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What a high-yield savings account is and how it works

January 26, 2026 – 6 mins

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How a high-yield savings account works

When you deposit money into a high-yield savings account, it starts earning interest right away. The interest typically accrues daily, meaning your balance is calculated each day to see how much interest you’ve earned, and it’s usually compounded and credited to your account monthly. This compounding means you earn interest not just on your original deposit, but also on the interest that’s already been added, so your money grows faster over time.

By understanding how deposits, daily accrual, and monthly compounding work together, you can see exactly how your savings can grow.

High-yield vs traditional savings accounts

High-yield accounts usually give you much higher interest rates or APYs, so your money grows faster. Traditional banks are convenient with in-person access, but their rates are lower. Minimum balance rules can vary. High-yield accounts often have low or no minimums, while traditional banks may require more to avoid fees. High-yield accounts usually have fewer monthly fees, whereas traditional banks may charge more for maintenance or extra services.

Overall, high-yield accounts trade a bit of in-person convenience for better growth on your savings.

Benefits of a high-yield savings account

High-yield savings accounts offer a range of benefits that make them a smart choice for growing your money.

  • Earn faster growth on your savings thanks to higher interest rates
  • Keep your money safe with FDIC insurance (Federal Deposit Insurance Corporation). That means your deposits are protected with up to $250,000 in coverage for each depositor, insured bank, and ownership category.
  • Enjoy low to no fees
  • Set up your account quickly and easily online
  • Perfect for short-term savings goals or building an emergency fund

You can open a Sallie Mae® High-Yield Savings Account with no monthly fees or minimum deposit requirements, making it an easy way to help your money grow.

Things to consider before opening one

Before opening a high-yield savings account, it’s a good idea to keep a few things in mind:

  • Be aware of withdrawal limits
  • Interest rates can go up or down with the market
  • Online-only banks may have limited in-person support, though Sallie Mae offers online support and a mobile app for easy access
  • Some accounts might have minimum balance or deposit requirements

Best uses for a high-yield savings account

High-yield savings accounts are a smart choice for a range of short-term savings goals. With higher interest rates than traditional savings accounts, your money can grow even while it’s waiting for the right time to be spent. They’re ideal for:

  • Building an emergency fund that gives you peace of mind
  • Saving for a vacation or a major purchase
  • Setting aside extra cash you might need quick access to

This makes a high-yield savings account a practical and flexible way to manage your finances.

Choose a savings account that works for you

Our Sallie Mae® High-Yield Savings Account helps you earn more and save smarter

  • No minimum balance and no monthly maintenance fees
  • Free transfers
  • FDIC-insured
  • Earn 7X more than the national averagefootnote 2
Open an account

Is it right for you?

High-yield savings accounts offer higher interest rates, low to no fees, and easy online access, making them a smart choice for growing your money safely. They’re especially useful for short-term goals like building an emergency fund, saving for a big purchase, or keeping extra cash on hand. If you’re not already maximizing your savings, now is a great time to consider opening one.

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footnote Sallie Mae does not provide, and these materials are not meant to convey, financial, tax, or legal advice. Consult your own financial advisor, tax advisor, or attorney about your specific circumstances.

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footnote Sallie Mae, the Sallie Mae logo, and other Sallie Mae names and logos are service marks or registered service marks of Sallie Mae Bank. All other names and logos used are the trademarks or service marks of their respective owners. 

footnote 1. No purchase necessary. Void where prohibited. Odds of winning depend on number of entries received. Ends 12/31/2026. See Official Rules.

footnote 2. National Average APYs are based on specific product types of top 50 U.S. banks (ranked by total deposits) provided by Curinos LLC through 07/01/2025. High Yield Savings Rates: Average APYs are based on High Yield Savings Accounts of $10,000. Curinos data is obtained from public sources; accuracy and completeness is not guaranteed. Curinos is not liable for reliance on the data.

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