How to Open a High-Yield Online Savings Account
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How to open a high-yield online savings account
Setting up a high-yield savings account can allow you to earn more interest than with a traditional savings account. Flamingo Images / Shutterstock.com
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- High-yield savings accounts pay higher rates than regular ones, and they rarely charge monthly fees.
- Signing up for a new high-yield savings account online can take as little as five minutes.
- You just need to provide personal information, fill out an application, and fund the account.
Opening a high-yield savings account is a great way to earn extra money. The national average rate on a savings account is only 0.33% APY. Many big-name banks pay even less, usually 0.01% APY to 0.05% APY.
But high-yield savings accounts pay significantly higher rates than the national average, and the interest earned is usually deposited into your account monthly. Here's how to open an account.
1. Compare high-yield savings account options
Shop around for the best high-yield savings account that fits your needs. Here are some important factors to consider:
- Annual percentage yield (APY)
- Monthly fees
- Minimum opening deposit
- Branch availability, if you want to bank in person (Although high-yield savings accounts are much more common at online banks)
- Ability to bank online/in an app, if you want to bank digitally
- If you want to do all your banking at one institution, check whether the bank also offers accounts, such as checking accounts or CDs
Once you find an institution that meets all of your needs, you can start the process of opening a savings account.
Quick tip: You can read our article about what a savings account is to learn more about savings account features.
2. Gather your personal information
When you visit a bank (or its website) to open a savings account, have all of your documentation on hand. If you are opening a joint account, you will need information for both parties. Here's what most banks will require to open a savings account:
- Legal name
- Social security number
- Identification, such as a driver's license
- Date of birth
- Address
- Phone number
- Email address
If you aren't a US citizen (thus do not have a Social security number or US ID), you can still open a savings account. Some banks let you apply with documents such as an Individual Taxpayer Identification number (ITIN), permanent residency card, or foreign passport.
3. Fill out the application
Most online banking applications take less than 10 minutes to complete. If you are working with a bank that offers a strong customer experience, it may take even less than five minutes.
Most of the application details should be things you already know off the top of your head. Outside of some employer details, everything in the application is personal.
Online banking may be intimidating if it is new to you, but rest assured that it is safe and simple to use.
4. Fund your account
In many cases, your identity confirmation is instant and you can fund your account right away. If you've ever filled out a direct deposit form for payroll or linked a checking account to pay a mortgage or credit card bill, this will feel very familiar.
Many high-yield savings accounts at online banks have no minimum balance requirements to avoid monthly fees, though some banks do require a minimum to open a new account. Whether you plan to deposit $1, $100, or $1,000 in your new account, the process is almost always the same.
You may also have the option to mail in a check, deposit a check using your new bank's mobile app, or make a transfer with a bank wire. Outside of wire transfers, there are typically no fees or costs with transferring funds to or from an online savings account.
5. Set up online banking
Now you can set up online banking with a username and password. You'll do this on your web browser and/or via the institution's mobile app.
One of the biggest benefits of online banking is the ability to manage your finances from one central hub. If you connect all of your accounts, including other banks, investments, credit cards, and bills, you'll be able to save a lot of time in the future.
On your online account, you'll be able to see account balances, make transfers from one account to another, and see your transaction history.
6. Set up other features
Now that you have a savings account, make a list of things you need to do with this account. For example, you may want to:
- Set up direct deposits with your employer
- Enroll in e-statements so you don't have to wait for statements in the mail (many banks also charge for paper statements)
- Set up overdraft protection so that money is transferred from your savings account to your checking account in case you overdraw (if your bank offers this service)
- Sign up for automatic bill pay (This is more common with checking accounts, but you can still pay bills directly from your savings account if you want)
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UFB Best Savings
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Capital One 360 Performance Savings
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CIT Bank Savings Connect Account
Frequently asked questions about opening savings accounts
Checking accounts are great places to store money you plan on spending, whether it's for rent, bills, gifts, or fun purchases. But you probably want to put money that you don't want to touch into a savings account. This separates your money and reduces temptation to spend money that you want to save.
A savings account is a good place to store an emergency fund. It's also ideal for short-term savings goals like a down payment on a home or a trip. If it's a long-term goal, like retirement or saving for your child's education, you're usually better off investing your money instead of putting it in a savings account.
Yes, online banks and credit unions typically pay the highest interest rates on savings accounts. Some examples of online banks include Ally, Capital One 360, and Synchrony.
If you prefer to have physical branches, you might want a brick-and-mortar institution rather than an online one. Just know that high-yield savings accounts are rare at in-person banks.
If you're struggling to open a high-yield savings account at a particular bank because you don't have a US ID or social security number, know that you still have options. There are some banks that allow you to use a foreign passport or ITIN number to open a savings account.
If you're not comfortable with online-only banking, you might consider opening a Kasasa bank account. Kasasa is a financial services company that works with local banks and credit unions to offer more competitive products. For example, one type of Kasasa account is the Kasasa Saver, which is a high-yield savings account. Usually, to open a Kasasa Saver account, you'll also have to open a Kasasa checking account.
Some savings accounts charge monthly service fees. Preferably, you would find one that either charges a very low fee or makes it easy for you to waive it. And many online banks don't charge monthly service fees at all.
Most banks charge a fee for withdrawing money from your savings account more than six times per month.
Some accounts charge you for paper statements, but you can avoid those by enrolling in e-statements.
There are three main things to consider when choosing a savings account:
A high APY is especially important if you are looking for a high-yield savings account, rather than a regular savings account at an in-person bank. Compare online banks' APYs to see which ones pay the highest rates.
However, keep in mind that savings accounts have variable interest rates, which means they can change at any time. For example, many banks dropped their rates in the height of the COVID-19 pandemic. As the Federal Reserve has increased the federal funds rate, banks are increasing their rates again.
The message is that you probably don't want to choose a savings account that pays, say, only 0.05% more than another one, because that could change overnight. But you do want an account that tends to pay competitive rates overall.
Ideally, you would open a savings account that doesn't charge a monthly fee — or one that makes it easy to waive its fee.
Monthly service fees aren't the only charges to think about, though. Many savings accounts charge a fee if you transfer money out of the account more than six times in one month. If you're worried about this fee, look for an account that either charges a low amount (maybe $10 or less) or that doesn't charge a fee at all. In lieu of a fee, some banks will close your account if you go over six monthly withdrawals a certain number of times.
Special features
Some high-yield savings accounts have unique perks that might make them the best choice for you. You may want an account with savings buckets to make it easy to save for separate goals all in one account. Or you might want one that comes with an ATM card so you can withdraw money from an ATM rather than transfer funds to a checking account.
Deciding which features you want in a savings account will help you narrow down your choices.
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