What's happening to savings account rates right now

Savings account interest rates move up and down based on what the Federal Reserve does with its benchmark interest rate, which it adjusts several times a year. When the Fed raises its rate, banks usually raise what they pay you on savings within weeks or months. When the Fed cuts its rate, banks typically cut what they pay you faster than they raised it.

Whether rates are going up on your account depends on two things: what the Fed is doing, and what your bank decides to do. The Fed's decisions are public information you can find on its website. Your bank's decision is up to them — some banks move quickly to match Fed changes, others move slowly, and some don't move at all.

Right now, the direction of rates depends on when you're reading this. The Fed has cut rates several times since 2023, and banks have been cutting the rates they pay on savings accounts in response. If you opened a savings account a year or two ago, you likely earned more interest then than you do today.

Key Takeaways

  • The Federal Reserve's interest rate decisions drive whether banks raise or lower what they pay you on savings, but banks don't have to match the Fed when ready or at all.
  • When the Fed cuts rates, banks usually cut what they pay you within a few weeks; when the Fed raises rates, the process is often slower.
  • You can check the Fed's current rate on its website, but you need to compare your bank's rate to other banks to know if you're earning competitively.
  • Online banks and credit unions often pay higher rates than large national banks, even when the Fed's rate stays the same.

How the Federal Reserve's decisions affect your rate

The Federal Reserve sets a target range for the federal funds rate — the interest rate banks charge each other for overnight loans. This isn't a rate you see directly, but it's the anchor that moves all other rates in the economy. When the Fed raises this rate, it becomes more expensive for banks to borrow money, so they raise the rates they pay on deposits (including your savings) to attract customers' money. When the Fed cuts the rate, banks can borrow more cheaply, so they cut what they pay you.

The Fed meets eight times a year to decide whether to raise, lower, or hold its rate steady. You can find the announcement of each decision on the Federal Reserve's website, along with a statement explaining why they made that choice. The statement usually mentions inflation, employment, and economic growth — the three things the Fed watches most closely.

However, the Fed's rate change doesn't automatically change your rate. Your bank decides how much of the Fed's move to pass along to you. A bank might raise your rate by 0.25% when the Fed raises by 0.25%, or it might raise by 0.10%, or it might not raise at all. This is why two banks can offer very different rates even when the Fed makes the same move.

Why banks move at different speeds

Large national banks often move slowly to raise rates when the Fed goes up, because they have plenty of customer deposits already and don't need to compete as hard for new money. They move quickly to cut rates when the Fed goes down, because they want to protect their profits. Online banks and credit unions often do the opposite — they raise rates quickly to attract customers and cut more slowly because they rely on deposits to stay competitive.

This creates an opportunity: if you keep your savings at a large national bank, you might be earning significantly less than you could earn elsewhere, even though the Fed's rate hasn't changed. Checking your bank's current rate against rates at online banks and credit unions once or twice a year is a straightforward way to know whether you're falling behind.

How to track whether your rate is changing

Start by finding your current rate. Log into your bank's website or app, or call and ask what interest rate you're earning on your savings account. Write it down with today's date. Then check what online banks and credit unions are offering for the same type of account — a high-yield savings account or money market account, depending on what you have.

Websites like Bankrate, DepositAccounts, and the Federal Reserve's own site list current rates at many banks. You don't need to check constantly; once every three months is enough to notice if your bank has made a move. If your rate hasn't changed in six months but the Fed has raised or cut its rate, that's a sign your bank isn't keeping pace with the market.

You can also set up a straightforward spreadsheet to track your rate over time. Write down the date, your bank's rate, and the Fed's current rate target. After a few months, you'll see the pattern — whether your bank moves quickly or slowly, and whether it moves as much as the Fed does.

What to do if your rate falls behind

If you find that your bank's rate is significantly lower than what other banks are offering, you have options. The simplest is to move your money to a bank offering a higher rate. This usually takes a few days — you open an account at the new bank, give them your old account number, and they transfer the money for you. You don't lose any interest during the move.

Before you move, check whether your current bank will match a competitor's rate if you ask. Some banks will, especially if you've been a customer for a long time. It's worth a phone call to your bank's customer service line to ask. If they won't match, moving your money takes less than an hour of your time and could earn you significantly more interest over a year.

Another option is to split your savings between accounts. You might keep a small amount at your current bank for convenience and move the bulk to a higher-paying bank. This way you still have straightforward access to some of your money while earning more on the rest.

Understanding the difference between your rate and the Fed's rate

The Fed's rate and your savings account rate are not the same number, and they don't move in lockstep. The Fed's rate is currently somewhere between 4.25% and 4.50% (this range changes when the Fed meets). But you won't find a savings account paying that much — most high-yield savings accounts pay between 4% and 5%, and regular savings accounts at big banks often pay less than 0.5%.

The gap between the Fed's rate and what you earn exists because banks keep some of the interest for themselves. They borrow from you at one rate (what they pay on your savings) and lend that money to other customers at a higher rate (mortgages, car loans, credit cards). The difference is their profit. This is normal and necessary — banks couldn't operate otherwise. But the size of that gap varies by bank, which is why shopping around matters.

What happens if rates keep falling

If the Fed continues to cut its rate over the coming months, you should expect your savings account rate to fall as well. This is frustrating if you're trying to earn interest, but it's also temporary — the Fed's rate has gone up and down many times in the past, and it will do so again. When rates eventually rise again, your rate will rise with them.

In the meantime, locking in a higher rate while you can is worth considering. Some banks offer certificates of deposit (CDs), which let you agree to leave your money untouched for a set period — three months, six months, a year, or longer — in exchange for a may provide rate. If you know you won't need the money for six months, a six-month CD might lock in a better rate than a savings account that could fall further.

Frequently Asked Questions

Can I predict what my bank will do when the Fed moves?

Not with certainty, but you can watch the pattern. After the Fed makes a move, check your bank's rate a few weeks later. If your bank consistently moves within two weeks, you can expect it to move again. If it takes two months, plan accordingly. Online banks tend to move faster than large national banks.

If I move my money to a higher-paying bank, will I lose interest?

No. Interest accrues daily and is usually paid monthly. When you move your money, you receive all interest earned up to that point. The new bank starts paying interest on the new account from day one. There's no gap or penalty.

What if the Fed raises rates — will my bank definitely raise what it pays me?

Not necessarily. Some banks will raise quickly; others will raise slowly or partially. Large banks especially may not raise as much as the Fed does. This is why comparing rates across banks matters even after the Fed moves.

Is there a way to earn more interest without moving my money?

Ask your bank if they offer a higher-rate savings product, like a money market account or a CD. Some banks also offer promotional rates for new deposits. You could also split your savings between your current bank and a higher-paying one, keeping just enough at your bank for convenience.