Are high-yield savings accounts safe?

Yes, if the account is at a bank or credit union insured by the FDIC or the NCUA, respectively. The FDIC insures banks up to $250,000 per depositor, per bank, for each account ownership category. Credit unions are insured by the NCUA, which offers coverage up to $250,000 per share owner, per insured credit union, for each account ownership category.

Are high-yield savings accounts taxable?

If you choose to use a high-yield savings account, you should be aware of the tax implications that come with it. The IRS considers interest earned on the money in your account taxable interest. Your financial institution will typically send you a 1099-INT statement for any interest earned over $10, and the amount you owe will depend on how much interest you’ve earned and your tax bracket.

How are savings rates set?

Individual banks set savings rates loosely based on the federal funds rate—the interest rate that banks charge other banks when they lend one another money, usually overnight or for a few days. When the Fed hikes rates, this can raise the cost of borrowing and motivate banks to raise their APYs to attract new customers.

How often do high savings rates change?

Savings rates can change at any time. It’s important to remember that the rate information provided on the day you open the account is not a fixed rate. Banks and credit unions can, and likely will, adjust rates based on changes in the economy and interest rate increases or decreases by the Fed.

How often can I withdraw money from a high-yield savings account?

According to federal law, high-yield savings accounts allow you to make withdrawals or transfer funds out of your account up to six times per month without paying any fees. However, this rule was loosened in 2020 during the coronavirus outbreak, and customers can now make an unlimited number of transfers and withdrawals from their savings accounts.

In which situation would a high-yield savings account be the best banking choice?

A high-yield savings account is a viable option for savers who are looking to save money for a large purchase, such as a house, a short-term or midrange financial goal, or who want to maximize their savings and keep their money safe in a federally insured account.

What is a good high-yield savings account rate?

What’s considered a “good” rate is somewhat subjective. The national average savings account rate is 0.41%, so any rate above that would be considered above average. However, many banks offer savings accounts earning 1% APY and up—as much as 4% to 5% APY. So, if you’re looking for a high-yield savings account, it pays to shop around to find the highest rates available.

What’s the difference between APY vs. interest rate?

The interest rate is the percentage of your account balance that the bank pays you in interest over the course of a year, not factoring in the effects of compounding. APY, on the other hand, considers the interest compounding frequency. Therefore, APY gives you a more accurate picture of your actual earnings over a year.

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Personal FinanceSavings

Best high-yield savings accounts of May 2025

BYGlen Luke Flanagan

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