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High Yield Savings vs. Regular Savings

Both high yield savings accounts(HYSA) and regular savings accounts offer distinct advantages and drawbacks, catering to different financial goals and lifestyles. The blog discusses the difference between both accounts and which is better as per your financial needs.
high yield savings vs regular savings
High Yield Savings vs. Regular Savings
In this article
While considering personal finance, it is important to analyse where to store your hard-earned money. Let's delve into the features of a high yield savings account (HYSA) and a regular savings account to understand which is better for your needs.

In personal finance, making wise decisions about where to store your hard-earned money is crucial. Two popular options often await your attention are a high yield savings account (HYSA) and a regular savings account. Both offer distinct advantages and drawbacks, catering to different financial goals and lifestyles. Whether you are saving for short-term goals or building an emergency fund, high-yield savings accounts offer a balance between security and competitive earnings. Get it now with Beem.

Let’s delve into the features of each account type, exploring when a high-yield savings account is superior and when a regular savings account takes the lead.

High-Yield Savings Account (HYSA) Defined

A High-Yield Savings Account (HYSA) is a unique savings category offering significantly higher interest rates than standard savings accounts. Online banks and institutions facilitate these accounts, which can have interest rates up to 10 to 12 times greater than the national average rates. The rise of online banks and heightened competition has popularized HYSA, with online institutions leading in competitive rates. A HYSA offers significantly higher interest rates. Numerous HYSAs are achieving annual percentage yields (APYs) of approximately 3.5% to 4.5%, sometimes even exceeding these figures.

What’s a Regular Savings Account?

A Regular Savings Account entails committing to monthly deposits, garnering higher interest than current or ordinary savings, but having lower interest rates than HYSA. Also known as “monthly savers”, they suit those seeking structured savings habits or aiming for events like weddings or vacations. Requirements vary, typically demanding monthly contributions of $10 to $500. Opening a current account often precedes accessing a regular savings account, with accumulated funds and interest returned after a fixed term. A standard savings account typically yields interest rates ranging from 0.01% to 0.35% on deposited funds.  

One common thing between HYSA and Saving accounts is;

Both high-yield savings accounts (HYSAs) and conventional savings accounts benefit from insurance coverage provided by the Federal Deposit Insurance Corporation (FDIC) and, in the case of credit union accounts, the National Credit Union Administration (NCUA). These two US government entities extend insurance protection of up to $250,000 per individual per financial institution in case of a bank or credit union failure.

When is a High-Yield Savings Account Better?

Opting for a high-yield savings account often proves advantageous, particularly in these three scenarios:

Embracing Digital Banking

Online banking institutions frequently offer Premier high-yield savings accounts, some of which lack physical branches. If the absence of brick-and-mortar locations is of no concern, a high-yield savings account emerges as the evident choice. The convenience of managing your finances digitally comes to the forefront.

Preferring Higher Interest Rates

The discernible disparity in interest rates between conventional and high-yield savings accounts can amass considerable gains over time. To illustrate, envision a savings balance of $2,000. A regular savings account would yield a mere $6.60 annually at prevailing interest rates. Conversely, a high-yield savings account would generate a noteworthy $71.14 to $91.88. Notably, this differential becomes even more pronounced as your account balance increases.

Desiring Fee Efficiency

The operational cost advantage of online banks, devoid of the physical infrastructure present in traditional counterparts, empowers them to extend these savings to their customers. Consequently, many online banks offer reduced fees, encompassing monthly maintenance charges and overdraft fees, compared to conventional banks. This fee reduction can significantly impact your overall savings strategy.

also know about: High Yield Savings

When is a Regular Savings Account Better?

Although they accumulate less interest, regular savings accounts come with their own set of advantages. Here’s when they might be the more suitable option for you:

Short-Term Goals

Regular savings accounts are the go-to choice for short-term objectives. Plan money to buy a new gadget or cover holiday expenses? The convenience and easy accessibility of a regular account make it a practical option for funds you’ll need within the following year.

Flexibility

Regular savings accounts offer more flexibility when it comes to withdrawals. If you anticipate using your savings occasionally, a regular account’s lower penalties and withdrawal restrictions make it a more suitable choice.

Low Account Balance

Some high-yield savings accounts require a minimum balance to unlock top-tier interest rates. A regular savings account is better if you’re starting to save or have a modest balance, as it typically has lower or no minimum balance requirements.

Frequently Depositing Cash

If an online bank isn’t part of an ATM network, you’ll need to deposit cash into a conventional bank account first and then transfer it to your online account. This process takes longer and may involve extra costs.

High-Yield Savings Accounts Vs Regular Savings Accounts: Which Is Better?

CriteriaHigh-Yield Savings AccountRegular Savings Account
Account TypeOnline accounts with higher APYTraditional accounts at banks or credit unions
Interest RateHigher interest rates [3.5% – 4.5%], maximizing growthLower interest rates [0.01% – 0.35%]
Banking AccessOnline or mobile bankingIn-person, online, mobile, or phone banking
FeesFewer or lower fees, including maintenance feesPossible maintenance and excess withdrawal fees
Minimum DepositLower minimum deposit requirementsLow minimum deposit requirements
Withdrawal LimitsGenerally more flexible, depending on the bankUp to six monthly withdrawals before a penalty
ATM AccessVaries by a bank, may or may not have ATM accessPossible ATM access
Table 1.0. Comparison between High yield savings accounts and regular savings accounts

HYSA is better suited for individuals who prioritize earning a higher interest rate on their savings and are comfortable with online banking. These accounts offer a chance to significantly grow your money and come with the advantage of fewer fees. If you’re willing to forgo branch access and value convenience, a high-yield savings account can be a powerful tool for maximizing your savings potential.

Regular Savings Accounts cater to those seeking a more traditional banking experience, value the accessibility of in-person banking, and are content with lower interest rates. While they may offer different potential for rapid growth, regular savings accounts provide a reliable way to save money for short- and long-term goals.

Ultimately, the decision hinges on your financial goals, preferred banking style, and willingness to explore digital banking. By evaluating your needs and priorities, you can confidently select the savings account type that aligns with your unique circumstances.

Conclusion

The verdict is evident in comparing high-yield savings accounts (HYSA) and regular savings accounts. In the realm of personal finance, a HYSA takes the lead. While both options offer advantages and drawbacks, a HYSA offers substantial benefits for those seeking financial growth. Higher earnings, digital convenience, and lower fees make HYSAs the better choice for long-term financial success. Check out Beem to get updated interest rates and compare the latest best high-yield savings accounts that align with your savings goals and priorities. Your financial ambitions and preferences will guide your decision, and a well-informed choice awaits as you explore your options.

Frequently Asked Questions 

1. Are High-Yield Savings Accounts Safe?

Yes, high-yield savings accounts offered by reputable banks are generally considered safe. They are usually insured by the FDIC (or the equivalent agency in other countries) up to a specific limit, providing a safety net for your deposits.

2. What Is the Main Benefit of a High-Yield Savings Account (HYSA) Compared to a Regular One?

A HYSA offers significantly higher interest rates, often 3.5% to 4.5%, while regular savings accounts offer lower rates of around 0.01% to 0.35%, maximizing the potential for long-term growth.

3. Can I Have HYSA and Regular Savings, Both Accounts?

Absolutely! Many individuals maintain a combination of high-yield and regular savings accounts to cater to different financial needs. You can use a HYSA for long-term goals and a regular savings account for short-term expenses, creating a balanced financial strategy.

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Picture of Allan Moses

Allan Moses

An editor and wordsmith by day, a singer and musician by night, Allan loves putting the fine in finesse with content curation. When he's not making dad jokes or having fun with puns, he's constantly looking to tell stories out of everything.

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This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

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