Despite the positives, there are a few things to consider before opening your high-yield savings account.
APYs change over time
All banks raise or lower their savings accounts' APYs from time to time. This usually happens because the Federal Reserve has raised or lowered the federal funds rate, though there may be other reasons.
This means the fantastic interest rate that grabbed your attention isn’t locked in forever.
Minimum balance requirements
Some banks require you to deposit a certain amount of money to open an account. They may also require you to maintain a minimum balance -- often $1,000 or more -- to avoid monthly maintenance fees or to earn the highest APY.
Make sure you read the fine print before opening a high-yield savings account. If a bank advertises a high APY, but you need to deposit more than you can afford to keep in the account to get that rate, then you should look elsewhere.
Many of the best high-yield savings accounts do not have minimum balance requirements.
Withdrawing money takes some time and effort
Getting money out of a savings account is relatively easy -- but it's not instantaneous.
Most savings accounts don't come with debit cards, so you can't spend money directly from the account. If you open a checking account with the same bank, you can instantly transfer money from savings to checking and then spend it with a debit card or withdraw it from an ATM.
Transferring money to an account at a different bank usually takes a few days to process before the funds are available. This can be an inconvenience if you need the money now.
Withdrawals are limited
While not as common since the suspension of Regulation D in 2020, some banks may still place limitations on the number of withdrawals you can make per month without penalty. Some high-yield savings accounts only allow you to make six withdrawals per month, though the best accounts usually don't have this limit.
All banks limit the amount of money you can withdraw at once. For example, you may be limited to $1,000 per ATM withdrawal, $5,000 per debit card transaction, and $20,000 per in-person withdrawal.
No local bank branches
Most of the best high-yield savings accounts come from online-only banks. That means you can't walk into a physical bank location to speak with an agent in person or to deposit or withdraw cash.
There are exceptions, though. Some banks that offer high-yield savings accounts have brick-and-mortar locations, like the Capital One 360 Performance Savings. The Western Alliance Bank High-Yield Savings Premier also has branch locations available across several states. Be sure to check your area for branches before you sign up. Others allow you to deposit or withdraw cash at certain retailers.
Keep in mind that a lack of physical branches is what allows some banks to offer high-yield savings accounts in the first place. By operating online only, they save a lot of money -- and they pass those savings on to customers through more competitive interest rates.
Lower returns than some investments
High-yield savings accounts are perfect for emergency savings or other funds that you may need to withdraw on short notice. However, they're not the best option for growing your wealth.
Even a high-yield savings account may not always keep up with inflation. If your savings account pays a 4.00% APY, but prices rise by 4.75% per year, then your savings will lose value.
For long-term financial goals like saving for retirement, you're probably better off investing in the stock market through a 401(k) and/or an IRA. There's greater risk of losing money, at least temporarily. However, a diversified stock portfolio can achieve much higher returns. Over the past 100 years, the S&P 500 index -- which includes the biggest publicly traded companies in the U.S. -- has returned an average of 10% per year.
