How to Open a High-Yield Savings Account

1. Shop for the Top Rates

Hundreds of bank and credit union options are now accessible via the Internet. If you hope to beat inflation, you may need to move funds into a high-yield savings account outside your primary bank. There are no limits to the number of checking or savings accounts you have at multiple banks.

That said, you may already bank at a top-paying institution. So, check what you earn in a savings account at your existing bank or credit union. Then, review the top national high-yield savings account rates.

Many of the top rates are offered by online banks. Internet-only banks don't carry the overhead costs of physical branches and often pay the most competitive deposit rates in the country. However, many brick-and-mortar institutions now offer separately-branded online banks with competitive rates.

When shopping for rates, be sure to read the fine print regarding:

• Rate: Is the rate introductory for a limited time only?
• Compounding: How often is interest earned added to your balance?
• Minimum requirements: Do you need an account minimum to earn the high-yield APY?
• Maximum requirements: Can you earn high-yield interest rates only up to a certain amount?

2. Choose the Institution Best for You

After identifying rates from the top-paying savings account institutions, it's time to make the right choice for you. If you find your existing bank's savings rate competitive, open a new account with your current bank. You'll enjoy the convenience of one checking and savings account login, instantaneous transfers between the two accounts, and a streamlined signup process.

But if you're like most rate shoppers, you'll find that you can earn more by opening a savings account at a new institution. Some top national rates are up to 12 times higher than the national average in 2023.

If a top rate on your contender's list is from a credit union, ensure you qualify. Banking at a credit union requires you first to become a member of that institution. Any credit union appearing on Investopedia's ranking of the top savings accounts accepts members nationwide, although some may require a joining fee.

Review any fees that may be associated with the institution's account. Common banking fees include:

• Inactivity fees
• Account closing fees
• Paper statement fees

Also, research the institution. You can review complaints regarding high-yield savings accounts in the Consumer Financial Protection Bureau's Consumer Complaint Database. However, there are very few complaints—only 53 out of nearly 4 million complaints total. The CFPB has taken action against companies that misrepresented high-yield savings accounts.

3. Complete the Account Application

Once you've selected your new high-yield savings account institution, complete the required application, likely online. In most cases, it should only take 10 minutes or so.

You will need to provide the institution with your:

• Full name
• Address
• Telephone number
• Email address
• Identification number, such as your Social Security Number (SSN) or Taxpayer Identification Number (TIN)
• Driver's license, passport, or other government-issued photo ID
  

You'll also need to decide whether to open this account as a single individual or jointly with another person, such as your spouse. If you opt for a joint account, provide all the second applicant's information.

You can visit a branch if you're opening an account at a physical bank in your community. But even with local institutions, you can likely open an account online. This saves you a trip to the branch and creates a faster process than in-person with a banker.

4. Fund Your New Account

Some institutions require setting up an electronic transfer of funds from an outside account into your new account. You may be asked to do so immediately to fund the minimum initial deposit, while others don't have a minimum deposit amount or allow you to open the account first and then fund it.

Ways to fund a new savings account include:

• Transfer from another bank
• Send a paper check
• Perform a mobile deposit of a check

Funding your new account from an existing bank usually requires you to provide the institution's routing and account numbers. The online application may also ask for your bank's login credentials to instantly verify the account.

If not, your new account may send two trial deposits to the account you're linking, which you'll use for account verification over the next few days.

5. Enroll in Online Banking and Download the App

Once you've opened your new account, enroll in online banking. You may be able to do this right away after completing your online application. For other banks and credit unions, you may have to wait a few days until you get an email or letter with the account information for online enrollment.

Once set up to check your account online, note your username and password in a secure place or using password storage software. Then, set up the bank's app on your smartphone or tablet. Downloading the app will be free, but once you open the app, you'll need to enter your username and password to interact with your accounts.

6. Establish Beneficiaries

If not part of the application process, log in to your account and designate one or more beneficiaries. Beneficiaries are those you name to inherit your account balance should something happen to you.

Almost all accounts allow for establishing a primary beneficiary. Many also accommodate secondary beneficiaries, who inherit the account balance if the primary beneficiary isn't living.

A typical scenario is to designate your spouse as the primary beneficiary (if he or she is not jointly named on the account) and your children as secondary beneficiaries. But your beneficiary choices are up to you and your situation.

7. Turn On Alerts and E-Statements

Review your choices for account alert options. You might want to be alerted regarding deposits or withdrawals over a certain amount or if your account balance drops below a designated amount. You can often choose whether active alerts are sent by email, by text, or via notifications from the app.

Also, consider whether you want electronic account statements. E-statements may offer more secure protection against identity theft, and some online-only banks may require opting into e-statements—or charge a monthly fee if you request paper statements.

8. Link Additional Transfer Accounts

When setting up an initial deposit transfer, you likely linked one external bank account to your new high-yield savings account. But with most institutions, you can link multiple external bank accounts. This can be useful if you bank at multiple institutions or often transfer funds to your children's accounts.

As soon as you think of other accounts you may want to link for transfers, start the process immediately to be ready when you need it; the setup can take a few days.

9. Follow Your Account's Rules

Lastly, understand all your account's rules and requirements to avoid future fees. Fees could quickly eat into any higher-yield interest returns.

While some accounts are free, with minimal requirements, others have a more complicated formula for actions you can take to avoid monthly fees. These actions could include:

• Setting up a direct deposit for a minimum amount monthly
• Establishing a recurring transfer
• Having a linked account at the same institution

For example, note whether you must carry a minimum balance in the account to avoid a monthly fee. If so, keep your account balance above that minimum.