Function

A high-yield savings account is a type of deposit account designed to help account holders save for college, retirement, major purchase or emergency situations. In exchange for keeping your money in the bank, the bank pays its customer a percentage of the amount kept in the account, called interest.

Features

A high-yield savings account differs from other types of savings accounts in that it pays a higher rate of interest, often one of the highest savings rate offered by a bank. There is no set criteria that defines how high a rate is considered "high-yield" and because of this, one bank's high-yield savings may pay considerably more or less than another.

Fees

Because they pay higher rates than other accounts, banks often charge monthly maintenance fees on high-yield savings accounts. In some cases, banks waive this fee if customers keep a certain minimum balance in the account or have a minimum amount deposited in other bank accounts, such as a checking account or hold a certificate of deposit with the bank.

Benefits

High-yield savings accounts allow users to make more interest on their money without the risk of losing any of their investment. The Federal Deposit Insurance Corp. and the National Credit Union Administration insure the balances of high-yield savings accounts at participating banks and credit unions up to a certain dollar amount against bank failures,

Considerations

For some people, the amount of a monthly maintenance charge is more than the amount of interest they receive in a high-yield savings account. Because of this, it is important to carefully consider the terms of the account.

Source:

Investopedia.com: Handling High-Yield Savings Accounts