Traditional savings accounts pay almost nothing. High Yield Savings Accounts (HYSAs) offered by online banks pay 10-20x more interest. This calculator shows how much more you can earn by switching to a competitive high-yield account.
How This Calculator Works
This calculator compares your current savings growth to a high-yield alternative:
- Current Balance: Money you have saved
- Regular Contributions: Monthly or annual deposits
- Current APY: What your bank currently pays (often 0.01-0.5%)
- High Yield APY: What competitive online banks offer (4-5%+)
- Time Period: How long you'll keep the money invested
- Difference: Extra earnings from switching banks
The Formula Explained
Interest Earned = Balance × APY × Time
For compound interest with contributions: FV = P(1 + r/n)^(nt) + PMT × [(1+r/n)^(nt) - 1]/(r/n)
The difference between 0.5% and 4.5% APY on $10,000 over 5 years: $223 vs $2,400!
Step-by-Step Example
10-Year Comparison: Traditional vs High-Yield
Initial: $20,000 | Monthly Contribution: $500
| Account Type | APY | Year 5 | Year 10 |
| Traditional | 0.10% | $50,150 | $80,400 |
| Average HYSA | 3.00% | $55,200 | $94,000 |
| Top HYSA | 5.00% | $59,300 | $107,500 |
Switching to a top HYSA earns $27,100 more over 10 years on the exact same savings behavior!
Frequently Asked Questions
What is a High Yield Savings Account (HYSA)?
A HYSA is a savings account that pays significantly higher interest than traditional bank savings accounts—typically 4-5% vs 0.01-0.5%. They're offered primarily by online banks, which have lower overhead costs. HYSAs are FDIC insured and function like normal savings accounts with easy access to funds.
Are high yield savings accounts safe?
Yes, HYSAs at legitimate banks are FDIC insured up to $250,000 per depositor, just like traditional bank accounts. Your money is protected even if the bank fails. Verify FDIC membership at FDIC.gov before opening an account. Credit unions have equivalent NCUA insurance.
Why do online banks pay higher interest rates?
Online banks have dramatically lower overhead—no branch buildings, fewer employees, reduced real estate costs. These savings are passed to customers as higher interest rates. Traditional banks with branches can't compete on rates because their cost structure is higher.
How do I switch to a high yield savings account?
Switching is easy: (1) Research and choose an FDIC-insured online bank, (2) Open an account online (takes 10-15 minutes), (3) Link your existing bank account, (4) Transfer your money electronically (ACH transfer), (5) Set up direct deposit or automatic transfers. Most transfers complete in 1-3 business days.
What's a good APY for a high yield savings account?
As of 2024, competitive HYSAs offer 4.0-5.0% APY. Anything above 4% is excellent. Rates change with Federal Reserve policy—when the Fed raises rates, HYSA rates increase too. Always compare current rates; the best bank changes frequently. Avoid accounts offering below 3.5% when 5% is available.
Are there downsides to high yield savings accounts?
Minor inconveniences include: (1) No physical branches for in-person service, (2) Transfers take 1-3 days (not instant), (3) Rates are variable and can drop, (4) Some limit transactions per month. For most people, earning 10x more interest far outweighs these minor limitations.
Should I put all my savings in a HYSA?
HYSAs are ideal for emergency funds and short-term savings (1-5 years). For longer-term goals like retirement, investments typically earn higher returns (7-10% historically). Keep 3-6 months expenses in your HYSA for emergencies, then invest additional savings for growth.
How is HYSA interest taxed?
Interest earned in a HYSA is taxable as ordinary income. You'll receive a 1099-INT form for interest over $10. At 5% APY on $10,000, you'd earn ~$500 and owe taxes on that amount at your marginal rate (potentially $60-$185 depending on bracket). It's still worth it—taxed earnings beat no earnings.
Key Points to Remember
- Switch banks: Earning 5% vs 0.1% is a no-brainer for savings
- Verify FDIC insurance: Ensure your money is protected
- Rates are variable: APYs change—monitor periodically
- Shop annually: The best rate leader changes frequently
- Keep emergency funds here: Perfect for accessible, safe savings