High Yield Savings Account: What It Is and How It Works

If growing your savings is a priority, a high yield savings account offers an ideal mix of financial security and top-tier interest rates. Whether you're building an emergency fund or saving to buy a home, a high yield savings account can play an important role in reaching your financial goals.

But what is a high yield savings account? How do high yield savings accounts work? Here's a closer look at how high yield savings accounts work and how they differ from other types of bank accounts.

 

Pros and Cons of High Yield Savings

High yield savings are an excellent account for many situations, but they're not always perfect. Here's a look at the pros and cons of high yield savings to consider.

Pros

High yield savings accounts feature several key benefits. Top perks include:

• Above average interest rates: You'll typically earn significantly more than the national average for a standard savings account. The Synchrony Bank High Yield Savings account offers a competitive interest rate to help you grow your savings.
• Flexibility: Your money isn't locked in and can be accessed without penalty at any time. The flexibility of a high yield savings account is ideal for short-term savings and specific savings goals, like a down payment on a home or a dream vacation. Keep in mind that while banks are no longer legally required to limit how many times you can withdraw your funds, some still do and may charge fees for going over their monthly limit.1
• Risk-free savings: High yield savings accounts come with a level of predictability, with a set (but variable) interest rate on all deposits. Funds are FDIC-insured, ensuring you'll get your money back, up to FDIC limits, even if the bank fails.
• Good for short-term savings goals: With better-than-average interest rates, high yield savings accounts make it easier to build your savings and reach short-term goals.
• Ideal for an emergency fund: A high yield savings account is a safe, accessible place to park your emergency fund and build your financial resilience. You'll earn interest on the cash when you're not using it, and you can take out funds if needed.
• Cons
• For some savers, there could be some disadvantages as well:

Not good for daily transactions: Savings accounts aren't designed for everyday banking. They're a place to store cash you don't plan on spending right away. A checking account, on the other hand, is ideal for daily transactions such as buying groceries and paying bills.
More requirements to open than a standard savings account: Because high yield savings accounts offer better interest rates than standard savings accounts, they may have stricter requirements, such as withdrawal limits or higher initial deposit amounts. Depending on the bank, minimum balance requirements may apply to avoid a monthly service charge. Synchrony Bank doesn't require a minimum balance or charge monthly fees.
Not the best for long-term financial goals: While you'll earn interest on a high yield savings account, it may not be enough to keep up with inflation or hit long-term goals like saving for retirement.
Fluctuating interest rate: Unlike with a CD account, the interest rate you receive in a high yield savings account is not set in stone. The interest rate can change at any time without notice.