3 costly high-yield savings account mistakes to avoid this fall

With the right approach, savers can still earn sizable returns with a high-yield savings account now. Westend61

High-yield savings accounts have traditionally been a safe and reliable home for your money. And, in recent years, they've been one of the most profitable places to keep it, too.

While inflation and higher interest rates badly hurt the wallets of millions of Americans, high-yield savings accounts offered secure and effective ways to grow your money. With rates here comfortably over 5% but without the restrictions that alternatives like certificates of deposit (CDs) came with, this was a natural option for many savers.

But the overall economy and the interest rate climate is evolving again. The Federal Reserve issued multiple rate cuts last year, and it has renewed that rate-cut campaign in recent weeks, reducing the earnings these accounts now provide to savers. Still, with the average rate on a traditional account under 0.50% now, a high-yield savings account can still be valuable for many savers – assuming they avoid some costly mistakes this season. Below, we'll detail three worth skipping now.

See how much interest you could be earning with a top high-yield savings account here.

3 costly high-yield savings account mistakes to avoid this fall

High-yield savings accounts can still be valuable for many savers. To get the most out of these accounts while you still can, however, you'll specifically want to avoid:

Using your local banking branch

Online banks, thanks to their ability to save the overhead maintenance costs physical banking branches contend with, tend to offer higher rates. Using your local banking branch to open a high-yield savings account, then, likely means forgoing interest-earning potential that you may otherwise be able to secure with an online bank. 

While it may take a bit more time to find an online bank with the features you're looking for, the time will be better spent if it results in bigger returns on your money. And with rates on a general downward trend regardless of which bank you use, the importance of choosing the right one now is especially high.

Start shopping for high-yield savings accounts online now.

Putting all of your money here versus putting some into a CD, too

High-yield savings account rates are still in the 4.20% to 4.30% range this fall, but so are CD accounts. And, unlike high-yield savings accounts, CD rates are fixed and will remain the same for the full term, while the high-yield account rate will adapt over time based on market conditions. 

Putting all of your money into a high-yield savings account now, then, while CDs offer the same rate, would be a mistake, especially with additional rate cuts expected for late October and in December. Those reductions will impact high-yield savings accounts in a way that they won't with previously opened CDs. Consider splitting your funds, then, between both account types (but avoid keeping any in a traditional savings account thanks to the aforementioned minimal rate those accounts now come with).

Assuming that Fed rate cuts have eliminated the benefits of these accounts

Are high-yield savings accounts as lucrative as they were a year or so ago? They're not. And are they positioned to become less advantageous as additional rate cuts are issued? That's true. Still, assuming that Fed rate cuts have eliminated the benefits of these accounts is faulty thinking. 

Savers can still earn approximately $4 for every $100 deposited now, and they can do so while maintaining the flexibility and usage frequency they're already accustomed to with traditional savings accounts. And with predicted rate cuts in the minimal amounts of just 25 basis points each and the reality that the Fed doesn't directly dictate the rates banks offer on these accounts, they're likely to remain valuable for the foreseeable future.

The bottom line

A high-yield savings account can still play a worthwhile role in your broader savings strategy. It will just need to be approached and managed a bit more strategically than in the recent past. By avoiding these three costly mistakes this fall, however, you can boost your chances of success with this unique savings vehicle, both now and in the months and years that follow.

Edited by Angelica Leicht