Standard Vs High Yield Savings

Ready to Stretch Your Savings and Reach Your Goals Faster?

Read on for your complete guide to standard vs. high-yield savings accounts. 

Let your money generate even more money through a standard savings account or a high-yield savings account. Whether you want a nice nest egg, plan to remodel your home, or make a large purchase, reach your goals faster and maximize your funds. 

But how do you know which savings account is right for you?

Standard Savings Accounts

This is the type of account you typically think of when a savings account comes to mind. Every bank offers standard savings accounts, and most people normally open one in conjunction with a checking account.

Here are the pros and cons of a traditional savings account. 

Pros of Savings Accounts

  • Minimal funds required – The amount needed to open a savings account is typically very low, with some banks offering a $25 minimum initial deposit. 
  • No credit checks – Credit checks are not required to open a savings account. 
  • Easy withdrawal – You have 24/7 access to your money and can make withdrawals and transfers anytime. 
  • Minimal fees – Most savings accounts have no monthly maintenance threshold or a relatively low balance (or in some cases, number of deposits) you are required to maintain to avoid fees.
  • Insured by the FDIC – The FDIC insures up to $250,000 in deposits.

Cons of Savings Accounts

  • Low-interest rates – Interest for standard savings accounts is low. For example, as of May 2022, the national savings rate is only 0.07% annual percentage yield (APY).
  • Slower return – Due to low-interest rates, your rate of return will be slower than a high-yield savings account.
  • Limited withdrawals – You can only withdraw a maximum of 6 times per month, as mandated by the federal government. This is a key difference between checking and savings accounts.

High-Yield Savings Accounts

Just as they sound, high-yield savings accounts are designed to give you a faster return on your money.

This type of savings account is most commonly offered by online banks. You may find some traditional banks that offer a high-yield savings account as a separate product in the same way that banks issue credit cards, but they are not as common. 

Pros of High-Yield Savings Accounts

  • Higher interest rates – This type of savings account offers above-average interest rates, which means a faster return on your money. 
  • Low risk – There is no risk of losing funds as you might experience with stocks or other investments. 
  • Minimal fees – Due to lower overhead, most online banks either charge very low fees or do not have monthly fees at all.
  • Easy access – Withdraw money at any time. Just be aware of the 6-time-per-month withdrawal maximum. 

Cons of High-Yield Savings Accounts

  • Interest rates fluctuate – Interest rates can change at any time, depending on the economy. 
  • Not for long-term – Although great for the short to mid-term, there are better alternative options for long-term savings like retirement funds.
  • Withdrawal limits – Per the federal mandate, you can only make 6 withdrawals per month. 
  • Larger initial deposit – Most high-yield savings accounts require a larger minimum deposit to open an account.
  • Credit check – A soft pull of credit is typically done before opening an account. This should not affect your credit score but might be an issue if your credit score is already very low.

How to Choose Which Account is Right for You 

The bottom line is that standard and high-yield savings accounts operate very similarly. Both are insured by the FDIC, allow for a maximum of 6 withdrawals per month, have minimal fees, and are ideal for short to mid-term savings. 

The main differences are that higher-yield savings accounts have higher interest rates (which is a good thing when it comes to investments), allow for faster returns, require a larger initial deposit, and are mainly offered by online-only banking institutions.

On the other hand, standard savings accounts require a small initial deposit, are provided at both in-person and online banks, and have a lower interest rate with virtually no risk. 

Which type of savings account you choose will depend on your needs.

A high-yield savings account is the way to go if you have a large deposit available and want to reach your goals faster.

However, a standard savings account is a great option if you have a small initial deposit and are not in a hurry to reach your goals. 

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