Your Vacation Fund Deserves Better Than a Checking Account. Here Are 3 Smarter Places to Put It.

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Earn a Great Return on Your Travel Funds

Socking away travel money before a vacation, rather than trying to catch up on the credit card bill afterwards, is always smart. It’s also wise to have an ongoing travel fund you continually add money to, like a recurring automatic deposit every month.

But no matter how much or how little you’ve saved for your travels, you’re doing yourself a disservice if that money is just sitting in your primary checking account or a traditional savings account—and earning close to zero interest.

Instead, you can put your money to work by having it earn even more by simply stashing it in an account that pays you a competitive return. And savers right now are in luck, because today’s U.S. interest rates are very high, making it a cakewalk to find numerous savings options that pay at least a 4% annual percentage yield (APY), and as much as a 5.00% APY.

Option #1. A Top High-Yield Savings Account

Savings accounts are excellent vehicles for stashing extra cash or setting up automated transfers to build your travel fund. But not all savings accounts are created equal, so it’s important that you know what rate you’re earning. For instance, the national average savings account rate across all FDIC banks is a mere 0.42%. Even worse, some of the biggest banks, like Chase, Bank of America, and Wells Fargo, pay a near-zero 0.01% on their savings accounts.

Fortunately, you can do better— think 10 times better, or even more. That’s because dozens of high-yield savings accounts currently pay in the mid- to upper-4% range, or even up to a 5.00% APY. And we make the research easy for you, publishing our ranking of the top-APY savings accounts every business day.

While opening one of these likely means starting a relationship with a bank other than where you currently hold your checking account, electronic transfers between banks are easy to set up and often only take 1 day to appear in your destination account (and generally never longer than 3 days). In addition, holding your travel funds at a different bank may provide added savings benefits. Keeping the money “out of sight” also keeps it “out of mind,” which may lead to less temptation to pay other expenses, and ultimately result in greater vacation savings.

Option #2. This High-Yield Checking Account

Though we say right in the title of this story that your travel fund deserves better than a checking account, there is one checking account available right now that can stand in pretty well as a savings account because it offers a rate as high as the best savings account. By opening this account with mph.bank—an online-only operation of the brick-and-mortar Liberty Savings Bank—you can earn an impressive 5.00% on your money by jumping through a single hoop: Setting up at least $2,000 in direct deposits each month (there can be multiple deposits as long as the total is at least $2,000 in each calendar month).

This checking account from mph.bank will pay you 5.00% on up to $50,000 every month you meet the direct deposit requirement. So if that’s an option for you, you may prefer this account to the two 5.00% savings accounts on our list.

Option #3. A Short-Term Certificate of Deposit

With a high-yield savings or checking account, you never know if your current APY will drop next month or the month after that. That’s where certificates of deposit (CDs) have an advantage: The APY you sign up for is yours to keep until the CD matures, whether that’s in 3 months, 12 months, or even 5 years.

For a vacation fund, you probably don’t want to commit your money to a CD for too long a period, since you’d be hit with an early withdrawal penalty if you cashed out before the maturity date. But you’re in luck, because the best-paying nationwide CDs right now—offering 4.50% APY—have terms between 3 and 13 months.

Besides guaranteeing your rate for the full term, CDs offer another advantage for those who sometimes have trouble saving or even keeping their money in savings. The threat of a penalty for an early CD withdrawal can be a useful tool, as it can help you keep your hands off the money for a period of your choosing, giving you added incentive to resist temptation and not spend your savings on something unplanned.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account’s minimum initial deposit must not exceed $25,000. It also cannot specify a maximum deposit amount that’s below $5,000.

Banks must be available in at least 40 states to qualify as nationally available. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g., you don’t live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.