Getting motivated to save money can be tough, and many financial institutions don’t do much to encourage you. At the typical American bank, if you deposited $10,000 in a savings account, you might earn as little as $1 in interest a year. That’s quite a paltry reward!

However, with something called a high-yield savings account, you could be earning as much as $300 or more a year on that same $10,000 balance. Read on to learn about high-yield bank products and how they could benefit you.

High-Yield Banking Explained

Over the past decade, a number of financial institutions have begun offering customers a higher return on their deposits than what is offered by traditional banks. These institutions are often fully fledged banks that operate primarily or entirely online to eliminate the costs of “brick-and-mortar” branches and pass on the savings to customers.

Comparing rates between different banking products is usually done by looking at the APY (annual percentage yield) offered. For example, the typical savings account might have an APY of 0.01%, which would return $1/year on a $10,000 deposit (0.0001 x $10,000 = $1) assuming the balance and rate remained the same for the year. However, as of this writing, high-yield savings accounts offer APYs as high as 3.00% or 4.00%. At those rates, the annual return would be $300 or $400/year on a $10,000 deposit – a significant increase over a single dollar!

High-yield versions of savings accounts, money market accounts, CDs (certificates of deposit) and even checking accounts are available from various providers. As with their traditional versions, high-yield bank accounts offer rates that are subject to rising or falling at any time, whereas CDs guarantee a specific rate for a specific period of months or years.

Finding a High-Yield Product

As previously mentioned, many providers of high-yield banking products are banks that operate mainly or solely online. Major brands include Capital One, Discover, American Express, Synchrony and Ally. However, you may also find competitive offers from local banks and credit unions.

With many Internet-based providers, opening a high-yield account is a quick, simple and free online process. These institutions typically offer their products with no monthly fees and little or no minimum balance requirements. You can even link your accounts between most brick-and-mortar and online banks to transfer funds between them for free.

Do your research on any institutions or products you consider. When selecting a bank, it’s important to ensure they are an FDIC-insured institution, so you know your deposit will be protected up to the covered maximum ($250,000 per depositor, per institution, for each account ownership category, by standard). Make sure you understand the terms and fees of any products before you sign up.


High-yield banking products can be a worthwhile part of your financial strategy. You shouldn’t expect to earn high long-term returns as from investments such as stocks, and your interest will typically be subject to income taxes. However, you can expect a better return than traditional savings products while still keeping your funds accessible and safe from investment risk.

Draper and Kramer Mortgage Corp. and its employees do not provide financial planning, investment, tax or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide and should not be relied on for such advice. Do not act or refrain from acting on the basis of this material without first consulting a qualified professional for advice. The information about providers and services contained on this document does not constitute endorsement or recommendation by Draper and Kramer Mortgage Corp.