Savings rates are falling, but they remain well above what they were before 2022

Savings account interest rates have been declining since mid-2023, when the Federal Reserve stopped raising its benchmark interest rate. The Fed has actually cut rates several times since then, and banks have responded by lowering what they pay on savings accounts. If you opened a high-yield savings account in late 2023 and saw 5% APY, that same account today likely pays between 4% and 4.5%, depending on the bank and the current month.

The direction of rates depends on what the Federal Reserve does next. The Fed does not directly set savings rates—banks do that on their own—but banks follow the Fed's moves closely. When the Fed signals it will cut rates further, banks usually lower their savings rates within weeks. When the Fed pauses or hints at holding steady, rate cuts slow down. Right now, the Fed's next moves are uncertain, which is why some banks are holding rates steady while others continue to trim them.

For your money, this means the window for locking in higher rates is narrowing. A 4.5% APY today is still far better than the 0.01% many banks offered in 2021, but it is lower than what was available six months ago. If you have been meaning to move money to a high-yield savings account, the incentive to act is stronger now than it will be if rates keep falling.

Key Takeaways

  • Savings rates have fallen from their 2023 peak of around 5% to a current range of 4% to 4.5% at most banks, following Federal Reserve rate cuts.
  • The direction of future rate changes depends on the Federal Reserve's decisions, which are announced roughly every six weeks and affect bank rates within days or weeks.
  • Even at current lower rates, savings accounts pay far more interest than they did before 2022, so moving money now still makes sense if you have not already.
  • Different banks cut rates at different speeds, so shopping around can still find you a 4.5% or higher rate even as the overall trend moves downward.

Why the Federal Reserve controls the direction, not the level

The Federal Reserve's benchmark rate—called the federal funds rate—is the interest rate at which banks lend money to each other overnight. It sounds abstract, but it is the anchor that everything else ties to. When the Fed raises this rate, banks raise savings rates to attract deposits. When the Fed cuts it, banks cut savings rates because they can afford to pay less and still compete for your money.

The Fed does not announce rate changes every month. It meets roughly every six weeks, and at each meeting it either raises rates, cuts them, or holds them steady. Banks do not wait for the next meeting to move—they watch what Fed officials say between meetings and adjust their rates based on what they expect the Fed to do next. This is why you might see a savings rate drop even in a month when the Fed did not meet.

Right now, the Fed has cut rates multiple times from their 2023 peak, but it has not signaled how much further it will go. That uncertainty is why some banks are cutting rates aggressively while others are holding steady, hoping the Fed will pause. The banks that hold steady longer tend to attract more deposits, but they also risk looking uncompetitive if the Fed cuts again and other banks follow.

How to know if rates will keep falling

The Fed publishes its rate decision and economic projections after each meeting. These projections include what Fed officials expect to do over the next year or two. If the projections show more rate cuts ahead, you can expect savings rates to fall further. If they show the Fed holding steady or raising rates, savings rates will likely stabilize or rise.

You do not need to monitor the Fed yourself. Financial news outlets cover every Fed meeting, and your bank's website usually shows its current rates and sometimes includes a note about why they changed. The key is to check your rate every month or two if you have a high-yield savings account, because banks can change rates without notifying you directly—they just post the new rate on their website.

One practical signal: if you see multiple banks cutting rates in the same week, the Fed probably just signaled more cuts are coming. If rate cuts slow down and banks hold steady for a few weeks, the Fed is probably pausing.

Which banks are cutting rates slowest

Not all banks cut rates at the same speed. Some online banks that rely heavily on deposits—like Marcus, Ally, and American Express Personal Savings—tend to cut rates more slowly than traditional banks, because they need to keep deposits flowing in. They know customers shop around, so they hold rates higher longer to stay competitive.

Credit unions sometimes move even more slowly, because they are member-owned and do not need to maximize profit the way banks do. If you have a credit union account, it is worth checking their savings rate against online banks, because you might find the credit union is paying more straightforward because it has not cut yet.

The trade-off is that these slower-cutting banks also tend to raise rates more slowly when the Fed is raising. So if you locked in a 5% rate at one of these banks in 2023, you benefited from their slow cuts. But if you are opening a new account now, you want to find whoever is paying the highest rate today, not bet on who will cut slowest in the future.

What happens if rates fall below 3%

If the Fed cuts rates aggressively and savings rates fall below 3%, the math changes. At that point, a high-yield savings account is no longer dramatically better than a regular savings account at a traditional bank. You might start seeing people move money into certificates of deposit (CDs), which lock in a rate for a set time period, or into money market funds, which can sometimes offer better returns when savings rates are low.

We are not there yet. Current rates are still in the 4% to 4.5% range at competitive banks, which is worth the small effort of moving money. But if you are watching rates and they drop below 3.5%, that is a signal to start looking at other options like CDs or short-term bond funds.

How to lock in a rate before it falls further

You cannot lock in a savings account rate the way you can with a CD. Savings accounts are variable-rate products, meaning the bank can change the rate whenever it wants. But you can move your money to a bank paying the highest rate right now, and you will earn that rate until the bank cuts it.

If you want to truly lock in a rate, a CD is the tool. A six-month or one-year CD lets you lock in today's rate for that entire period, even if the Fed cuts rates and savings rates fall. The trade-off is that you cannot touch the money without paying a penalty. For money you will not need for six months to a year, a CD can make sense right now, especially if you think rates are about to fall further.

For money you might need sooner, a high-yield savings account is still the right choice. Just move it to whichever bank is paying the highest rate today, knowing that rate will probably fall at some point but will still be better than what you would get at a traditional bank.

Frequently Asked Questions

Will savings rates ever go back up to 5%?

Only if the Federal Reserve raises interest rates again. The Fed raises rates when inflation is high and needs to be slowed down. If inflation rises significantly in the future, the Fed might raise rates, and savings rates would follow. But there is no way to predict this—it depends on economic conditions that have not happened yet.

Should I move my money to a CD instead of a savings account?

It depends on when you need the money. If you will not touch it for at least six months, a CD locks in today's rate and protects you if rates fall further. If you might need it sooner, a savings account is safer because you can withdraw anytime without penalty. Many people split the difference: keep three to six months of expenses in a savings account, and put longer-term money in a CD.

How often do banks change savings rates?

Banks can change rates whenever they want, but most change them within a few days or weeks after the Federal Reserve meets. Some banks change rates more frequently if they are trying to attract or discourage deposits. Check your bank's website monthly to see if your rate has changed.

Is 4% APY still worth moving money for?

Yes. A 4% rate on $10,000 earns $400 per year, compared to $1 per year at a traditional bank paying 0.01%. Even at lower rates, the difference adds up quickly. The effort to move money takes an hour or two, so the return is worth it.

What if my bank cuts rates but I just moved money there?

You can move it again to a bank with a higher rate. There is no penalty for moving money between savings accounts. Some people move money every few months to chase the highest rate, though most people find it easier to pick a reputable bank and stay put unless the rate falls significantly below competitors.