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Welcome to This Week on Reddit, our weekly series that answers redditors’ biggest banking questions. Each week, our editors choose an interesting and relevant user question to examine. Read on for our expert analysis.
Following the Federal Reserve’s second rate cut of the year, savings account interest rates are falling from their historic highs. This has left many savers wondering how to maximize their interest earnings.
Today, some of the best rates can be found on high-yield savings accounts (HYSAs). These accounts work like traditional savings accounts — but as the name suggests, they typically provide much higher annual percentage yields (APYs).
However, not all HYSAs are created equal. Some offer modest rates and higher fees compared to competitors. So what’s the best HYSA available today? That’s what one redditor is trying to find out.
Reddit user NYSports1234 posted the following question on Wednesday:
The top response comes from user Alarmed-Membership-1, who correctly pointed out that following the Fed’s rate cuts, savings account rates across the board are on the decline. “So even if you find one that may have higher rate, it’s not guaranteed to stay at that rate,” they wrote.
Indeed, savings account rates are variable, so financial institutions can choose to increase or lower their rates at any time, at their discretion. And now that the Fed is implementing rate cuts, we can expect many banks and credit unions to follow suit.
Read more: How do banks set their savings account interest rates?
Still, if you’re going to have your money sitting in the bank, you might as well be earning as much as possible on the balance.
As far as the best HYSAs available today, there were mixed responses. Some options called out in the thread include Discover Bank (4.00% APY), Ally (4.00% APY), and Marcus by Goldman Sachs (4.10% APY).
User Crouton4727 noted that they held a high-yield savings account at VIO Bank over the last year, but didn’t like the functionality of the bank’s website and app. They recently made the switch to My Banking Direct (which currently offers 4.85% APY) and have been very happy so far.
Another user known as cbduck said that Openbank currently offers an attractive 5.25% APY, but they do not recommend it due to issues with the Android version of the app.
All of these suggestions are solid options, but are they the best?
A high-yield savings account can be a great place for your savings because it helps you grow your balance through compound interest.
High-yield savings accounts work the same way traditional savings accounts do; the main difference is the interest rate. Typical savings account interest rates are less than 1% APY, while high-yield savings accounts offer rates as high as 4% to 5% APY.
However, it’s important to keep in mind that some high-yield savings accounts require you to maintain a minimum balance in order to earn their highest rate and/or avoid fees. For example, BrioDirect is currently offering 5% APY, but you must deposit at least $5,000 to open that account.
On the other hand, certain accounts may cap the balance that earns the highest APY.
So if you’re looking for the highest possible HYSA rate, make sure you can meet the minimum balance requirement (if there is one) and ensure that your entire balance can earn interest.
That said, here’s a look at some HYSAs from our verified partners, all of which earn at least 4% APY:
Our experts also analyzed the top HYSAs on the market today and ranked the 10 best, based on factors such as interest rates, fees, minimum deposit requirements, customer service, and more. You can see our list of the 10 best high-yield savings accounts here.
It’s also important to note that some financial institutions offer incentives to drum up new business in the form of cash bonuses. For example, SoFi currently offers a $300 sign-up bonus to new savings account customers.
An extra few hundred dollars can help you reach your savings goals a little faster, but bonuses shouldn’t necessarily be a key deciding factor in the account that you choose. Before you sign up for an account because of a bonus offer, read the terms and conditions of the offer to determine what the requirements are to qualify for and keep the bonus. Here’s a list of the best new bank account bonuses available right now.
Finally, know that an HYSA isn’t your only option. Especially as interest rates fall, you could benefit from putting your money in a certificate of deposit (CD). These accounts may offer better rates than many savings accounts, and they allow you to earn a fixed rate. The catch is that you must keep your money on deposit for a set period of time, known as the CD’s term, which can range from a few months to several years. If you pull your money out before the CD matures, you will have to pay a penalty.
Read more: The best CD rates on the market today
The right high-yield savings account for you will depend on the factors that matter most to you, whether it’s earning the highest rate possible, avoiding fees, maintaining easy access to your money, or other perks.
Before opening an account, evaluate what kinds of fees you could incur, whether there are any minimum balance requirements, how easy it is to access your funds, and what customer service options are available. Ideally, you should choose an account that helps you grow your savings without any hurdles or headaches.