How this HYSA comparison works
Both accounts are projected with daily compounding and a contribution at the end of each month. The quoted APY is converted to a nominal rate compounded daily, then to an effective monthly rate:
i = (1 + r/365)^(365/12) − 1
FV = P(1 + i)^m + PMT × [(1 + i)^m − 1] ÷ i
- P — initial deposit; PMT — monthly contribution; r — annual rate; m — number of months
Worked example
Put $10,000 away and add $500 a month for 10 years. At a 0.45% standard rate you earn roughly $1,800 in interest. At 4.2% in a high-yield account the same deposits earn roughly $21,000 — over ten times as much, with no extra risk if the account is deposit-insured.
Key terms
- High-yield savings account (HYSA)
- A savings account, usually from an online bank, paying several times the national average rate. Called easy-access savings in the UK and a high-interest savings account in Canada.
- APY / AER
- The effective yearly return including compounding.
- Variable rate
- HYSA rates can change at any time, usually following the central bank's policy rate.
- Deposit insurance
- FDIC (US), FSCS (UK) and CDIC (Canada) protect eligible balances if the bank fails.