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CBS News
a day ago
- Business
- CBS News
Is a high-yield savings account worth it in today's economy? Here's what savings experts think.
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. If you want to earn more interest on your money, it could be time to open a high-yield savings account. Getty Images While there are numerous interest-bearing deposit accounts for savers to consider, high-yield savings accounts have become a popular financial tool. These accounts are easy to open from the convenience of your own home, thanks to the wide variety of online banks that offer them. And unlike traditional savings accounts, high-yield savings accounts allow you to earn hefty returns on your savings. Like other savings tools, though, the potential returns on high-yield savings accounts are largely dependent on the economic climate. These accounts were especially worth considering in recent years, as interest rates were high overall thanks to the fight against elevated inflation. When the Federal Reserve lowered the federal funds rate in late 2024 and early 2025, though, many high-yield savings account rates dropped in tandem. That, in turn, led to questions about whether it was really worth it to open this type of savings account. Whether a high-yield savings account is ultimately worth it for you depends on a range of factors, including your savings goals and liquidity needs, so you'll need to weigh all the factors to determine whether opening one is the right move. But to help you decide, we spoke with savings experts to find out if these accounts are still worth it in today's economic climate. Find out how to earn more with the right high-yield savings account now. Is a high-yield savings account worth it in today's economy? Here's what experts had to say about opening this type of savings account in this economy: These accounts offer an opportunity to earn more A high-yield savings account can help you earn considerably more than you would in a traditional savings account. Right now, the average traditional savings account rate is just 0.42%, which doesn't really equate to a meaningful return on your savings. High-yield savings accounts, on the other hand, typically have returns that are many times that. "High-yield savings accounts do what most savings accounts don't: actually earn something, " says Ryan McLin, a CFP with Impact Wealth Group. "With rates often 10x higher than traditional savings accounts, they're ideal for emergency funds and cash reserves." To give you an idea of how much better the earning potential is with a high-yield savings account, imagine you had $10,000 of savings to deposit. In a high-yield savings account with a 4% interest rate, you would earn more than $400 in the first year and more than $2,200 after five years. Meanwhile, you would earn about $211 in interest on $10,000 after five years in a traditional savings account with a 0.42% return. According to McLin, these accounts are well-suited to short-term financial goals, such as the down payment on the home you're planning to buy in the next year or two. They're also the best place to house your emergency fund, thanks to the safety and liquidity they offer. Explore your high-yield savings account options and get started today. High-yield savings account rates remain high for now Interest rates on high-yield savings accounts are variable, so they generally ebb and flow based on the Federal Reserve's federal funds rate and other economic conditions. When the Fed lowers rates, the rates on high-yield savings accounts typically also decline (and vice versa). "After the Fed raised rates and then hit pause, we saw high-yield savings accounts hold steady with some of the best rates we've had in years," says Michael Rodriquez, a certified financial planner with Equanimity Wealth. "Online banks are still competing for deposits, which is keeping rates elevated for now. It's been a rare bright spot in a pretty uncertain economy." Though rates may be a bit lower than they were throughout parts of 2023 and 2024 when the federal funds rate was higher, it's still possible to find high-yield savings account rates of 4% or more currently. Rates on these accounts vary from one bank to the next, though, so it's worth shopping around for one with a competitive return. Of course, there's no guarantee high-yield savings account rates will remain high. If the Fed decreases the federal funds rate, you can expect high-yield savings account rates to dip. But even at their lowest rates, these accounts tend to offer more generous returns than traditional savings accounts. High-yield savings accounts aren't a substitute for investing While high-yield savings accounts are an excellent option for emergency savings and short-term financial goals, they aren't a suitable replacement for investing. "Don't let interest earned in high-yield savings account replace what equity and even bond markets can offer over the long term," says McLin. "This account isn't for growing wealth but making sure accessible cash doesn't lose purchasing power over time." According to the U.S. Securities and Exchange Commission, the stock market has an average historical return of about 10% per year. On the other hand, you'd be lucky to earn 5% in a high-yield savings account. This can make high-yield savings accounts less than ideal for things like your retirement savings, where the goal is growing wealth rather than just preserving it. Your high-yield savings account should also be just one part of your overall financial plan. Generally speaking, you'd turn to stocks and other investments for your retirement and long-term savings and reserve your high-yield savings account for emergency and short-term savings. You may want to consider CDs as an alternative High-yield savings accounts are one option for short-term savings, but they aren't the only option. You may also consider certificates of deposit (CDs). CDs have set terms and fixed interest rates, so you're able to lock in today's high rates for the full CD term. "Short-term CDs, those with maturities of under a year, offer more flexibility, while long-term CDs (one year or longer) typically provide higher interest rates in exchange for less liquidity," says Matt Hicks, VP of Deposit Products at First Tech Federal Credit Union. "However, with the current interest rate environment, consumers can still find short-term certificates with rates equal to or greater than those of their long-term counterparts." Some banks offer more competitive rates on CDs than on high-yield savings accounts, which can make them a solid choice. However, CDs also require you to lock up your funds for the full term. If you do withdraw money early, you will generally face early withdrawal penalties. The bottom line High-yield savings accounts can still be worth it in today's economic climate, especially compared to traditional savings accounts. While rates are a bit lower than they were a year or two ago, high-yield savings accounts remain one of the best tools for your short-term and emergency savings. Just make sure to think of a high-yield savings account as a part of your financial strategy instead of the entirety of it. When combined with other financial tools, though, high-yield savings accounts can help you meet your financial goals and preserve the value of your hard-earned savings.
Yahoo
a day ago
- Business
- Yahoo
How to choose the best high-yield savings account for you
Choosing the best high-yield savings account requires comparing interest rates, fees, and account features. Look for accounts offering APYs up to 4.40 percent with FDIC insurance, no monthly maintenance fees and convenient digital features like mobile check deposit and automatic transfers. The key is finding an account that combines competitive earnings with easy access to your money when you need it. High-yield savings accounts offer significantly higher interest rates than traditional accounts, helping you grow your money faster. Look for accounts with competitive APYs, FDIC insurance and low fees to maximize your earnings. Understand withdrawal limits and accessibility to make sure the account fits your savings habits. Compare multiple accounts to find the best combination of rate, features and convenience for your needs. The primary advantage of high-yield savings accounts is earning significantly higher interest on your deposits. While the average savings account pays 0.6, the best high-yield accounts offer rates above 4.00% APY. This difference can translate to hundreds more in interest annually. For a $10,000 balance, earning 4.50% APY generates $450 in interest per year versus just $50 with a 0.50% account. That extra $400 could cover a few months of groceries or contribute meaningfully to your financial goals. 'Don't just look at the headline rate when comparing accounts. Check if there are balance requirements to earn the advertised APY, promotional rates that drop after a few months or terms like minimum monthly deposits. The best high-yield accounts offer their top rates with minimal strings attached.' Online banks typically offer the highest rates because they have lower overhead costs than traditional brick-and-mortar institutions. These savings get passed along to customers in the form of higher yields. Keep in mind that some banks offer tiered or promotional rates depending on your balance or require you to meet certain conditions, like maintaining a minimum balance or making a minimum number of transactions per month. Learn more: See Bankrate's top picks for high-yield savings accounts Beyond the interest rate, account features can significantly impact your banking experience. Consider how easily you can manage your money and access the tools you need for everyday banking. Here are a few things to consider: Essential digital features: Modern high-yield savings accounts should offer a robust online and mobile banking platform. Look for features like mobile check deposit, which lets you deposit checks by taking photos with your phone, and automatic transfer options to move money between accounts seamlessly. Customer service: Consider how you prefer to get help when you need it. Some banks offer 24/7 phone support, while others provide live chat features or comprehensive online help centers. If you value in-person service, check whether the bank has branch locations in your area or partners with ATM networks. Account management: Look for banks that offer useful features like savings goal tracking, spending categorization or the ability to create multiple savings 'buckets' for different goals within one account. Here's a list of accounts that come with built-in budgeting tools. Payment and transfer options: Check what options you have for moving money. Can you easily transfer funds to external accounts? Does the bank support services like Zelle for sending money to friends and family? How quickly do transfers process? Related: Best mobile banking apps and features Federal deposit insurance is non-negotiable when choosing any bank account. Choose a high-yield savings account from a bank insured by the Federal Deposit Insurance Corp. (FDIC) or a credit union insured by the National Credit Union Administration (NCUA). These federal agencies protect your deposits up to $250,000 per depositor, per institution, in the event of a bank failure. This insurance gives you peace of mind that your money is safe, regardless of what happens to the financial institution. You can verify a bank's FDIC insurance status by checking the FDIC's online database or looking for the FDIC logo on the bank's website. For credit unions, check the NCUA's database to confirm insurance coverage. Account fees can quickly erode your interest earnings, so pay close attention to the fee structure of any account you're considering. Many high-yield savings accounts have no monthly maintenance fees and minimal other charges, but it's important to verify this before opening an account. Common account fees to watch for: Monthly maintenance fees: Often waived with minimum balance requirements Minimum balance fees: Charged when your account falls below a certain threshold Excess withdrawal fees: Applied when you exceed transaction limits ATM fees: Charges for using out-of-network ATMs Paper statement fees: Many banks charge for mailed statements Account closure fees: Some banks charge if you close your account too soon See the full list of bank fees (and tips to avoid them) here. The best high-yield savings accounts typically have no monthly maintenance fees and low or no minimum balance requirements. Others may waive fees if you maintain a certain balance or link a checking account. Also note minimum opening deposit requirements. Some accounts have no minimum to get started, while others ask for $50, $100 or more. If an account requires more than you're comfortable depositing initially, continue looking for better options. You can explore Bankrate's list of savings accounts with no minimum deposits and our list of banks that reimburse ATM fees to compare options. Federal Regulation D traditionally limited savings account holders to six 'convenient' withdrawals or transfers per month, including online transfers, checks, and debit card transactions. While this limit was suspended in 2020 due to the COVID-19 pandemic, some banks still restrict the number of withdrawals on savings accounts. Understanding these restrictions is important, especially if you plan to access your savings frequently. Some banks may charge excess withdrawal fees or convert your account to a checking account if you exceed their transaction limits. Check the specific terms for any account you're considering. Banks typically allow unlimited in-person withdrawals and ATM transactions, but may limit electronic transfers and other 'convenient' transactions. Choosing the right high-yield savings account involves balancing competitive rates with the features and convenience you need. Start by comparing APYs among FDIC-insured institutions, then evaluate fees, digital features and accessibility. Once you've chosen your account, maximize its benefits by setting up automatic transfers to build savings consistently, naming your account based on your goal to stay motivated, and reviewing your account periodically to ensure you're still earning a competitive rate. Money tip: Set up automatic transfers from your checking account to build savings without thinking about it. Even small, regular contributions can add up significantly over time thanks to compound interest. Consider opening multiple high-yield savings accounts for different goals — one for emergencies, another for vacation savings and perhaps a third for a home down payment. This approach helps you track progress toward specific objectives and resist the temptation to dip into funds earmarked for other purposes. Review your account's performance every six months to ensure you're still earning a competitive rate. If your bank has lowered rates significantly below market averages, don't hesitate to shop around for better options. Related reading: Compare current high-yield savings account rates High-yield savings vs. money market accounts vs. CDs How much should you save each month?
Daily Mail
3 days ago
- Business
- Daily Mail
Millions of fixed-rate savings deals to mature within three months triggering a wave of tax bills
A large chunk of Britons could face a tax bill on their savings interest in the coming months, analysis shows. Some 1.2million fixed-rate bonds are set to mature between June and September 2025 containing £70.5billion, according to Paragon Bank. Seven in 10 accounts set to mature will generate enough interest to potentially incur a tax bill, the data suggests. Of the 1.2million accounts, almost all will generate interest of more than £500. This would breach the Personal Savings Allowance (PSA) of £500 for higher-rate taxpayers. Meanwhile 822,000 accounts will generate more than £1,000 in interest, resulting in a tax liability for basic-rate taxpayers who have a PSA of £1,000. Under the PSA, basic rate taxpayers can earn up to £1,000 in savings interest across all accounts held before they incur tax, with higher rate taxpayers able to earn up to £500. Additional rate taxpayers don't have a PSA and pay tax on all savings interest outside an Isa. The figures are from an analysis of CACI data which is pulled from over 40 savings providers. Fixed-rate savings accounts surged in popularity in the second half of 2023 and into 2024 as savers took advantage of high fixed-rate savings accounts offering rates as high as 6.2 per cent in September 2023. Derek Sprawling, head of savings at Paragon Bank said: 'Fixed-rate savings dominated the market during 2023 and 2024, with many accounts benefitting from high savings rates.' Many of these one-year accounts will be maturing over the next six months, so savers could face a savings tax bill on the interest. The best way for savers who want to shield their savings from a savings tax bill is by keeping it in an Isa, a type of tax wrapper where any interest earned is completely tax free. For this reason, Sprawling said: 'I urge savers review their accounts and make the most of their tax-free allowance by utilising other savings products, including cash Isas.' The best cash Isas currently offer rates north of 5 per cent which is higher than the best one-year fixed rate bond which pays 4.45 per cent. How will I know if I need to pay tax on savings interest? Banks, building societies and NS&I report your taxable interest directly to HMRC each year. When HMRC receives this information, it checks if you've gone over your PSA. If you have, any tax due will usually be collected via a change to your tax code in the following year – assuming you're employmed and part of the PAYE scheme. If you are not employed, you may need to fill in a Self Assessment return and pay the tax due. So, keep track of how much interest you are earning and estimate your overall likely tax rate. If the interest you earn on savings is over £10,000 you need to complete a Self-Assessment tax return.
Forbes
4 days ago
- Business
- Forbes
High-Yield Savings Account Rates Today: June 16, 2025
Rates on savings accounts are the same compared to one week ago. You can now earn up to 5.84% on your savings. Shopping for an account where you can save for a rainy day or retirement? Here's a look at some of the best savings rates you can find today. Related: Find the Best High-Yield Savings Accounts Of 2025 Traditional savings accounts, called "statement savings accounts" within the banking industry, were notorious for paying meager interest in the aftermath of the Great Recession. Rates have been on the rise in recent years, and you can earn even more if you know where to look. For instance, online banks and credit unions often pay much higher rates than brick-and-mortar banks. The highest yield on a standard savings account with a $2,500 minimum deposit amount within the last week has been 5.84%, according to data from Curinos. If you spot a basic savings account with a comparable rate, you've done well for yourself. Today's average APY for a traditional savings account is 0.22%, Curinos says. APY, or annual percentage yield, reflects the actual return your account will earn during one year. It accounts for compound interest, which is the interest that accrues on the interest in your account. High-yield savings accounts often pay much more interest than conventional savings accounts. But the trade-off is you may have to jump through some hoops to earn that higher rate, such as becoming a member of a credit union or putting down a large deposit. On high-yield accounts requiring a minimum deposit of $10,000, today's best interest rate is 4.88%. That's about the same as last week. The average APY for those accounts is now 0.23% APY, unchanged from a week ago. On high-yield savings accounts with a minimum opening deposit of $25,000, the highest rate available today is 3.94%. You'll be in good shape if you can find an account offering a rate close to that. The current average is 0.24% APY for a high-yield account with a $25,000 minimum deposit. How To Find a Savings Account Whether you're looking for a traditional savings account, high-yield savings account or MMA, you'll want to keep a few things in mind. A high interest rate is important, but it's not the only factor when picking an account to hold your savings. Another major consideration is whether the account has a minimum deposit - and whether you can meet that requirement. You'll also want to watch out for fees. Savings accounts can come with monthly maintenance fees, excess transaction fees (if you make too many withdrawals) and other pesky charges that can eat into your interest earnings. And before you apply for an account, be sure you explore the reputation and safety of the bank or credit union. Check the reviews, see what people have to say about customer service and find out how the financial institution responds to consumer questions. Only consider accounts insured by the FDIC or, in the case of credit unions, the NCUA. Those federal agencies provide up to $250,000 in insurance per depositor and per bank for each account ownership category. To find the best savings account for your needs, you first must answer the question: What exactly are you looking for? And you must realize that different types of accounts have trade-offs. If you want to open an account at a traditional bank with branches, that will likely rule out the best interest rates, which are typically available at online-only banks. Many traditional savings accounts at brick-and-mortar banks earn just 0.01% or 0.02% APY, while some online-only savings accounts earn more than 4.00% APY. Don't settle on any option until you're certain you have a good grasp on the fees you'll be charged. Savings accounts can ding you with monthly service fees, excess withdrawal fees and returned item fees (if you deposit checks that bounce), among others. Those charges add up and can gnaw away at your savings. As you shop around, check the reviews and ratings of financial institutions and make sure you choose one that will protect your money with federal insurance—from the FDIC or, in the case of credit unions, the NCUA. Curinos determines the average rates for savings accounts by focusing on those intended for personal use. Certain types of savings accounts—such as relationship-based accounts and accounts designed for youths, seniors and students—are not considered in the calculation. The best high-yield savings account pays 5.84% now, according to Curinos data, so you'll want to aim for an account that delivers a yield in that ballpark. But rates aren't everything. You want an account that charges few fees, offers great customer service and has a track record of being a stable institution. Savings yields are variable and can change depending on economic conditions or a bank's particular financial need. Usually rates are influenced by the federal funds rate, meaning that a bank tends to raise or lower its rates along with the Fed. Online banks and credit unions tend to offer the best yields because they can pass along savings from low overhead while also striving to attract new customers.
Yahoo
5 days ago
- Business
- Yahoo
Best CD rates today, June 15, 2025 (lock in up to 5.5% APY)
Find out how much you could earn by locking in a high CD rate today. A certificate of deposit (CD) allows you to lock in a competitive rate on your savings and help your balance grow. However, rates vary widely across financial institutions, so it's important to ensure you're getting the best rate possible when shopping around for a CD. The following is a breakdown of CD rates today and where to find the best offers. Historically, longer-term CDs offered higher interest rates than shorter-term CDs. Generally, this is because banks would pay better rates to encourage savers to keep their money on deposit longer. However, in today's economic climate, the opposite is true. As of today, the highest CD rate is 5.5% APY, offered by Gainbridge on its 5-year CD. There is a $1000 minimum opening deposit required. Here is a look at some of the best CD rates available today from our verified partners: This embedded content is not available in your region. The amount of interest you can earn from a CD depends on the annual percentage rate (APY). This is a measure of your total earnings after one year when considering the base interest rate and how often interest compounds (CD interest typically compounds daily or monthly). Say you invest $1,000 in a one-year CD with 1.81% APY, and interest compounds monthly. At the end of that year, your balance would grow to $1,018.25 — your initial $1,000 deposit, plus $18.25 in interest. Now let's say you choose a one-year CD that offers 4% APY instead. In this case, your balance would grow to $1,040.74 over the same period, which includes $40.74 in interest. The more you deposit in a CD, the more you stand to earn. If we took our same example of a one-year CD at 4% APY, but deposit $10,000, your total balance when the CD matures would be $10,407.42, meaning you'd earn $407.42 in interest. Read more: What is a good CD rate? When choosing a CD, the interest rate is usually top of mind. However, the rate isn't the only factor you should consider. There are several types of CDs that offer different benefits, though you may need to accept a slightly lower interest rate in exchange for more flexibility. Here's a look at some of the common types of CDs you can consider beyond traditional CDs: Bump-up CD: This type of CD allows you to request a higher interest rate if your bank's rates go up during the account's term. However, you're usually allowed to "bump up" your rate just once. No-penalty CD: Also known as a liquid CD, type of CD gives you the option to withdraw your funds before maturity without paying a penalty. Jumbo CD: These CDs require a higher minimum deposit (usually $100,000 or more), and often offer higher interest rate in return. In today's CD rate environment, however, the difference between traditional and jumbo CD rates may not be much. Brokered CD: As the name suggests, these CDs are purchased through a brokerage rather than directly from a bank. Brokered CDs can sometimes offer higher rates or more flexible terms, but they also carry more risk and might not be FDIC-insured. This embedded content is not available in your region.
