Common Misconceptions About High-Yield Savings Accounts

Laveta Brigham

By Spencer Tierney Last year’s savings rates of 2% and higher have come and gone, but that doesn’t mean high-yield savings accounts disappeared. “There are high-yield savings accounts out there, but it’s all relative,” says Mike Schenk, chief economist for the Credit Union National Association. When the Federal Reserve cut […]

By Spencer Tierney

Last year’s savings rates of 2% and higher have come and gone, but that doesn’t mean high-yield savings accounts disappeared.

“There are high-yield savings accounts out there, but it’s all relative,” says Mike Schenk, chief economist for the Credit Union National Association.

When the Federal Reserve cut its benchmark rate to nearly zero in March, many banks and credit unions took their cue to lower rates on savings accounts. This affected online high-yield accounts more drastically than others. And it’s unclear when to expect rates to rise as the pandemic and related economic uncertainty continue.

If you’re thinking about getting a high-yield savings account or ditching the one you have, don’t fall for these misconceptions.

Myth 1: A High-Yield Savings Account has the Same Rate Over Time

Not true, which can be good and bad. Savings accounts have variable rates that are subject to change, so an account you opened last week might not have the same rate this week. This means rising rates can benefit you without you doing anything. But on the flip side, rate drops can occur and, as in recent months, even become common.

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