Pros and cons of a high-yield savings account (2024)

Editor's Note: APYs listed in this article are up-to-date as of the time of publication. They may fluctuate as the Fed rate changes. CNBC Select will update as changes are made public.

High-yield savings accountsaren't just a stable place to stash your cash: Thanks to their higher returns, your money will grow faster than in atraditional savings account.

There are HYSAs with annual percentage yields well over 5% — more than 10 times the 0.45% average APY available from traditional savings accounts, according to FDIC data from May 2023.

If you need to build your emergency fund or are working toward paying for a wedding, a dream vacation or a down payment, a HYSA makes perfect sense. But there are still drawbacks to consider.

Below, CNBC Select discusses the pros and cons of high-yield savings accounts.

Compare offers to find the best savings account

Marcus by Goldman Sachs' high-yield account has a 4.40% APY and no limit on how much money you can withdraw. (There is a limit of six withdrawals and transfers per monthly statement period, however.)

If you pair your HYSA with anAlly Bank Spending Account(Ally's checking account product), you'll get access to more than 43,000 free AllpointATMs. Ally will even reimburse out-of-network ATM fees up to $10 per month.

In addition to a healthy 4.75% APY, a Synchrony Bank High Yield Savings account comes with an optional ATM card with six free withdrawals per statement cycle. Synchrony will refund ATM fees in the U.S. up to $5 per cycle.

There are many benefits to opening a high-yield savings account.

Higher returns

In May 2024, rates for high-yield savings accounts hovered between 4.5% and 5%, greatly outpacing the average 0.45% return available from a traditional savings account. Because interest compounds daily or weekly, you don't have to start with much to build up a nice chunk of cash:

Lower risk

High-yield savings accounts are a safer option than stocks, bonds, ETFs, cryptocurrency and other investments that are dependent on market fluctuations. You can't lose your money because, just like your regular checking and savings accounts, the money is insured by theFederal Deposit Insurance Corporation up to $250,000.

Of course, the APY for any savings vehicle cango up or down, especially if the Federal Reserve changes its benchmark fund rate.

Accessibility

Unlike CDs, which are locked in for a fixed term, you can withdraw and transfer funds in an HYSA without any penalty. That could be helpful if you're nervous about an unexpected expense. Many accounts provide optional access to an ATM card, though the number of transactions or amount you can withdraw may be limited.

Fewer fees

The best high-yield savings accounts come with no monthly fees and low (or no) minimum deposit or balance requirements. Because HYSAs typically come from online banks, there's less overhead — and less need to nickel-and-dime customers.

While there are a lot of upsides to putting your money into a high-yield savings account, there are a few downsides to consider.

Fluctuating rates

Interest rates on high-yield savings accounts are variable and can change at any time — a bank may advertise a certain APY when you apply, but it likely won't last forever.

Limited growth

While you can grow your money with an HYSA, it's not the best way to generate long-term wealth for retirement because the yield often doesn't keep up with inflation. As a result, working with a broker or robo-advisor to develop an investment portfolio is better for long-range plans.

Fees and minimum requirements

None of the banks on CNBC Select's best high-yield savings account list charge monthly fees, but some others do. And that tempting APY may require a minimum balance or may have a cap on it. Varo Savings account's 5.00% APY is only available for the first $5,000, for example, and only if you direct deposit at least $1,000 a month and have a positive balance at the end of the month Otherwise, the yield drops to 3.00%.

Limits on withdrawals

Even high-yield savings accounts that don't limit how much you can transfer or withdraw from your account may cap how many times you can do it per cycle. And some online banks with HYSAs offer ATM cards — and will even refund ATM fees — not all do. You can transfer funds between banks but it takes time, typically 24 to 48 hours.

Few brick-and-mortar banks

Most high-yield savings accounts are offered by online-only financial institutions, not those with physical locations. If you prefer in-person banking, that might be a drawback.

If you're thinking about opening a high-yield savings account, consider these actors:

• Annual percentage yield
• Interest compounding
• Account fees
• Opening deposit and balance minimums
• Is it FDIC-insured?
• Limits on withdrawals and transfers
• Other financial products offered by the bank

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At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every finance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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