[USER]

I have been considering a HYSA. My friend sent me a referral link for Ally Bank so I might go with that. It seems like a no-brainer to park a significant amount of money in one. But what are the disadvantages? Anything I should be aware of first? Are you limited to when you can withdraw money? Have the rates varied significantly? Is the money always accessible to me? I am in a position where I could deposit up to $20,000 right away.

[Jen]

It’s a savings account with a higher rate of interest than most. Your money stays liquid (accessible) but it may take a day or two for you to transfer cash to another acct b/c it’s not Instant to transfer money between banks.

If you open the acct, you’ll be thrilled at the interest you’ll get at the end of the month. Probably around ~$50/month. What are you getting now?

[Carl]

There was a time not that long ago that hysa har rates less than 1%. Rates will vary and don’t stay fixed. Still better than keeping the money you need to keep liquid parked in your bank account.

[Cory]

Most transfers are fine and clear in a few days. I like both online HYSA I use.

I would note that I would use a traditional bank for wires if you need them at a specific time. My wire for a home took a lot longer from my HYSA than it should’ve a couple years back on a home purchase.

Would you also like to explore: What is your go to HYSA and why?

[Cathy]

There is a limit to the amount of withdrawals just Luke most savings accounts. If you don’t have a spending account with them, then there is a delay in getting your money.

[Megan]

Really the biggest disadvantage is that you didn’t do it sooner. High APY isn’t a new thing.

Ally is not the winning horse in the APY race, it’s just over hyped. Aim for a minimum of 5.25% APY given the current landscape.

[Ron]

If you have a brokerage acct anywhere, their money mkt ps are paying good rates. The money mkt acct at a brokerage is often referred to as your “core” acct.

At Fidelity, I am getting 5% in Spaxx and fdrxx. At vanguard is is even higher at 5.27% since they are a non-profit and have lower costs overall than anyone in the business.

And, you can get 5.5% if you buy 3-Month Fed treasuries, and the beauty of them is that you pay no state or local taxes on the income!

Also, check out: What should I do with my HYSA after having enough emergency fund?

[Andrea]

One disadvantage that I never see anyone discussing is that you have to report interest earned to the IRS and pay taxes on it.

So, it’s not like you’re actually getting that rate. This can come into play when you’re trying to stay eligible to contribute to a Roth IRA and stay under the income requirements…

[Kris]

All savings accounts have a limit to how many times you can transfer per month. I’m not aware of a dollar amount limitation. I use Ally and I’ve transferred up to $20k at one time. It takes 3 days to transfer from their savings to my checking that is at a different bank.

Just like any savings account, including HYSA, the interest moves when rates do.

[Katie]

I have a wealthfront joint savings account, but on the sight it says I can’t transfer money from my credit union to a joint account, only to an “individual” savings account. I didn’t know this before I created the account.

Should I just open another account as individual and try that work around? I’m a bit frustrated.

[Sara]

I just moved my emergency fund to Ally and like them so far. I wish I had done it sooner solely based on the amount of interest I made in January… it does take 3 days to get money to my credit union or vise versa.

I also have a checking account with them if I need to use funds immediately and can’t wait 3 days.

Would you also like to explore: Has anyone used Discover Bank’s HYSA?

[Emily]

We have a savings and checking account with them and they are great! They do delay transfers to external accounts for the first 3 months.

If you need immediate access I suggest opening a checking account with them so the transfer is immediate.

[Lianne]

I was with Ally for a while and love them, but the APY is lower compared with others. I moved everything out of Ally last year and into Wealthfront. Making 5.5% now with the promotion (5% normally. An extra 0.5% for 3 months for signing up with a referral link and you can keep getting 0.5% extra for referring people so it’s a win-win!).

I’m happy with Wealthfront so far! Like most HYSAs, the money isn’t totally accessible RIGHT away & it may take a few days to withdraw.

But I have it linked up to my credit cards and they pay automatically and keep enough in my checking just in case.

[Wallace]

A few months ago I opened an account with Valley Bank. The process was super easy. It was paying 5.25%. Their app works great. However, I just closed that account. I decided as a way of simplifying things in my life I would park that money in my Fidelity account where we have our IRAs and brokerage money. Fidelity has a MMA Money Market Account. It is currently paying 5%.

In both of these options, the interest rate will fluctuate. If you want to lock in those rates for a short term you can buy a CD currently paying 5.5%. Many banks and my local credit are over 5% on a 12-month CD right now.

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