How much can you make by depositing $5,000 into a high-yield savings account?
Following a pause in June, interest rates are headed back upward. The Fed's decision last week to move the benchmark interest rate to a range between 5.25% and 5.50% was unwelcome news for many borrowers. With rates the highest they've been in 22 years, the cost of everything from credit cards to mortgages is exponentially higher than it was just a few years ago. That said, there is one silver lining worth noting: The rates on high-yield savings accounts are also much higher than they had been.
To compare, interest rates on regular savings accounts are 0.42%, according to the FDIC. But rates on high-yield savings accounts are many times higher, frequently falling in a range of 4% and 5%. Since high-yield savings accounts operate the same way regular accounts do, savers are literally losing money if they don't switch to a bank that offers a high-yield account. But how much can you actually earn with a high-yield account — and what does that look like?
See how much more you could be earning with a high-yield savings account today. Get started now with Discover and lock in your terms from three months to 10 years.
How much can you make by depositing $5,000 into a high-yield savings account?
A few percentage points may, on the surface, not seem like a substantial difference. But when viewed from the prism of a high-yield savings account, it could mean hundreds of dollars more earned each year. The more you deposit, the greater your return, although it also helps to shop around for the highest rate available. Let's look at how much you could make by depositing $5,000 into accounts with various ranges:
- After one year with a regular account at 0.42%: $5,021.00
- After one year with a high-yield account at 4.50%: $5,225.00
- After one year with a high-yield account at 5.00%: $5,250.00
In short: You could be earning significantly more on your money simply by switching from a regular savings account to a high-yield one. While more money deposited means more interest earned, the benefits apply across the board. Using a smaller, $1,000 deposit instead savers could earn the following:
- After one year with a regular account at 0.42%: $1,004.20
- After one year with a high-yield account at 4.50%: $1,045.00
- After one year with a high-yield account at 5.00%: $1,050.00
Does a high-yield savings account sound beneficial to you? Are you ready to open one now? Get started now with Discover and lock in your terms from three months to 10 years.
Other considerations
While interest rates on high-yield savings accounts have been significantly higher than regular types of accounts, they're not the only option worth considering in today's market. Certificate of deposit accounts (CDs) have similar interest rates, and sometimes are even marginally higher depending on the amount deposited and the term length chosen. While long-term CDs have historically offered the highest rates on the market, short-term CDs are currently competitive with the best high-yield savings accounts. It's not difficult to find a CD that earns 5% APY or more right now.
This doesn't mean that you should forego a high-yield savings account. Both have unique advantages. Just make sure to do all your research now, particularly if you're considering a CD as the money in that account will be locked away and won't be able to be touched without penalty until the term has expired.
The bottom line
With interest rates the highest they've been in 22 years, now is a great time to open a high-yield savings account. No matter the amount you deposit, you're practically guaranteed to earn more than you would have by leaving the money untouched in a regular account. And, if you move a substantial sum into a high-yield account (think $5,000 or more), you could potentially earn hundreds of dollars more each year. So get started here now and begin earning more money!
