You saved $100. Now, imagine turning that $100 into $102, $103, or even more — without lifting a finger. That's the power of a high-yield or high-interest savings account. It’s an incredible tool that can accelerate your financial growth. 

This blog will demystify what a high-yield savings account is and why it's your golden ticket to faster financial security and peace of mind (even with a lower income). Plus, we’ll discuss how you can use Accrue Savings as an excellent alternative for big-ticket purchases.

Let’s dive into the world of high-yield savings, so you can see what type of savings account is right for your personal finances and financial goals.

A high-yield savings account is a type of savings account that offers a significantly higher interest rate compared to a regular savings account. In simpler terms, your money grows faster. 

While a standard savings account might offer a national average annual percentage yield (APY) of 0.43%, a high-yield savings account can offer rates upwards of 3.5% to 5% or more. 

These kinds of accounts are often found at online banks, as they have lower overhead costs and can afford to offer better rates. But you can sometimes find them at brick-and-mortar banks or credit unions as well.

Sure, all savings accounts offer foundational benefits — like keeping your money in a separate stash so you don’t feel tempted to spend it. But high-yield savings accounts? They're the superheroes of the saving world, taking your financial planning to the next level. 

Choosing the right way to save is crucial for maximizing your savings. Let’s focus on some of the game-changing benefits of high-yield savings that could help you make the right choice for your hard-earned cash.

Low-risk savings

First off, let's talk security. High-yield savings accounts are usually FDIC-insured up to $250,000. That means you can sleep soundly knowing your money isn't going anywhere except up, thanks to that sweet interest rate.

Higher interest rates

Speaking of interest rates, this is the primary draw. With a standard savings account from a traditional bank offering an APY of, say, 0.1%, a $1,000 deposit would grow by just $1 over the course of a year. 

But with a high-yield savings account rate of 4% APY, that same $1,000 would grow to $1,040. Now multiply that advantage over several years or with a bigger initial deposit, and you can see the clear benefit of putting your money in one of these bank accounts. 

Liquidity and flexibility

Need to dip into your emergency fund or cash out your vacation savings? No problem! High-yield savings accounts offer easy access to your money, with generally no restrictions on what you can use it for. It's your cash, and you can spend it how you please.

But if you want an easier way to save for a specific expense, Accrue Savings may be the better option. With Accrue Savings, you can also get rewards from our partner companies, including extra cash toward your purchase. Even the best high-yield savings accounts don’t offer perks like that.

Easy to open and use

Don't let the term "high-yield" intimidate you. These accounts are incredibly user-friendly. 

Online applications take minutes (but you’ll likely need your driver’s license and Social Security number), and features like mobile banking make managing your money a breeze. You can even set up automatic transfers or direct deposits so your savings grow effortlessly.

You might be wondering, "Okay, it sounds great, but how does a high-yield savings account actually work?" The magic lies in two things: how it calculates interest and how that interest compounds. 

In addition to high interest rates, these accounts typically offer daily or monthly compounding. Which means your interest earns interest — like a snowball getting bigger as it rolls downhill. 

But keep in mind that some accounts may have terms and conditions like minimum deposit amounts or balance requirements. Failing to meet these could result in lower compound interest rates or even fees.

When you open a high-yield savings account, you should take full advantage of its perks. Here's how to milk this type of account for all it's worth:

• Automatic transfers: Set up automatic transfers from your checking to your high-yield savings account. This ensures you consistently save without even thinking about it. 
• Maintain minimum balance: If your account has a minimum balance requirement to earn the highest rate, make sure you always meet it to dodge any monthly fees or lower rates.
• Keep an eye on competitive rates: Rates can change. Regularly check to make sure you're getting the best deal, and consider switching to a new financial institution or account type if a higher APY or better option comes along.
• Avoid withdrawals: Some accounts might limit the number of withdrawals you can make in a given time. Plan your spending carefully to keep your money growing.

So you see, it's not just about having a high-yield savings account — it's about using it wisely to maximize your interest earnings. 

Imagine if you coupled this strategy with Accrue Savings for your next big purchase — say, a dreamy vacation or an ultra-plush mattress. Your savings would grow from what you add, and you could get a boost toward your purchase from the company and funds from family or friends. 

While high-yield savings accounts are great when it comes to earning a solid rate of return with minimal risk, they aren't the only savings option in town. Let's see how they stack up against some other popular deposit accounts.

High-yield savings vs. money market

A money market account is another type of savings account that typically comes with a higher minimum balance requirement and offers perks like check-writing abilities. Interest rates are often comparable to high-yield savings accounts, but not always. Both provide liquidity but might limit the number of monthly transactions.

High-yield savings vs. traditional savings

Traditional savings accounts are what most of us think of when we hear "savings." However, their interest rates are usually abysmal compared to high-yield accounts. Over time, this can make a substantial difference in how quickly your money grows.

High-yield savings vs. checking

Checking accounts are your day-to-day financial workhorses — designed for transactions, not growing your money. They usually offer negligible or zero interest rates, making them a poor choice for long-term or even short-term savings.

High-yield savings vs. certificate of deposit

A certificate of deposit (CD) typically offers higher interest rates than a high-yield savings account, but they also lock in your money for a set period of time. You'll incur penalties for early withdrawals, so they don’t have the liquidity that high-yield savings accounts offer.

High-yield savings vs. Accrue Savings

Accrue Savings is unique because it helps you save for specific purchases — think travel, weddings, down payments on a house, or even a shiny new laptop. Unlike traditional online savings accounts, Accrue Savings takes it up a notch by getting savers up to 20% toward their purchases from brand partners.

But what makes this exponentially better than a high-yield savings account? 

With a high-yield savings account, your 5% has to be deposited the day you open your account and sit for a year in order to accumulate the full 5%. But with Accrue, you get the full reward the instant you purchase — whether you reached your savings goal in one month, three months, or six months — making the return on your dollar much higher with Accrue.

However, that’s not to say that high-yield savings accounts don’t have their place. They’re a great place to keep funds for long-term growth. You can then use that money to fund your Accrue wallet as you save toward specific big purchases to capture one of the best returns on the dollar on the market.

Choose Accrue Savings for your next big purchase

There are many ways to save, but if you have a particular purchase in mind, nothing beats the targeted approach of Accrue Savings. It not only aids in disciplined saving but adds a cherry on top by getting companies to chip in towards your savings goals. 

Ready to make saving a part of your life in the most rewarding way? Take the next step and explore your options with Accrue Savings today!