6 Things to Look For in a High-Yield Savings Account

If there’s a money-making tool I love as much as I love the Roth IRA, it’s the high-yield savings account. The HYSA is one of my favorite ways to save money for the short-term and for projected, expected expenses. Below are six tips to help you choose a high-yield savings account.

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You’ve always known that saving money is a good thing, right? Starting with your first coin bank, you knew that saving money for that special toy would make you feel like a proud, responsible kid.

And when you opened your first checking account, you probably opened a savings account at the same time. Or maybe your first bank account WAS a savings account. My first account was at Olympia Federal Savings in Olympia, Washington.

By the time you became an adult, you were still using the same savings account. Which means you’re likely earning less than 1% interest. You’re paying fees if you don’t keep a balance above a bajillion dollars. Or you get charged a fee anyway just because the bank can!

Let’s Talk To An Expert!

That is why I reached out to my good friend Charly Stoever. Charly is a non-binary LatinX money coach and host of the Unicorn Millionaire podcast, and they’re a huge fan of HYSAs and recommends them over a typical bank or credit union. “The interest rates are astronomically higher than in regular checking and savings accounts because these banks don’t have to pay to hire employees [in a physical location], so they pass on the savings to you with much higher savings rates.”

This is true. First Fed reports that a high-yield savings account pays 10-20% MORE in interest than a regular savings account!

High-Yield Savings Account Must-Haves

1. “Always confirm it’s FDIC-insured,” says Charly. “That means that the cash is insured up to a certain amount.” The Federal Deposit Insurance Corporation guarantees that your money is protected up to $250,000 at one (insured) bank. If you have more than $250,000 in savings, you should open an account at another bank so you’re covered in case of a loss.
2. No direct deposit requirements. Don’t allow a bank to tell you how to manage your money. If you want to sign up for direct deposit, do it.
3. No fees. The big three (Chase, BofA and WF) banks charge a maintenance fee and in some cases, they charge a fee if you fall below a certain balance. As of this writing, Ally, CIT Bank and CapitalOne don’t charge maintenance fees.
4. A bank app. At the very least, you should be able to check your balances and transfer money between accounts inside and outside the bank.
5. A way to split up an account into buckets or a way to open multiple accounts. FOR FREE.
6. Competitive interest rate. As of this writing, rates range from 3.3% to 4.8%. My bank is currently paying 3.3%. It’s lower than average, but I’m happy with my bank and I don’t want to spend time chasing interest rates every few months.

Additionally, you may want:

• 24-hour customer service
• Bonus for signing up (just make sure to read everything carefully for the rules)
• Quick access to funds (wire transfers, debit card access, etc.)

But what if you want human contact at your bank? Charly’s advice? “Focus on talking to regular humans in your life because talking to humans at a [local] branch is not worth losing out on the potential tens of thousands of dollars you’d get in interest in a HYSA.”

Banks like Wells Fargo have people (you can talk to in person) and they scammed the shit out of customers when they opened millions of fake ghost accounts.

Charly stoever

The Unicorn Millionaire’s Tips on Getting the Most Out of Your High-Yield Savings Account

• Put all cash in your HYSA (or in multiple accounts, preferably at the same bank). There’s no reason to have savings in a low-interest checking or savings account.
• Only put money in checking when you need to pay a bill or pay someone, such as through Venmo.
• Pay all credit cards from your HYSA.
• If you make more than 10 withdrawals or transfers from your savings account, consider opening a second (free!) HYSA. Charly has two HYSAs for that reason.

Need a bit more persuasion to see how much more you can earn in a HYSA? When I researched rates and fees, and all that other nonsense, I was stunned at the audacity of the big banks. Chase, Bank of America and Wells Fargo charge fees if you don’t set up automatic transfers or maintain a minimum balance for an interest rate of 0.01 percent. And they want US to give our money to them? Not a chance.

High-Yield Savings Account Tax Implications

Yes, there could be tax implications with a HYSA, as there could be with your regular savings account. No, the HYSA is not a retirement account. It’s a great savings vehicle for your emergency fund at any age, sure. So let’s clarify a few points.

1. A high-yield savings account is a bank account. It generally works the same way as your credit union savings account (just better!). You deposit money, the money earns interest. You can make withdrawals.
2. A HYSA is not a tax-deferred account. It won’t reduce your taxes now or in the future the way a 401(k) or Roth IRA will. It is not a good vehicle (by itself) for saving for retirement. Funds aren’t invested in the stock market. Its growth is limited to whatever the current interest rate is for the bank.
3. Yes, you may have a tax obligation with a HYSA. But you may also have a tax obligation with your Chase savings account. If you earn interest in your Chase savings account, Chase will send you a 1099-INT form in January. If you earn interest in your online high-yield savings account, that bank will send you a 1099-INT form in January. All banks do this.
4. When you file taxes, you report how much interest you’ve earned. You don’t report the balance of your account. Your tax situation (income earned and tax bracket) contribute to your final tax bill.

Setting Up Your HYSA

Once you find a bank you like, grab your ID, take 20-30 minutes and open an account. Check your email (and junk mail folders!) for any instructions. Your application will be rejected if the bank can’t verify your identity.

Then connect your funding account. Usually this is your main checking account. You can also have your payroll department to deposit part of your paycheck into your new savings account (remember to pay yourself first!).

When you have time, look up the bank’s education section. It’ll have useful info on how to use the savings accounts to their maximum advantage. I love Ally because they have boosters and round-ups, and they have videos that show you how they work. These are little ways to add to your savings that have huge impact! (If you decide to go with Ally, you can use my referral code and we’ll both get a bonus!)

One thing I love about these accounts is using the bucket system. I’m a very visual person and need an overall picture of view of where I need to add money or how far along I am in my goals. My eldest kiddo finds the buckets too overwhelming and they just put everything into their one savings account. My middle and youngest sons like the buckets. Do what works for you.

My current buckets are:

• Cats
• Travel
• Emergencies
• Cars
• World Cup 2026
• Holidays
• Birthdays
• Entertainment (concerts, plays, museums)
• My granddaughters
• Online sales

My cats don’t have pet insurance, so I save throughout the year for vet visits, licenses and special treats like scratchers and if they’re good this year, a cat tree.

This is Samantha, my mother’s kitty. She doesn’t care that she has a savings account because she doesn’t pay any of her bills.

Have I convinced you yet? Want to know more? I hosted a webinar on HYSAs that you can watch for more information!