This Savings Account Pays Over 6% APY. Is It Too Good to Be True?

If you have money in savings, you're hopefully riding today's wave of high interest rates. After years of low rates that didn't even keep up with inflation, it isn't unusual to see APYs of 4% or 5% right now. Indeed a couple of accounts, such as the Digital Federal Credit Union's (DCU) savings account, advertise rates of over 6%.

That's pretty impressive, especially since savings accounts are relatively safe and -- unlike with stock market investments -- those rates are guaranteed. However, you need to check the fine print with any high-yield savings account, and even more so with a super high-yield one.

Is the Digital Federal Credit Union Primary Savings too good to be true?

The Digital Federal Credit Union Primary Savings account pays a 6.17% APY on balances up to $1,000. There's a minimum of $5 to open the account and no minimum balance required to earn interest. Plus, it won't charge a monthly fee. If you have less than $1,000 in savings, the account could be a good choice. That's assuming you meet the credit union's eligibility requirements and are able to join.

The slight kicker is this: If your savings balance is higher than $1,000, you'll only earn an APY of 0.15% on the remaining balance. So if you have more money in the bank, you'll likely earn more interest with an account that pays a lower rate on the whole balance.

Our Picks for the Best High-Yield Savings Accounts of 2024

Capital One 360 Performance Savings APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
American Express® High Yield Savings APY 4.25% Rate info 4.25% annual percentage yield as of August 24, 2024 Min. to earn $1 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	APY 4.25% Rate info 4.25% annual percentage yield as of August 24, 2024	Min. to earn $1
UFB Portfolio Savings Account APY 5.15% Rate info To ensure you keep getting the highest rate at UFB, you'll need to keep an eye on their rates. Occasionally, the bank launches new accounts with higher rates. Existing accounts need to contact the bank to request being moved to one of these new accounts. Min. to earn $0 Open Account for UFB Portfolio Savings Account On UFB's Secure Website. Member FDIC.	APY 5.15% Rate info To ensure you keep getting the highest rate at UFB, you'll need to keep an eye on their rates. Occasionally, the bank launches new accounts with higher rates. Existing accounts need to contact the bank to request being moved to one of these new accounts.	Min. to earn $0

Now, unlike a certificate of deposit (CD), the interest on a savings account is variable. Today's rates won't last forever. At some point, the Fed will start to lower interest rates and this will likely impact savings account APYs.

But for the sake of illustration, let's say you put $2,000 into the Digital Federal Credit Union Primary Savings account and it doesn't change its rates for a whole year. You'd earn $61.70 in interest on the first $1,000. But the second $1,000 would only earn you $1.50, taking your total interest to $63.20.

We can compare that to another account that pays 5.30% with $250+ in monthly deposits on the whole balance -- such as the LendingClub LevelUp Savings. Here's how much interest you'd earn in one year with different balances:

The average American could earn over $300 more with a different savings account

The average American had $8,000 in their savings and checking accounts in 2022, according to the Federal Reserve. If that money is in a top high-yield savings account that pays an APY of 5%, it could earn $400 in interest in a year. That's $327.80 more than it would earn in the Digital Federal Credit Union Primary Savings account.

As with many financial products, there's no right or wrong answer. If you have a lower-than-average balance or plan to use other DCU products, its Primary Savings account could still be the right choice. DCU has another savings account with an APY that's as high as 3.56%, as well as a competitive checking account. Residents of New Hampshire and Massachusetts -- where DCU has branches -- will also get more out of its products.

Watch out for these savings account catches

Whenever you see a savings account or CD with a higher APY than its competitors, look closely before you sign up. Check for things like:

• Monthly maintenance or other fees
• Minimum deposit requirements
• Minimum balance requirements
• Limits on balances that earn high interest rates
• Restrictions on withdrawals

Think about what you need and how you'll use the account. That includes things like how much you plan to save and what type of customer service you might require. If you're confident you'll meet any balance requirements to waive a fee or earn a higher interest rate, you'll have different priorities from someone who's just started to save.