--- title: What are High Yield Savings Accounts? description: What are high yield savings accounts? How do you go about opening one? Read and find out! --- [Financial Literacy by First Alliance Credit Union ](https://www.firstalliancecu.com/blog) # [What are High Yield Savings Accounts?](https://www.firstalliancecu.com/blog/what-are-high-yield-savings-accounts) Written by [Chris Gottschalk](https://www.firstalliancecu.com/blog/author/chris-gottschalk) | Feb 18, 2020 11:39:00 AM Everyone knows that [savings accounts](https://www.firstalliancecu.com/guide-to-savings) pay interest on the money you keep in them. However, that amount of interest you learn is pretty low. Usually, it’s a fraction of a percent. This can lead to a lot of people wishing there was somewhere they could store their money where it could earn more interest. Enter the high-yield savings account. ## High-Yield Savings Account Benefits High-yield savings accounts are exactly what they say they are—[savings accounts](https://www.firstalliancecu.com/blog/what-is-a-savings-account) that offer a higher interest rate than a traditional savings account. What the exact number is, though, varies greatly. While a traditional savings account will have interest rates of about 0.01%, a high-yield savings account will have interest rates of at least 1%. In other words, if you were to put $100 in a traditional savings account, you’d have $100.01 after a year. If you were to put the same $100 in a high-yield savings account, you’d have $101 after a year. Granted, one dollar per year doesn’t seem like a lot. However, when you factor in monthly deposits and [compound interest](https://www.firstalliancecu.com/blog/the-power-of-compounding-interest), you can stand to make significantly more money than you could if you only put your money in a traditional savings account. ## Drawbacks of a High-Yield Savings Account Even though high-yield savings accounts can seem like a great deal, they also have their drawbacks. The biggest drawback is that a lot of high-yield savings accounts require you to keep a minimum amount of money in them in order to keep the high interest rate. If you don’t, you don’t get the higher interest rate. High-yield savings accounts may also come with monthly maintenance fees. When looking at high-yield savings accounts, you need to make sure that the fees don’t wipe out any of the money you might get from the higher interest rate. Currently, though, some online-only banks offer high-yield savings accounts. These banks can afford to offer a higher interest rate since they don’t have the overhead brick-and-mortar financial institutions need to worry about. While keeping your money in these online-only banks may be tempting, online-only banks have limited means to accept deposits, and generally have little to no in-person assistance. If you want to keep your money in a high-yield savings account run by an online-only bank, be sure to take a look at how the bank accepts deposits, how you can withdraw money from your account and whether or not you can talk to an actual person if you need assistance. #### How financially fit are you? ## High-Yield Savings Account Alternatives If you’re looking for other ways to get a high interest rate for your money, you do have other options than a high-yield savings account. A [Certificate of Deposit (CD)](https://www.firstalliancecu.com/certificate-of-deposit) will give you an interest rate that is comparable to a high-yield savings account, and it only gets better the longer you [leave your money in a CD.](https://www.consumerfinance.gov/ask-cfpb/what-is-a-certificate-of-deposit-cd-en-917/) If you want a good interest rate for a retirement fund, take a look at an IRA. [Both traditional and Roth IRAs](https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras) have comparable savings rates to a high-yield savings account, and they can have significant tax benefits as well. ## Get a Savings Account That Fits Your Needs at First Alliance Credit Union Deciding if a high-yield savings account fits your needs comes down to your financial goals and habits. If you’re someone who consistently maintains a healthy balance and wants your money to grow faster than it would in a traditional savings account, a high-yield option could be a great fit. It’s especially appealing for individuals who prefer easy access to their funds without the commitment required by other financial products, like [CDs](https://www.firstalliancecu.com/blog/are-certificates-of-deposit-worth-it) or [IRAs](https://www.firstalliancecu.com/blog/traditional-ira-vs.-roth-ira). However, if you need frequent access to your money or struggle to keep a minimum balance, you might find the potential fees or limitations of a high-yield savings account frustrating. A high-yield account works best for someone [who’s starting to build their emergency fund](https://www.firstalliancecu.com/blog/how-to-start-an-emergency-fund) and wants a safe place to grow their savings without locking the money away for too long. To decide if it's right for you, here are a few simple steps: 1. **Evaluate your savings habits** – Can you maintain a minimum balance? 2. **Check for fees** – Make sure they don’t eat into your earnings. 3. **Consider alternatives** – If a high-yield account doesn’t suit your needs, explore options like CDs or IRAs. 4. **Look for flexibility** – Make sure the account meets your access needs, especially if you’re considering an online-only bank. By following these steps, you'll be able to make a decision that supports your financial goals. If a high-yield savings account sounds like a good fit, you can explore options at [First Alliance Credit Union ](https://www.firstalliancecu.com/contact)that work for you. #### Have more questions about high-yield saving accounts? Ask us! 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