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When saving for a rainy day or a major purchase like a home or car, you might consider opening a high-yield savings account (HYSA). These accounts operate almost identically to traditional savings accounts, except for one major detail: the interest they earn.
Many high-yield savings accounts earn 10 times or more interest than a typical savings account. And while opening a high-interest savings account should feel familiar to you if you’ve opened a savings or checking account before, informing yourself can make the process go even more smoothly. Here’s what you’ll need to open an account and start earning a competitive rate on your savings.
Opening a high-yield savings account is a pretty straightforward process. It can be done in person, online, or over the phone, depending on the bank. Here are the general steps you should follow when opening a new account:
What is the best savings account for you? The answer lies in what your savings goals are, and how you plan to use the funds.
Most savings accounts offer interest on your balance, with the total return including compounding represented by its annual percentage yield (APY). The rates on savings accounts are variable, meaning they can change at any time with market trends. However, the average savings account rate is only 0.46%, according to data gathered by the Federal Deposit Insurance Corp.
A high-yield savings account, on the other hand, can offer a significantly higher return. In fact, these accounts can pay interest rates as high as 5% APY. That’s why it’s important to shop around and compare accounts before opening one.
Keep in mind, however, that APY isn’t the only account feature you need to consider. Picking the specific high-yield savings account that’s right for you depends on exactly how you plan to manage that account.
For example, if you only have a few dollars to put in savings right now, you may want to stay away from a performance savings account that requires a hefty opening deposit or minimum balance. Failing to maintain a big balance could lead to fees or missing out on the highest APY available.
If there’s a chance you’ll need to pull from your savings account for monthly bills or to keep you afloat in between paychecks, don’t choose a savings account with a monthly withdrawal limit. Exceeding this limit (which is often six per statement cycle) could lead to your account being closed or converted to a transactional (checking) account. You might also be subject to penalties.
Other features to consider include extended customer service hours, sign-up bonuses, or linked checking accounts.
High-yield savings accounts can be found at most types of financial institutions, and each has its pros and cons. Here are a few places to look for the best high-yield savings accounts:
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Online banks: Many online-only banks offer the highest savings account rates because they have lower overhead costs than traditional brick-and-mortar banks. The trade-off is that you can’t visit a physical branch if you want to do your banking in person. Some well-known online banks include Ally Bank, Discover Bank, and Capital One.
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Credit Unions: Many credit unions also provide competitive interest rates on high-yield savings accounts. Credit unions are not-for-profit institutions that tend to pass their savings back to members in the form of better rates and lower fees.
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Traditional banks with online divisions: Though traditional banks aren’t typically known for offering the most competitive rates, some do offer high-yield savings accounts through their online divisions. For example, CIT Bank and VIO Bank, which are affiliated with larger, well-known institutions, offer higher rates through their online savings accounts.
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Fintech companies and neobanks: Increasingly, financial technology companies and digital-only banks (also known as neobanks) offer high-yield savings accounts with competitive rates. Examples include Chime and SoFi.
Some banks will allow you to open a new high-yield savings account online, while others may require you to visit a branch and open your new account in person. This information will usually be listed on the bank’s website, though you can also call customer service and ask.
Depending on the financial institution and whether you already have other products or accounts there, you may also be able to open a new high-yield savings account through your web portal or mobile app with just a few clicks.
Just like opening a traditional savings or checking account, you’ll need to provide the bank with certain personal and financial information.
Most require you to provide the following to open an HYSA:
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A government ID with your legal name and birth date — such as a driver’s license, a state ID, a military ID, a passport, a permanent residency card, or a consular ID
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Your Social Security number or Individual Taxpayer Identification Number (ITIN)
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Your address (including a previous address if you’ve lived in your home for a shorter period)
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Your home phone number
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An email address
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Debit card information, a money order, or the routing and account numbers for a separate bank account if you need a deposit to open the account
Depending on the bank or your personal preference, you may be able to fill out the application online, in person, or by phone. If you’d prefer to open the account in person, you can make an appointment online or by phone at a local bank branch, if one is available.
To fill out the application online, you’ll need to create a login and then provide information such as your name, birth date, Social Security number, address, phone number, email address, citizenship status, employment status, and potentially the name of your employer.
In some cases, you may have to fax or email additional information, such as a copy of your driver’s license. In addition, if the bank has a physical location, you might have to come into the bank to finish opening your account. You might also have to fill out a bank signature card and mail it back before using the account.
Once you’ve completed the application and met the minimum deposit requirements, if any, the bank will activate your account. Some accounts are ready for use within minutes of approval, while others will take a day or even longer.
Some banks require you to make an initial deposit before you can start using your high-yield savings account. Typically, the easiest ways to fund your HYSA include depositing a check from a separate checking account using your bank’s mobile app, mailing a check to the bank, or setting up a transfer from a separate savings or checking account. To set up a transfer, you’ll need to provide the routing and account number of the account where you want to pull the money. You might also need to verify your login information to this outside account.
Opening a savings account is the first step toward saving for the future, whether for a specific goal or giving your family a financial safety net.
The next step? Managing and maintaining that account in the months and years to come.
Determine how much you want to add to your savings account and when you want to do it.
One of the easiest ways to ensure your balance grows consistently over time is to set up automatic contributions. Your employer may allow you to split direct deposits to different accounts, or you could set up a recurring transfer from your regular checking account to savings.
You should have beneficiaries for all of your bank accounts to ensure that if you die, the funds are passed on to the right people. If you didn’t select a beneficiary when you applied for the account, it’s a good idea to do so as soon as possible. You’ll need to know your beneficiary’s Social Security number to add them to the account. Many banks allow you to do this online, but in some cases, you may need to give the bank a call.
Once your account is open, you can download your bank’s mobile app, which may offer helpful online banking services such as mobile check deposit.
Be sure to create a strong password, set up two-factor authentication, and familiarize yourself with all the features of the app.
If you don’t want paper bank statements mailed to your home, you can sign up to receive e-statements through the bank’s website or app. Your financial institution may even require enrolling in e-statements to avoid fees or earn the highest advertised interest rate.
You can set up account alerts (email, text, and/or app notifications) to let you know when certain transactions occur. This not only helps you keep tabs on your account balance, but also can be a good way to catch any suspicious activity early.
Many banks offer free budgeting tools or other free financial tools to help you keep track of your account, save for different goals, and visualize your progress. Seeing how your contributions are helping you move closer toward your goals can motivate you to stay the course.
To open a savings account, you’ll typically need a few key documents on hand to prove your identity, such as a driver’s license and Social Security number. If your bank has a minimum opening deposit requirement, you’ll also need to have those funds ready to addd to your new account.
The best bank to open a savings account depends on the features that are most important to you. If you aren’t sure where to start, you can see our ranking of the 10 best high-yield savings accounts here.
There’s no set amount needed to have a savings account. Many banks and credit unions offer free savings accounts or accounts that require as little as $1 to open and earn interest, while others may require $100 or more. Of course, the more money you have in a savings account, the more interest you can earn over time.