High yield savings accounts are accounts that pay a higher interest rate as compared to a regular savings account. A regular savings account or deposit will hardly earn you any interest (typically 0.01% APY) and may lose you money when factoring in inflation. You should open a high yield deposit account only at an FDIC (Federal Deposit Insurance Corporation) insured bank that provides insurance up to $250,000 or an NCUA (National Credit Union Share Insurance fund) which also includes coverage up to $250,000.

A high yield savings account works to optimize your overall financial portfolio. It should be used only to keep your immediate, or short-term liquid cash requirements (for example, a specific amount: $2,000, $5,000 or $10,000 to take care of expenses or emergencies) and the remaining amount should go into your other savings and investment strategies. There are many traditional, and online banks offer high yield savings accounts. You can simply research and compare them on financial websites.

Let’s take a look at some top high yield savings accounts:

• Goldman Sachs
  Goldman Sachs bank offers an APY of 1.2% with no transaction fees or minimum balance requirements. Funds can be deposited or withdrawn using electronic transfer or wire transfer. GS bank offers one of the highest rates in the market as well as is insured by the FDIC.
• Barclays
  Barclays offers 1.15% APY with no monthly maintenance and no minimum balance requirement. A deposit can be made by electronic transfer, mail, direct deposit, and mobile check deposit. Barclays also offers a dream account where you can earn an extra 2.5% on your interest, but you need to leave the money untouched for at least six months.
• Discover
  Discover also offers 1.15% APY with no minimum balance requirement or monthly maintenance fee. Funds can be deposited by electronic transfer, direct deposit, mobile deposit or by mail.
• Synchrony
  Synchrony bank also offers 1.15% APY but requires you to keep at least $30 as balance, or you end up paying $5 maintenance fee per month. It is possible to make deposits by electronic transfer, mobile check deposits, over the phone or an optional ATM card. Synchrony’s Optimizer Plus offers benefits such as discounts on travel and reimbursement of ATM fees.
• Ally
  Ally is an online bank but offers you a very attractive 1.15% APY with no minimum account balance requirement and no monthly maintenance charges. You can also make deposits by electronic transfer, direct deposit, mobile check deposit or mail.
• Salem Five Direct
  Salem Five Direct offers a great APY of 1.25% for first-time customers but requires a minimum $100 deposit.

Not all high yield accounts are the same, so you need to figure out the one that suits your interests. These are some of the inquiries you should make before opening a high yield savings account:

• What is the APY (rate of interest) and what is the duration of that rate? Some banks offer a high APY for new customers for a limited period.
• What is the compounding method for calculating interest? Interest can be calculated daily, monthly, quarterly, semi-annually or annually.
• What is the initial deposit requirement?
• What is the minimum balance requirement? If it is not maintained, then monthly fees may be applicable. Also, you may not get the advertised APY if a minimum balance is not sustained.
• You may also be required to open an additional account to withdraw funds from your high yield savings account
• Are there any charges for withdrawing funds via ATM, checks or online transfer?
• How many free transactions are allowed per month?
• You should also find out if your account can be linked to your brokerage account and accounts in other banks for ease of transfer.

With high yield savings accounts, you can earn more interest compared to a regular savings account. Most online accounts also have very low or no fees at all as long as you don’t mind online customer care. Furthermore, you can still withdraw your money quickly, which is not possible with retirement accounts where your money is frozen for very long durations (sometimes decades).

The flipside is the limit of only six withdrawals per month. If that is a cap you frequently cross, then you may end up paying fees. Also, if you are not comfortable with online banking or prefer a brick and mortar bank, then you might not get the higher interest rates which are offered by online banks. The deposit amounts might also be higher. Moreover, typically accessing money from your high yield account has a lead time of 5 days. If you need to access your funds more quickly, then this might not work for you.