These Bank Accounts Offer APYs Over 3.00%. Here's Why You Should Stay Far Away

APY isn't all that matters.

A high annual percentage yield (APY) is a huge selling point for a lot of bank accounts. The higher your APY is, the more money you make just for keeping your savings in the account. But you really shouldn't base your bank account decision on this alone. Eye-catching APYs sometimes come with strings attached, as is the case with this popular type of bank account.

Sometimes a high APY isn't worth it

A high APY is only one factor you need to consider when choosing a bank account. You also want to make sure the bank is FDIC insured, that it has good customer service and online tools, and that it enables you to access your cash when you need it.

That last one is what makes certificates of deposit (CDs) -- especially those with longer terms -- such bad investments right now. The best five-year CDs currently offer rates around 3.20%. That's higher than what you can find with most of the top high-yield savings accounts. But in exchange for this guaranteed rate, you have to promise not to touch the money you put in the account for the full five years. If you withdraw your money early, you usually pay a penalty in lost interest.

That's a problem for those who need to access their funds at a moment's notice to pay for emergency expenses. It also makes CDs a bad choice for money you plan to use before the CD term is up.

Right now is an especially bad time to invest in a CD because interest rates on all bank accounts are rising. When you open a CD, that rate is usually locked in for the whole term. So if you open a CD for 3.20% right now and the bank later offers CDs with 3.50% APYs, you're stuck earning 3.20% until your CD term is up.

Opening a CD could make more sense when rates are falling because you can lock in a rate that won't drop for several years. But even then, it might not be the best home for your long-term savings.

So what should you do with your money instead?

In the current rate environment, you're better off sticking with a high-yield savings account for your emergency fund and short-term savings. These accounts don't have guaranteed interest rates, so they can fluctuate over time. Your APY might drop at some point, but currently, APYs are trending up, so it's more likely you'll see a higher rate than a lower one in the near future.

Savings accounts also give you the freedom to withdraw your money at any time. Some banks impose a limit on the number of free monthly withdrawals you can make. This used to be part of a federal law known as Regulation D, but the government suspended it early in the COVID-19 pandemic. Still, some banks haven't changed their ways, so it's a good idea to double-check the rules before moving your money around.

Though rare, some savings accounts come with ATM cards that enable you to withdraw cash directly. Otherwise, you can use online bill pay or transfer funds to a linked checking account when you need to.

For money you don't plan to spend in the next five to seven years, a brokerage account or retirement account is a better fit. Investing carries a risk of loss, but it also enables you to beat inflation over the long term and actually increase your wealth. Even the best savings accounts and CDs can't do that.

But what if you really want a CD?

If you're dead set on opening a CD right now, despite the risks, stick with a short-term CD -- one with a term of one year or less. These usually have lower APYs than the long-term CDs, but your money isn't tied up for as long, so you can access it sooner if you need it.

You might consider looking for a no-penalty CD. These are CDs that don't charge you a penalty if you want to withdraw money before the CD term is up. However, you usually have to withdraw all the money in the CD at once. These CDs can also be difficult to find as not many banks offer them.

When you're making any decision that's going to affect your finances -- especially one that's going to affect your access to your funds -- you want to take your time. Explore all the options available to you and weigh the pros and cons of each before opening any new bank account.