## Frequently Asked Questions
### How Do High-Yield Savings Accounts Calculate Interest, & What Is Compounding?
Your savings account’s yield is a function of its interest rate and compounding frequency. Compounding frequency describes how often your account adds the interest it’s earned to the original (principal) balance. The higher the compounding frequency, the longer each extra bit of interest has to earn interest on itself. For example, imagine two seemingly identical savings accounts. Both earn 0.50% interest. The only difference: Account A compounds annually and Account B compounds daily. You seed both accounts with $10,000 and make no further deposits. The interest rate remains level at 0.50%. By Year 10, how much bigger is Account B’s balance?
### Can You Lose Funds Held in a High-Yield Savings Account?
Federal deposit insurance (FDIC coverage) protects savings balances held with member FDIC institutions up to at least $250,000. That protection kicks in if the member bank fails. Always ensure your bank is FDIC-insured. Otherwise, there’s no guarantee you’ll get your money back if it closes its doors. FDIC insurance doesn’t cover everything that can go wrong at your bank. It might not reimburse you if your account is hacked and drained without your consent or if you fall victim to a financial scam.
### Do Banks Still Charge Excess Withdrawal Fees for High-Yield Savings Accounts?
Some banks continue to charge excess withdrawal fees. But a growing number of financial institutions now choose to waive them. That’s because of a long-overdue change to a Federal Reserve bylaw known as Regulation D (Reg D). For years, Reg D limited withdrawals or payments from savings and money market accounts to six per statement period. In April 2020, the Federal Reserve announced that deposit institutions were no longer bound by the strict monthly withdrawal limit.
### How Safe Are High-Yield Savings Accounts?
FDIC-insured high-yield savings accounts are completely safe, insuring your funds for up to $250,000, with some banks offering even higher levels of protection. The best high-yield savings accounts also take extensive measures to protect your private information.
## Conclusion
Choosing a high-yield savings account can feel overwhelming, so take a step back before you make your pick and consider which factors matter most to you. Often, the decision process begins and ends with yield. If that’s the case for you, choose the highest-yielding savings account you can find. Try not to overthink it. Opening a savings account isn’t something to be done lightly, but it’s also not as big a deal as buying a car or house. You can always open another one if you decide your first choice wasn’t the right one.