5 Misconceptions About High-Yield Savings Accounts in 2023

High yield savings accounts have become increasingly popular in recent years as a way for individuals to earn more interest on their savings than traditional savings accounts. However, there are some common misconceptions about high yield savings accounts that may prevent individuals from fully understanding their benefits and drawbacks. In this article, we will explore five common misconceptions about high yield savings accounts and provide clarity on what they are and how they work.

1. Big banks offer the best rates on savings accounts

The average interest rate for savings accounts at all banks is only 0.39% (source). But some finance companies can offer much higher rates on high-yield savings accounts. These rates can go as high as 4.5%+.

2. Your money is only insured up to $250,000

While true, some platforms partner with several banks. This means your cash is spread around to accounts at those partner banks, and every account is insured by the FDIC up to $250,000 per person, per bank.

3. Savings accounts are limited to six transactions a month

Historically, savings accounts were limited to six withdrawals per month, but this regulation was indefinitely waived in April 2020, which means savings accounts can operate like checking accounts in this regard.

4. All savings accounts are the same

Different banks offer different fees and features, so research is key to getting the best deal when choosing a high-yield savings account.

5. Savings account returns aren’t as high as stock market returns

In some cases, savings account returns can be as high or higher than stock market returns. While market returns have historically been higher, savings accounts may be more favorable now due to market uncertainty. If you want to run the numbers, M1 has a useful calculator where you can project how much yield you will receive over time: https://m1.com/save/high-yield-savings-calculator.