What is a high yield savings account and how does it work?

Who should consider a high yield savings account?

You finally landed a job you’re excited about and you have a little extra money in your account after all your bills are paid.

You know your checking account isn’t growing your money, but you still need access to it in case of an emergency.

If this sounds familiar, a high yield savings account (HYSA) could be your next step. It’s a great way to make your money work as hard as you do without tying it up in an investment account. Here’s what you need to know.

What is a HYSA?

A high-yield savings account (HYSA) is a savings account that offers a higher interest rate than a traditional savings account, helping your money grow faster while remaining easily accessible. High-yield savings accounts are designed for both short- and long-term savings goals and offer a simple way to earn more on funds you are not actively spending.

The difference in account rates can be significant. While traditional savings accounts may pay a fraction of a percent in interest, a HYSA can often earn several times more on the same deposit, helping your savings grow more quickly through compound interest. For people looking to maximize the return on their cash while keeping it readily available, a HYSA can be a smart savings tool.

Can you withdraw from a high yield savings account anytime?

Yes, you can withdraw money from a high-yield savings account when you need it, making it a flexible option for both emergency savings and short-term financial goals.

Keep in mind that withdrawal limits and transfer timing can vary by financial institution. While many banks no longer enforce the former federal limit of six withdrawals per month, some banks may set their own transaction limits. Transfers from a HYSA to another account may also take one to three business days to process. Before opening an account, review the account terms so you understand any withdrawal restrictions, transfer timelines, or fees that may apply.

Do high yield savings account rates change?

Yes, high-yield savings account rates can change over time. Most HYSAs have variable annual percentage yields (APYs), which means the interest rate may increase or decrease as economic conditions change. One of the biggest factors influencing HYSA rates is the Federal Reserve's benchmark interest rate. When the Federal Reserve raises or lowers rates, banks often adjust the rates they offer on savings accounts.

Even if rates change, the money you deposit into a HYSA does not lose value because of stock market fluctuations. Unlike investments such as stocks or mutual funds, your account balance does not rise or fall with the market. Changes in a HYSA rate affect how much interest you earn, not the amount of money you have deposited.

For many savers, safety is a key benefit of a HYSA. Deposits at FDIC-insured banks are protected up to $250,000 per depositor, per insured bank, per ownership category. As long as your funds are within applicable insurance limits, your money is protected even if the bank fails.

This makes a high-yield savings account a low-risk option for earning interest on cash while maintaining easy access to your funds.

How to choose a high yield savings account

When comparing high-yield savings accounts, look beyond the interest rate. It's also important to review account fees, minimum balance requirements, withdrawal policies and any relationship benefits that could help you earn more on your savings.

For example, Huntington's Relationship Savings Account offers a relationship rate benefit when linked to an eligible Huntington checking account and the $10 monthly maintenance fee can be waived by maintaining a $2,500 average daily balance or having a Huntington personal checking account. The account also earns interest on every cent deposited.

If you're looking for a lower-balance option, Huntington's Premier Savings Account earns interest starting with the first cent in the account and waives its monthly maintenance fee when you maintain a $300 average daily balance or have a Huntington personal checking account.

Before opening a high-yield savings account, compare rates, fees, balance requirements, and account features to find the option that best fits your savings goals and banking needs.

How much can a high yield savings account earn?

One of the biggest benefits of a high-yield savings account is the potential to earn significantly more interest than a traditional savings account. While rates change over time, even a few percentage points can make a noticeable difference in how much your money grows.

Here's an example of how a $1,000 deposit could grow at the national average savings rate of 0.41% APY compared to a 4.00% APY high-yield savings account, assuming annual compounding and no additional deposits:

On the same $1,000 deposit, a 4.00% APY high-yield savings account could earn about $438 more over 10 years than an account earning 0.41% APY. Actual earnings will vary because savings account rates can change over time.

How often do savings accounts pay interest?

Most savings accounts calculate interest on your balance every day and pay that interest into your account monthly. This means your balance can earn interest each day it remains in the account, while interest payments are typically added to your savings once per month.

Because interest is added to your account regularly, you may also benefit from compound interest, which allows you to earn interest on both your deposits and the interest you've already earned. Over time, compounding can help your savings grow faster, especially when you consistently add money to your account.

One way to maximize this growth is by setting up automatic transfers or direct deposits into your savings account. Contributing a fixed dollar amount or percentage of each paycheck can help you build a consistent savings habit while taking advantage of ongoing interest earnings and compounding.

How to open a high yield savings account

Opening the right high-yield savings account starts with understanding how different accounts work and what features matter most for your savings goals.

• Compare APYs, not just interest rates. The annual percentage yield (APY) reflects both the interest rate and the effect of compounding, giving you a clearer picture of how much your savings could earn over time.
• Review fees and account requirements. Before opening an account, look for monthly maintenance fees, balance requirements and any withdrawal restrictions. Some accounts offer ways to waive monthly fees by maintaining a qualifying balance or linking a checking account.
• Understand minimum opening deposits. Some banks require a minimum deposit to open an account. For example, Huntington's Relationship Savings Account requires a $100 opening deposit, while the Premier Savings Account requires a $50 opening deposit.
• Choose a bank that fits your needs. Consider factors such as account access, digital banking tools, customer service, branch availability and whether the account can be opened online. Many high-yield savings accounts can be opened online in just a few minutes, making it easy to start saving.

Taking time to compare account features, requirements and earning potential can help you find a high-yield savings account that supports your financial goals and helps your money grow.

Is a high yield savings account worth it?

While not built for long-term wealth building, high yield savings accounts can be your first step toward it. They help you grow what you have now, smartly and safely, while keeping your options open. You don't need special financial expertise or an abundance of extra cash to get started. This option rewards those who value steady growth over showy returns and offers something most consumers could use a little more of: clarity, control, and confidence.

Whether you're saving for something specific or building your financial foundation, it helps to know your money is working for you, even while it rests.

Ready to start? Compare Huntington's Relationship Savings, Premier Savings, Money Market Account and Certificate of Deposit options to find the fit for your goals.

Frequently asked questions about high yield savings accounts

Are high yield savings accounts safe?

Yes. High-yield savings accounts are generally safe when they are held at an FDIC-insured bank or NCUA-insured credit union. Deposits are typically protected up to $250,000 per depositor, per insured institution, per ownership category. Unlike stocks or other investments, your account balance does not fluctuate with the market. While interest rates may change over time, the money you deposit remains protected within applicable insurance limits.

What is the downside to a high yield savings account?

The main downside of a high-yield savings account is that interest rates are usually variable, meaning the rate you earn can increase or decrease over time. Some accounts may also limit certain types of withdrawals or transfers and could have balance requirements or fees. In addition, while HYSAs can help your savings grow, they generally do not offer the same long-term growth potential as higher-risk investments such as stocks.

Can you lose money in a high yield savings account?

No, you generally cannot lose money in a high-yield savings account. If your account is held at an FDIC-insured bank or NCUA-insured credit union, deposits are protected up to applicable insurance limits, typically $250,000 per depositor. However, inflation can reduce your money's purchasing power over time and account fees could lower your balance if account requirements are not met.

Is it difficult to get money out of a high-yield savings account?

No, withdrawing money from a high-yield savings account is typically straightforward. Most banks allow transfers, online withdrawals, ATM access, or transfers to a linked checking account. Depending on the institution, certain withdrawal limits or transaction restrictions may apply and transfers to another bank can take one to three business days to process. Reviewing your account's withdrawal policies can help you understand any limitations before you need access to your funds.

Do you pay taxes on high yield savings account interest?

Yes. Interest earned from a high-yield savings account is generally considered taxable income. If you earn enough interest to meet reporting requirements, your bank may provide a Form 1099-INT showing the amount earned during the year. For questions about how interest income may affect your specific tax situation, consult a qualified tax professional.