How to choose a high-yield savings account

As the name suggests, high-yield savings accounts can allow you to earn a better yield on your savings than a standard account. Often, the difference in your potential earnings is far more than a fraction of a percentage rate — even with the recent rate cuts by the Federal Reserve.

Although banks are "following the Fed's lead in gradually reducing interest rates," the "rates paid on federally insured high-yield savings accounts, many offered by banks that operate solely or mostly online, are still beating inflation," said The New York Times. As of Nov. 22, "online banks were offering rates of 4% or higher this week, compared with a national average rate of just 0.56% for all types of savings accounts," the Times added, citing Bankrate.

There is still more to consider, in addition to the rate, when finding a high-yield savings account that suits your savings needs. Here is a rundown of the steps you should take before cementing a decision.

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Evaluate your banking needs

Because "banks offer much more than high-yield savings accounts," it is "wise to choose a bank based on your whole financial situation," said SmartAsset. When assessing your options, consider whether you will also "need a checking account to regularly access your money." Particularly if you would prefer to do your banking all in one place, look into the "availability of other accounts, such as individual retirement accounts (IRAs) and certificates of deposit (CDs)," as well as "other offerings such as mortgages, personal loans and financial advising."

Consider accessibility

An institution's accessibility is also a key consideration. Many of the best annual percentage yields (APYs) are offered by online-only banks, so consider whether you are comfortable doing your banking entirely in-person. If you anticipate needing to take out cash, check to ensure there are in-network ATMs nearby. Further, as "many high-yield savings accounts limit free electronic transfers and withdrawals," you will want to "read the fine print to understand how easy it will be to access your money," said Experian — especially if it is the fund you are relying on in case of emergency.

Check for deposit insurance

"Going with a federally-insured bank or credit union is a must when you're choosing a savings account," as this "ensures you won't lose your money should the financial institution end up failing and closing its doors," said Bankrate. Accounts with a bank are insured by the Federal Deposit Insurance Corp. (FDIC), while credit union accounts are insured by the National Credit Union Administration (NCUA). Both types of coverage protect "up to $250,000 per depositor, per insured bank or credit union, for each account ownership category," said Bankrate.

Compare APYs

Since with a high-yield savings account you are there for the yield, it is worth shopping around and seeing what APYs different institutions offer, which is "the interest rate earned in a year, including compounding interest," said CNBC Select. The general rule of thumb here, said Experian, is "the higher the APY, the more interest your money will earn." Usually, said Bankrate, the best place to find a competitive APY is "often at an online-only bank" — by comparison, brick-and-mortar banks "are known for paying rock-bottom yields."

Watch out for fees

Even if a bank offers a stellar APY, that can quickly get undercut if it charges steep or numerous fees. "Read the fine print in advance and choose a savings account that doesn't charge maintenance fees — or one that makes these fees easy to avoid when you maintain a set minimum balance or receive direct deposits," said Bankrate. Other fees to look out for include overdraft fees, inactivity fees and ATM fees.

Make sure you meet requirements

Lastly, take a look at a bank's requirements for an account to ensure you can easily meet them. For instance, "some banks require a minimum deposit to open a high-yield savings account, especially if it has a very high yield," said CNBC Select. With others, "you may be required to maintain a minimum balance," and "if you don't, you could be hit with a fee or a lower APY," said Experian.