A premium savings account pays higher interest rates in exchange for keeping a larger balance or meeting other requirements

A premium savings account is a deposit account that offers a higher interest rate than a standard savings account. Banks use these accounts to attract customers who have more money to deposit. In return for maintaining a minimum balance—often $25,000 to $100,000 or more—you earn more interest on your money. Some banks also require you to make a certain number of deposits each month or keep the account open for a minimum time period.

The trade-off is straightforward: you lock up more of your money, and the bank pays you more for it. If you fall below the minimum balance, the interest rate typically drops to the standard savings rate, sometimes overnight. This means a premium savings account only makes sense if you have the cash available and won't need it in the short term.

Key Takeaways

  • Premium savings accounts require you to maintain a higher minimum balance—usually between $25,000 and $100,000—to earn the advertised interest rate.
  • The interest rate drops to a lower tier if your balance falls below the minimum, so you need to be certain you can keep the money there.
  • Some banks also require monthly deposits, a certain number of transactions, or linked checking accounts to may have access to for the premium rate.
  • The extra interest earned depends on both the rate offered and how long you keep the money in the account.

How the minimum balance requirement works

Banks set a threshold balance that you must maintain to earn the premium rate. This is not the amount you need to deposit once—it is the amount you must have in the account at all times, or at least on the day the bank calculates interest (often the last day of the month).

If your balance drops below the minimum even for one day, many banks will drop your rate when ready. Some banks use an "average daily balance" method, meaning they look at your balance every day during the month and calculate an average. If that average falls short, you lose the premium rate. Other banks use a "minimum daily balance" method, where even one day below the threshold costs you the rate. Read the account terms carefully to understand which method your bank uses.

The minimum balance requirement also means your money is not truly accessible for emergencies without a penalty—the penalty being the loss of the higher interest rate. If you withdraw $10,000 from a $50,000 balance to cover an unexpected expense, you may drop below the minimum and lose the premium rate on the remaining $40,000.

Interest rates and how they compare to standard accounts

Premium savings accounts typically offer 0.50% to 2.00% annual percentage yield (APY), depending on the bank and current market conditions. A standard savings account at the same bank might offer 0.01% to 0.10% APY. The difference sounds small, but it compounds over time.

If you have $50,000 in a standard savings account earning 0.05% APY, you earn about $25 per year. In a premium account earning 1.50% APY, you earn about $750 per year on the same balance. Over five years, that difference grows to roughly $3,750 in additional interest (before accounting for compounding). However, interest rates change frequently, so the premium rate you see today may not be the rate you earn next year.

Some banks also tier their premium accounts—a "premium" tier at $25,000 minimum and a "premium plus" tier at $100,000 minimum, with higher rates at each level. The more you deposit, the more you earn, but the more you are also committing to keep in one place.

Other requirements beyond the minimum balance

Many banks attach additional conditions to premium savings accounts. Common ones include maintaining a linked checking account with the same bank, making a minimum number of deposits per month (often three to five), or keeping the account open for a set period. Some banks require you to use their debit card a certain number of times each month or maintain a minimum balance in the linked checking account as well.

These requirements exist because banks want to lock in your relationship—if you have a checking account, savings account, and debit card all with them, you are less likely to switch banks. Before opening a premium account, confirm what the full list of requirements is and whether you can realistically meet them every month. Missing a deposit requirement or letting your checking account balance drop can cost you the premium rate just as much as a low savings balance.

When a premium savings account makes sense

A premium account is worth considering if you have a large sum of money sitting in a low-interest account and you do not plan to touch it for at least a year or two. Examples include an emergency fund that has grown larger than you need, money saved for a down payment on a house, or inheritance you are holding while you decide what to do with it.

It makes less sense if you are still building your emergency fund, if you have irregular income and may need to withdraw money frequently, or if you are saving for something less than a year away. It also makes less sense if the premium rate is only slightly higher than what you can earn elsewhere—some online banks offer competitive rates on regular savings accounts without any minimum balance requirement.

Compare the premium rate to what you could earn in a money market account, a short-term certificate of deposit (CD), or a high-yield savings account at an online bank. Sometimes the online bank's standard account beats the brick-and-mortar bank's premium account, even after accounting for the higher minimum balance.

FDIC protection and account safety

Premium savings accounts at banks are covered by FDIC insurance up to $250,000 per depositor, per bank. This means if the bank fails, the federal government guarantees your money up to that limit. The FDIC does not pay higher interest on insured deposits—it straightforward protects the principal amount. A premium account with $100,000 in it is fully protected; a premium account with $300,000 in it has only $250,000 protected.

If you have more than $250,000 to deposit, you can open accounts at different banks to keep all your money insured. Each bank's FDIC coverage is separate, so $250,000 at Bank A and $250,000 at Bank B are both fully covered. Some people use this strategy to earn premium rates at multiple banks while keeping all their money insured.

Frequently Asked Questions

What happens if my balance drops below the minimum for one day?

Most banks will drop your interest rate to the standard savings rate when ready or at the next interest calculation date. Some use an average daily balance method, so one day below the minimum may not cost you the rate if your average for the month stays above it. Check your account agreement to see which method your bank uses, and call to confirm before you make a large withdrawal.

Can I withdraw money from a premium savings account whenever I want?

Yes, you can withdraw money anytime, but doing so may drop your balance below the minimum and cause you to lose the premium interest rate. Savings accounts are not like CDs, which lock your money away for a set term. The trade-off is that you have access to your money but risk losing the higher rate if you use it.

Is the interest rate on a premium account may provide to stay the same?

No. Banks can change interest rates at any time, and they often lower rates when the Federal Reserve lowers its benchmark rate. The premium rate you see when you open the account may be different six months or a year from now. Some banks offer an introductory rate for a limited time, then drop to a lower rate after that period ends.

Should I move money from a regular savings account to a premium account?

Only if you have enough to meet the minimum balance and you are confident you will not need that money for at least a year. If moving money to a premium account would leave your emergency fund too small, keep it where it is. If you have extra savings beyond your emergency fund, a premium account may earn you more interest than a regular account.

What is the difference between a premium savings account and a money market account?

Both require higher minimum balances and pay higher interest rates than standard savings accounts. Money market accounts sometimes offer check-writing or debit card access, while premium savings accounts typically do not. Money market accounts may also have limits on how many withdrawals you can make per month. Compare the rates and features at your bank to see which one pays more for your situation.