Interest rates are often changing, so take advantage while APY is high.
The interest rate being offered by a savings account, money market account, certificate of deposit or checking account is the main indicator of how fast your account balance will grow. If you calculate the interest incorrectly, you could make the wrong choice about the high-interest savings account that’s right for your needs.
- Interest compounded daily
- 24/7 online account access
- FDIC insured
Our top pick: CIT Bank Savings Builder High Yield Savings Account
A super-high interest rate if you're in the habit of saving at least $100 per month or have $25K in the bank.
- APY: 2.45% with a minimum balance of $25,000 or a monthly deposit of $100+
- APY: 1.17% with a balance below $25,000 and monthly deposit of less than $100
- Monthly fee: None
Compare today’s rates
How do interest rates work?
Interest rates have a major impact on how your money will grow, and they’re constantly changing. In the early 2010s, average interest rates in the US dropped and then held steady at a low rate for several more years. We’re just now beginning to see interest rates climbing back up, which means that money in the bank will be able to accrue interest more quickly.
When interest is calculated, when it is deposited and if the account allows for compound interest will all be determining factors when comparing interest rates. Compound interest means that you accrue interest both on the money you put into the account and on the interest you’ve already earned.
How are interest rates calculated on my account?
Interest is calculated by this formula: Daily closing balance/365 x Interest rate/100″
If you are comparing high-interest savings accounts and wondering about the significance of having the interest calculated daily and paid monthly, it basically means you will earn more interest.
How to get the best interest rates
Don’t stop at the advertised interest rate when making savings account comparisons. There are various points to consider that will help you determine which savings account is best for you:
- The base rate. The standard interest rate is where your comparison should start. Check to see if it is variable or fixed and how it compares against other savings accounts.
- Introductory rates. Some banks will offer an introductory rate on a savings account. Check to see for how long that rate is in effect, and if you need to meet any requirements in order to maintain it. Compare both this rate with the account’s standard rate — if you can find a higher standard rate on another account, you could be better off in the long term.
- Compound interest. Ideally you want a high-interest savings account where interest is calculated daily and paid into the account monthly. This allows you to grow your savings faster by being paid for interest that you have already earned.
- Terms. Check to see if the interest rate is only applied if you are able to meet certain conditions, such as maintain a minimum balance or make a limited number of withdrawals.
- Flexibility. Interest rates are predicted to keep going up for a while longer, which means that if you are locking in a CD account, look for an interest rate that isn’t going to be exceeded by those of online savings accounts in the next few months. Or choose a CD that lets you upgrade your interest rate or withdraw for an early exit to a better investment option.
Things to consider when choosing an account
Interest rates are not the only important feature for a savings account. When making your comparisons check for:
- Linked account. Some savings accounts need to be linked to a checking account in order to facilitate the transfer of funds. Check to make sure that by opening a savings account at a different bank, you can still use your current checking account to link them.
- Introductory rates. An introductory rate on interest can give you a big boost toward meeting your savings goals.
- Security. Ensure that the financial institution is insured by the FDIC so that you’re safe is something happens to the bank.
- Fees and penalties. Certain monthly fees could apply to savings account products as well as penalties for making too many withdrawals. Read the fine print carefully to make sure that extra fees aren’t eating your savings.
- Balance requirements. You might be expected to open the account with a certain amount of funds, or have to maintain a minimum balance in order to avoid fees.
Any interest earned on a savings account is taxable as income. This includes earnings on children’s savings accounts and CDs. However, you can claim deductions on expenses tied to earning the income. This can include account-keeping fees from the bank, management fees or financial consultations.
What are the risks?
You could easily not meet your savings potential by not weighing the type of savings account and the interest rate carefully. In order to avoid this, make sure that you are:
- Choosing the right account. If you are savings towards a goal that is a few years off, you’ll get the highest return with a certificate of deposit.
- Not mistaking an introductory rate for the standard. Check the advertised rate carefully, as this may just be the introductory interest rate. The standard rate is what will be applied after the introductory period ends.
Finding the perfect savings account can feel overwhelming, but a high interest rate coupled with low fees will help your savings grow. Take your time to compare rates, balance requirements, linked accounts and your level of trust in the bank itself — and then open your account and start saving.
How did we choose these accounts?
Our lists of best savings accounts and CDs are ordered by specific features like annual percentage yield (APY).
Common questions about interest rates
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