UFB High Yield Savings
- 5.25% APY
- $0 monthly fees
- $0 minimum deposit
- FDIC insured
Putting your cash into a compound savings account can make your money work harder — you get to earn interest on the money you’ve deposited and earn interest on the interest you’ve earned.
A compound interest account reinvests your earned interest into your balance. This new balance then continues to earn interest, resulting in effectively earning interest on your interest — also known as compounding.
Most savings accounts have interest that compounds daily or monthly, meaning your earned interest is folded into your balance each day or once a month. But you might find some that compound on a quarterly or annual basis. Daily compounding is the ideal rate, as it’s the fastest way to grow your money, though the difference between daily and monthly is very minor.
These compound interest savings accounts feature market-leading APYs, few fees and little to no minimum deposit requirements.
UFB High Yield Savings
American Express® High Yield Savings Account
SoFi Checking and Savings
The more frequently your interest compounds, the quicker your money will grow. There are generally four rates of compounding interest.
Most work off of a simple formula, though slightly tweaked depending on the compounding rate. Here’s the formula for daily compounding for example: Daily closing balance x interest rate (as a percentage) / 365
Want to see how much you could earn with daily compound interest? Use a compound interest calculator to estimate your savings growth.
Although savings accounts and CDs are the most common, there are other accounts that compound your interest. How often it compounds depends on the type of account and the bank.
Depending on the bank, your savings account could compound on a daily, monthly, quarterly or yearly basis. Savings accounts tend to limit the number of withdrawals you make each month, and their interest rate fluctuates alongside changes to the federal interest rate. The best high-yield savings accounts offer far more competitive yields than traditional brick-and-mortar banks.
UFB High Yield Savings
Finder score: 5 / 5 ★★★★★
CDs compound on a daily or monthly basis. Compared to savings accounts, their main advantage is that they’ll lock in the account’s APY for the duration of the CD term. This means that if the federal rate changes in the interim, your CD’s APY is unaffected. However, while your rate is locked, so is your money. If you need to withdraw your money before the term is up, you’ll pay a withdrawal fee. The best CDs offer high interest rates for a low minimum opening deposit. The best CDs offer a 12-month term with an APY upwards of 4% or more, while the FDIC average for a 12-month CD is 1.36% APY. Longer-term CDs tend to have higher rates than even the best savings accounts.
Western Alliance Bank 12 months CDs through Raisin
Finder score: 4.7 / 5 ★★★★★
|Minimum deposit to open||$1|
These accounts compound on a daily, monthly, quarterly or yearly basis, depending on the bank. Money market accounts are very similar to a savings account when it comes to interest and saving money. The main difference is a money market account typically offers a debit card and the ability to write checks. Rates between savings accounts and money market accounts are roughly similar, so the one you to choose depends on whether you value the additional spending flexibility.
Pacific Western Bank MMDA through Raisin
Finder score: 4.8 / 5 ★★★★★
Your money is FDIC-insured through Pacific Western Bank, which is based out of Los Angeles, and offers a wide range of lending, leasing and banking services.
|Minimum deposit to open||$1|
While rare, some checking accounts offer interest, which typically compounds on a daily, monthly, quarterly or yearly basis, depending on the bank. Checking accounts tend to have lower interest rates than savings accounts or CDs and may also carry fees or restrictions. For example, Axos Bank Rewards Checking offers 1.25% APY but only up to $50,000. Still, this is better than the FDIC interest rate average for checking accounts, which is currently at 0.06% APY.
SoFi Checking and Savings
Finder score: 4.5 / 5 ★★★★★
An IRA account is typically made of a variety of investment options, and each could compound at a different rate: monthly, bi-monthly or annually. There are multiple great IRA options, including Roth and Simple IRAs, each with its own set of rules and advantages. Compared to savings accounts or CDs, IRA accounts are riskier as they’re subject to the ups and downs of the stock market. These accounts have the opportunity for the biggest gains over a long period of time, though they carry more risk of value loss through market volatility.
Finder score: 4 / 5 ★★★★★
Dividend stocks tend to compound quarterly, though you can find some that compound monthly. Dividend stocks are a type of stock investment that pays out dividends based on your owned shares. These can lead to stable, reliable returns on an investment, though the quality of your investment can range from company to company and how they react to a fluctuating economy.
Bonds earn interest monthly and compound semi-annually every six months. Bonds are an asset investment option similar to stocks or real estate, though they are technically loans to the consumer from an entity. These entities eventually pay back the bond amount purchased by the consumer, plus interest. They fall into three categories: corporate, government and municipal. Since these are effectively “loans,” you can’t retrieve your money before the bond’s maturity without paying some form of penalty, typically three to 15 months of interest, depending on when you cash out. Bonds tend to have higher interest rates than savings accounts and CDs: I bonds currently sport an APY of 6.89%, according to TreasuryDirect.
These high-return investment options grant assets that return a portion of the company or land’s profits. Since its profits are reliant on other factors like the real estate market, REITs are a riskier investment compared to savings accounts or CDs.
While there are other types of accounts that compound interest, savings accounts are the most well-known and often the most flexible. If you’re looking for a compound interest account, these are a good place to start. Select up to four accounts and select “Compare” to see how they stack up side-by-side.
When comparing savings accounts, there are a few important considerations to determine the best one for your needs.
|Bank||Savings account||How often they compound||Highest APY offered|
|UFB||UFB High Yield Savings||Daily||5.25% APY|
|CIT Bank||CIT Savings Connect||Daily||4.65% APY|
|Barclays||Barclays Online Savings||Daily||4.35% APY|
|Discover||Discover Online Savings Account||Daily||4.3% APY|
|American Express||American Express® High Yield Savings Account||Daily||4.30% APY|
|Quontic Bank||Quontic Bank High Yield Savings||Daily||4.5% APY|
|Capital One||Capital One 360 Performance Savings||Monthly||4.3% APY|
|Bread Savings||Bread Savings™ High-Yield Savings||Daily||5% APY|
To get the most out of compound interest, deposit as much as you can into your account and limit any withdrawals from it, whether for bills or fun money. The more that’s in your account at the end of the month, the more interest you’ll earn. Even if you can’t deposit extra money into your account, your balance continues to grow as your interest compounds each month.
Depending on the interest rate and your balance, the difference between daily, monthly and yearly compounding might only amount to a matter of pennies. But if you have a high balance and a high interest rate, the difference in compounding frequency could add up to a decent chunk of change.
Here’s a breakdown of how much interest $10,000 would earn in a 1% APY savings account over the course of 10 years based on whether interest compounds yearly, monthly or daily. For simplicity’s sake, this example assumes no additional contributions are made to the account.
Open a compound interest account the same way you would any bank account. Most CDs, savings and money market accounts compound interest, but how often it compounds varies. The first step would be to find an account with a compounding frequency that suits your needs. Look at the deposit agreement to find the account’s compounding frequency, and if you can’t find it, contact the bank.
To get the most out of an account with compound interest, save as early as possible and avoid unnecessary withdrawals.
Compound interest is an incredible benefit. But it’s only one element to consider when shopping for a savings account.
Yes, provided the account is insured by the FDIC. Most reputable banks and accounts are FDIC-insured, which protects up to $250,000 of your investment. Accounts that don’t offer this insurance are much riskier.
If you’re not sure where to start, read our comprehensive guide to interest rates to see popular high-interest savings accounts. Note that interest rates are often variable, meaning they can change according to the federal interest rate.
Unlike Treasury bonds, treasury bills (T-bills) don’t compound interest. Treasury bonds compound interest every six months. T-Bills are bought at a discounted rate, and you get the full value when it matures. For example, say you were to buy a T-Bill for $90 and it’s worth $100. Once it matures you get $100, so you technically made $10.
Yes, they can. A 401(k) is a retirement plan offered by employers to help employees save up money for retirement. When you contribute to the 401(k), you can choose to invest the funds into investments that compound interest.
See top bank accounts that currently offer 5% or higher interest right now, plus see options that allow you to lock in your rate.
Chime’s savings account has a solid APY and is free but requires a Chime checking account.
The credit-monitoring company’s savings account earns an attractive amount of interest, and it has above-average FDIC insurance and a monthly sweepstakes.
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