7 Things to Know Before Opening a High Yield Savings Account

What To Know About High Yield Savings Accounts (HYSA)

Here’s seven important things you need to know before opening a high yield savings account, like taxes, fine print, what to look for, the truth about interest rates, and the top six accounts. That way, you’re prepared to open one without any nasty surprises. 

#1: HYSA Are Not Ideal for Long-Term Investments

The first thing you have to know is high yield savings accounts are not for long-term investment. The yearly interest earned, or annual percentage yield, is variable, meaning it can change at any time. So the rate today might not be the same in a year or even in a few months. And it can be as low as 0.5%. So you can’t rely on consistent interest and growth for the long term. 

Why do interest rates change? APYs on high yield savings accounts mainly depend on the federal funds rate and a bank’s own strategy. If a bank wants to attract deposits quickly, it might boost rates temporarily or run promotions. External factors like inflation and market certainly also play a role in how much interest you earn. When you’re looking at a financial institutions website, you’ll likely see fine print that says the APY is variable and subject to change at any time without notice based on market conditions or the discretion of the bank. 

#2: HYSA Are Not for Spending

A high yield savings account is not for spending, it’s for saving. If you withdraw from it, like a checking account, you’re basically canceling out the interest benefits. Remember, the more money you have in your account, the more interest you could accrue. The longer your money sits, the more it works for you. If you do want to save and spend, you might be better off getting a money market savings account, which is basically a hybrid of a checking and savings account, but they usually have higher balance minimums. 

If an unexpected emergency happens to you and you only have the money in your savings, then yes, definitely withdraw. But if an emergency happens before you’ve saved anything, don’t hesitate to get a quick online personal loan from Credit Ninja, one of the highest rated emergency lenders with thousands of five-star reviews on Trust Pilot. 

#3: What HYSA Are Best For

A high yield savings account is best for emergencies. Your emergency HYSA fund should cover 6 months of living expenses. So tally up your rent, food, bills, and your must-have expenses for the month, then multiply by six. And that is a good target goal to have in your savings and for an emergency fund. 

If you use the HYSA account correctly, it’s risk-free growth where you can earn real interest on savings unlike traditional savings accounts which only offer around 0.01% to 0.4%. In fact, The Federal Deposit Insurance Corporation (FDIC) reports that the average national deposit rate on a traditional savings account was 0.38% as of July 21, 2025.¹ Inflation is usually 3% per year, so every dollar you keep in a regular bank account is essentially losing money. Also, your money stays liquid unlike CDs which are locked up for a year or more. To work towards your savings goals, set up automated deposits each paycheck so you get the most out of the high APY. 

#4: HYSA and Taxes

Keep in mind that you have to pay taxes on the interest earned in your HYSA. Know that when it’s tax season, you will get a 1099 tax form from your bank on the interest that you earned because it counts as income. This isn’t a bad thing because this means you’re making money, but you will need to add it to your income for taxes. 

#5: Read the HYSA Fine Print

When you sign up for a high yield savings account, you have to read the fine print. Look out for these terms and conditions: 

• Interest Rate Qualifications — You may have to meet certain qualifications to get the best interest rate. For example, with Fitness Bank, which offers a very generous 5% APY, you can only get 5% if you have a $5,000 average daily balance and 10,000 steps per day.² If you walk a lot, this might be great. But if you don’t maintain $5,000 or walk everywhere every day, your APY will drop significantly. 
• Minimum Deposit Requirements — Some banks include things like minimum deposits to even open an account. For example, Open Bank has a 4.20% to 4.40% APY, but you have to have a minimum of $500 to open an account.³
• Limited Interest Payments — Varo has a standard rate of 2.50%, but there is an elevated savings rate of 5% interest on balances up to $5,000 with certain qualifications. After qualifying, you’ll earn the 5% APY for next month and continue to earn 2.50% APY on any additional balance above $5,000.⁴ So, you may see a hold time on deposits where your money may not earn interest or be available right away. 
• Direct Deposit Requirements — SoFi has a standard savings APY of 3.30%, but there is a 0.70% boost (total 4.00% APY) when you set up a new account with eligible direct deposit into a SoFi checking account.⁵ 
• Withdrawal or Transfer Limit — With AMX, accounts may be closed or reclassified if there are excessive withdrawals.⁶ For example, more than six withdrawals in a statement may incur a $10 fee per transaction. 

#6: You Can Open Multiple HYSA Accounts

You don’t need to be loyal to any bank. Instead, be strategic. You can open multiple accounts and take advantage to get higher interest. Some people have multiple HYSAs at different banks for various savings goals, such as a down payment, car payment, and an emergency fund. However, you do need to keep track of your banks and check every few months to see if the interest rate has changed. 

#7: Verify the HYSA is FDIC Insured

It’s critical to ensure the bank you want to open an account with is FDIC insured. FDIC insurance protects your money and most well-established banks like Ally, SoFi, Amx, Discover are direct members of FDIC because they directly hold your money. Banks like Chime are actually neobanks, which means they don’t actually hold your money. Instead, your money actually sits in an account with partner banks. For Chime, that’s the Bank Corp Bank and Stride Bank.⁷ 

Don’t worry, your money is still safe with neobanks as long as their partner banks are FDIC insured. So, when you’re looking for HYSA options, look for member FDIC and the actual bank partner name. It’ll likely say something like FDIC insured for up to $250,000 through XYZ bank if it’s not a direct member. 

How to Find the Best HYSA For You

In order to choose an HYSA that’s best for you, the first thing you have to consider is how much you have to initially deposit. If you have a larger amount, you can qualify for higher APY. If you have zero dollars to put in initially, there are a lot of options, too. Do you feel comfortable putting money into a bigger, more established bank? Or are you okay with a small bank? 

The best savings account is one that protects your money, gives you peace of mind, and helps you actually save. Sometimes that’s a big bank with likely better customer service where you could reach a real human. Sometimes it’s a scrappy online one with higher interest. Just make sure it fits your situation. Pick your top three and read up on their Trustpilot reviews and go to Reddit to see what customers are actually saying. 

Our top picks for HYSAs are the following, in no particular order:

1. Axos — Offers a high APY of 4.31%, but you must receive at least $1,500 in total monthly qualifying direct deposits and maintain an average daily balance of more than $1,500. This is a good option if you have the cash.⁸ 
2. Varro — Has the highest APY at 5%. But it’s only up to $5,000 and then after that it’s 2.50%.⁴ But if you’re saving for 5K, this could be perfect. And anything over, you could put in another HYSA. 
3. SoFi — They’re currently offering a promo where you can earn an extra $50 or $300 with eligible direct deposit of $1,000 or more.⁵ There is no minimum, so this may be a good starter account.  
4. Ally Bank — They have a 3.30% APY with no monthly maintenance fees or minimum balance requirements.⁹ They also have a ton of booster features, such as their money round ups. 
5. Open Bank — They have a 4.20% to 4.40% APY, but there is a minimum deposit requirement of $500.³
6. Bread Financial — Offers a 4.00% APY on high yield savings accounts, but they require a minimum deposit of $100.¹⁰

References:

1. National Rates and Rate Caps – June 2025 │ FDIC
2. Elite Checking │ FitnessBank
3. HYSA │ Openbank
4. Savings Interest Rates and Information│Varo
5. HYSA │ Sofi
6. Savings Schedules │ American Express
7. Home │ Chime
8. Axos One │ Axos
9. Online Savings Account │Ally
10. Bread Savings │ Bread Financial

Izzy M

Izzy is a copywriter and social media specialist at CreditNinja, specializing in personal finance and branded content. With six years of professional experience, her expertise includes fraud prevention, budgeting, debt repayment, and subprime lending. Izzy earned her Bachelor of Arts in English Literature in 2017.