hasn't impacted me too much, but if I had an emergency and needed to withdraw from my savings in a hurry, it might be an issue.

I still like high-yield savings accounts, as they have some great features and can help mitigate some of the effects of inflation on my money. But it's important to keep these downsides in mind when you're considering where to stash your cash.

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Two of our top online savings account picks:

Rates as of Apr 15, 2024 Ratings Methodology
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SoFi Checking and Savings Western Alliance Bank High-Yield Savings Premier
Member FDIC. Member FDIC.
Rating image, 4.75 out of 5 stars.
4.75/5 Circle with letter I in it. 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
Rating image, 4.50 out of 5 stars.
4.50/5 Circle with letter I in it. 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

APY: up to 4.60%

APY: 5.36%

Min. to earn APY: $0

Min. to earn APY: $0.01

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