What Is a High Interest Savings Account?
By Synchrony Staff
- PUBLISHED August 01
- 3 MINUTE READ
Unlike checking accounts, savings accounts aren’t designed to be used for daily expenditures. Since savings accounts aren’t accessed as often, they usually aren’t as costly for financial institutions to manage, allowing them to offer high rates. Online banks are also able to offer high interest savings accounts because they don’t have the overhead costs of brick-and-mortar locations.
High interest savings accounts also typically do not have penalties for early withdrawals like CDs**. This added flexibility is a popular reason for choosing a high interest savings account.
A high interest savings account is a great option if you have money that you aren’t willing to take risks with and want protected. Whether it’s saving for a big purchase such as a home, or securing an emergency fund that you can rely on, high interest savings allow you to maximize your financial security options.
Finding a High Interest Savings Rate
Due to various economic factors, interest rates have been low over the last few years. While the Federal Reserve has raised interest rates in the recent past, many banks have not kept pace.
That's why it's important to research which savings accounts have the best interest rates. Rates can change at any time, so make sure you stay up-to-date on the latest offerings and understand your account. Make sure you also know how much you will need to invest to achieve your interest yield goal.
What Is APY?
Understanding annual percentage yield (APY) can help you select the best high interest savings account for you. APY defines how much you may earn from your investment in a year. It’s determined by interest rates and compounding periods.
APY is different than annual percentage rate (APR). APY is how much you earn on your money, while APR is used to determine how much interest you pay on money you owe for loans, credit cards, etc.
There isn’t a set percentage that’s considered a high APY. Since interest rates change, financial institutions update their APYs offered on their deposit accounts regularly.
With today’s technology, you don’t have to calculate your APY manually. You can use our online calculator to get a good idea of what return to expect out of a high interest savings account.
You Control Your Money
With all of the financial products on the market, it’s important to research which account type helps you best achieve your financial goals. A high interest savings account often offers higher yields than a standard savings account and greater flexibility than a CD, making it a great option for your financial portfolio.