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High yield savings accounts vs. traditional savings accounts: How to choose?
Key takeaways
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High-yield savings accounts offer significantly higher interest rates than traditional accounts, helping your money grow faster
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Traditional savings accounts provide in-person banking, bundled services with checking accounts, and easier immediate access to cash through branches and ATM networks
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Both account types offer the safety of FDIC insurance at least $250,000 per depositor, per bank, per ownership type
When it’s time to choose a savings account, should you go with high yield or traditional? The answer may seem like a no-brainer—just pick the one with the highest interest rate, right? But each type of account has its own advantages for different consumers with their own financial goals.
There's more to this choice than interest rates. Let's look at the details so you can decide which type of savings account is best for you.
What is a savings account?
A regular savings account is a bank account that lets you store your money safely while it earns interest. These accounts allow easy access to your savings, with few restrictions or limits. They usually allow in-person visits to a bank to make transactions and may also often offer ATM and online access as well.
What is a high-yield savings account?
A high yield savings account (HYSA) is a type of savings account that offers a higher annual percentage yield (APY) than standard savings accounts. However, these accounts may have restrictions, like limits on the number of withdrawals you can make in a given period and requirements for minimum balances.
Benefits of a high-yield savings account
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Faster growth for your money. With compound interest working for you, the higher interest rates help your savings increase faster
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Low fees. Many of these high-yield accounts have low or no monthly fees. Some have monthly fees—but if you keep a certain minimum balance, a bank may waive the fee. However, falling below a minimum balance or excessive transactions could trigger other fees
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Low minimum balance requirements. Some high-yield accounts have no minimum balance requirements or a minimum balance level of $100 or less
Benefits of a traditional savings account
What are the features that lead so many people to open traditional savings accounts? For some, it's mainly about the way they prefer to do business.
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In-person banking. If you need assistance at the bank or just prefer face-to-face transactions, in-person banking lets you work directly with a live teller or account specialist
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Bundled banking services. Savings accounts are typically linked to checking accounts. Besides the convenience, the arrangement may come with perks, too. For example, free checking if you maintain a certain minimum savings balance. You might also find relationship rates—better interest rates when you have bundled accounts. Other offers might include no-fee ATMs and free services like money orders and wire transfers
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Easy access to money. If a bank branch is open, you can walk in and withdraw or deposit money. Plus, traditional savings accounts often come with a debit card you can use at ATMs
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Low or no fees and balance requirements. Many banks don't charge saving account fees and have no minimum balance requirements. Even when fees and requirements apply, banks may give customers multiple ways to have them waived
Which is best for you?
Both types of accounts offer a safe harbor for your money if your bank is insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC covers deposits to at least $250,000 per depositor, per insured bank, per ownership category, if a bank fails.
There are other factors to look at when you are trying to decide which type of account is best for you.
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Choose a high-yield savings account if: You want to grow your savings faster over a shorter period. A high-yield APY and compound interest will work together for you
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Choose a traditional savings account if: You often require access to your cash. Instant or same-day transfers between savings or checking accounts typically are available. You can visit the bank during business hours and walk out minutes later with your cash. Your bank may also belong to an ATM network that gives you no-fee access at convenient hours
FAQs
Depending on your bank, it could take a few days to access funds deposited into your account.
Typically, transferring funds between banks takes 24 to 48 hours. Transferring money between accounts with the same bank could occur instantly or on the same day. Some banks provide ATM cards, allowing for quick access to available funds, although there may be limits on the number of transactions or amounts you can withdraw.
High-yield savings accounts typically have variable rates. They can rise or fall based on actions by the Federal Reserve and economic conditions. However, traditional savings accounts also typically have variable rates.