High-yield savings account

How it works

It works like any savings account: you deposit money, interest is added on a regular schedule, and the APY expresses a year’s worth of that interest as a percentage. The difference is the rate, which is usually variable. The bank or credit union can change it after you open the account, and federal rules do not require advance notice for a change in a variable rate.

An advertised rate can come with conditions, so the account terms are worth reading. Some rates apply only above or below a certain balance, some are introductory and later drop, and some accounts charge monthly fees or limit certain withdrawals. Other changes that could hurt you, such as a new fee, generally require 30 days’ advance notice. Transfer times to and from your checking account matter too.

Deposit insurance depends on where the money actually sits. A high-yield account at an FDIC-insured bank or federally insured credit union is covered within the standard limits. Some are offered through apps run by nonbank companies; the app itself is not FDIC-insured, and the money is covered only once it reaches a partner bank and other conditions are met. The FDIC’s BankFind tool can confirm whether the named partner bank is FDIC-insured.

Related terms

Sources and further reading

• CFPB: Advance notice of deposit-account changes
• FDIC: Banking with third-party apps

Examples are illustrative and focus on U.S. personal finance. This page is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.