Although it sounds attractive, the term “high interest” can be misleading. While you shop around for the best rate, it can be hard to keep your facts straight. Here’s what you can expect from so-called “high interest” savings accounts—and an option that may be a better fit for your funds.

What is a “high interest” savings account?

“High interest” or “high yield” savings accounts are basically just savings accounts that pay better-than-average interest rates. These higher rates may come with conditions like minimum balance requirements or maintenance fees. Some accounts offer high initial rates that drop to lower-than-average after a certain time period. You may even find that the savings accounts offering the most competitive rates aren’t specifically termed “high yield” or “high interest” at all.

What are “high interest” savings accounts good for?

A savings account with a competitive rate is good for funds you need access to quickly or regularly. They’re easy to set up, especially online savings accounts, and simple to use. Also, because savings accounts at FDIC-member banks are insured by the Federal Deposit Insurance Corporation (FDIC) up to the maximum amount allowed by law, they are a good place to put money you aren’t comfortable taking risks with. You could use a savings account for your emergency fund, for example, or a short-term savings goal.

Are there other “high interest” ways to save?

If you have a chunk of change you don’t need to access for a while, you may be better off considering a certificate of deposit (CD) over a “high interest” savings account. The tradeoff is that CDs require you to leave your funds in the account until the maturity date, which varies from a few months to several years. If you withdraw the funds before the maturity date, you may be charged an early withdrawal penalty. However, CDs often offer higher rates that the ones you receive when you place the same amount into a savings account for the same amount of time. The highest rates are usually reserved for CDs with the longest term lengths, but CDs come with a variety of different terms and features.

How can I find the best interest rates?

Whether you determine that a savings account or CD is best for your goals, wanting the highest interest rates is natural. Start rate shopping with a comparison site like You’ll likely find that online banks offer some of the most competitive rates because they don’t have the overhead expenses of brick-and-mortar banks. Also pay attention to how often banks compound interest. Interest compounded daily will have a higher overall yield than interest compounded monthly, quarterly, or yearly. Once you have some numbers to run, play around with a savings calculator to get a sense of your potential earnings and see how different banks stack up.

Getting the highest rate shouldn’t be your only consideration. You want to make sure the other features and terms of the account work for you, too. Compare things like minimum balance requirements and fees, along with customer service reviews and website usability.

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Last Edited: November 20, 2017