Banks pay between 0.01% and 5.35% APY on savings accounts, depending on the bank, the account type, and how much money you keep in it.
The rate your bank pays is not set by the bank alone. The Federal Reserve sets a target range for short-term interest rates, and banks use that range to decide what they pay depositors. When the Fed raises rates, banks raise what they pay you. When the Fed cuts rates, banks cut what they pay you—sometimes faster than they raised it.
Right now, traditional banks (Chase, Bank of America, Wells Fargo) typically pay 0.01% to 0.05% APY on regular savings accounts. Online banks (Marcus, Ally, Discover) pay much more—currently 4.50% to 5.35% APY on high-yield savings accounts. The difference is real money: $10,000 in a traditional bank savings account earns roughly $1 per year. The same $10,000 in a high-yield account earns $450 to $535 per year.
The rate you receive depends on three things: which bank you choose, what type of account you open, and sometimes how much you deposit. A few banks pay slightly higher rates if you maintain a minimum balance or set up direct deposit, but most online banks pay the same rate to everyone.
Key Takeaways
- Online banks currently pay 4.50% to 5.35% APY on savings accounts, while traditional brick-and-mortar banks pay 0.01% to 0.05% APY on the same type of account.
- The Federal Reserve's interest rate decisions drive what banks pay you, so rates rise and fall together across the industry.
- The difference between a 0.01% account and a 5.35% account means $535 per year on a $10,000 balance instead of $1 per year.
- Money market accounts and certificates of deposit (CDs) sometimes pay higher rates than savings accounts at the same bank, but your money is less accessible.
Why online banks pay more than traditional banks
Online banks have lower overhead costs than banks with physical branches. They do not pay for building leases, tellers, or branch staff. They pass some of those savings to depositors by paying higher interest rates on savings accounts. A traditional bank needs to cover the cost of its branches, so it keeps more of the interest income for itself.
Online banks also compete directly on interest rate. They have no other way to attract customers—no branch location, no relationship manager, no branded debit card. The rate is the product. Traditional banks compete on convenience and brand recognition, so they can afford to pay less.
This does not mean online banks are riskier. Most online banks are FDIC-insured up to $250,000 per account, the same as traditional banks. The insurance covers your money if the bank fails, regardless of how much interest it pays you.
How the Federal Reserve affects what you earn
The Federal Reserve does not set the exact interest rate banks pay you. Instead, it sets a target range for the federal funds rate—the rate banks charge each other for overnight loans. Banks use that range as a benchmark when deciding what to pay depositors.
When the Fed raises its target range, banks raise savings account rates within weeks or months. When the Fed cuts its target range, banks cut savings account rates—often faster than they raised them. This is why your savings account rate can change several times per year.
The Fed raised rates aggressively from March 2022 through July 2023, which is why savings account rates climbed from near zero to over 5%. If the Fed cuts rates in the future, you will see savings account rates fall again. The timing and size of those cuts are unpredictable, so the rate you see today may not be the rate you see in six months.
Comparing savings accounts, money market accounts, and CDs
| Account Type | Current Rate Range | Access to Your Money | When to Use It |
|---|---|---|---|
| High-yield savings account | 4.50% to 5.35% APY | Withdraw anytime, no penalty | Emergency fund or money you may need within a year |
| Money market account | 4.75% to 5.40% APY | Limited withdrawals per month; comes with a debit card | Short-term savings where you want check-writing access |
| Certificate of deposit (CD) | 4.50% to 5.50% APY | Locked in for a set term (3 months to 5 years); early withdrawal penalty applies | Money you will not need for a specific period |
| Traditional savings account | 0.01% to 0.05% APY | Withdraw anytime, no penalty | Rarely the best choice for earning interest |
Money market accounts sometimes pay slightly more than savings accounts because they come with limited check-writing or debit card access. That restriction means the bank can invest your money more predictably, so it pays you a bit more. The trade-off is that you can usually make only three to six withdrawals per month before fees kick in.
Certificates of deposit (CDs) lock your money in for a set period—anywhere from three months to five years. In exchange, banks pay a higher rate because they know your money will stay with them. If you withdraw before the term ends, you pay a penalty that eats into your interest earnings. CDs make sense only if you have money you genuinely will not need for that time period.
How much interest actually accumulates on different balances
The dollar amount you earn depends on three things: the APY, how much money you deposit, and how long it stays in the account. Banks calculate interest daily but usually pay it monthly.
Here is what one year of interest looks like at different rates and balances:
- $5,000 at 0.01% APY = $0.50 per year
- $5,000 at 5.00% APY = $250 per year
- $25,000 at 0.01% APY = $2.50 per year
- $25,000 at 5.00% APY = $1,250 per year
- $100,000 at 0.01% APY = $10 per year
- $100,000 at 5.00% APY = $5,000 per year
The difference between a traditional bank and an online bank compounds over time. If you keep $50,000 in savings for five years, a traditional bank at 0.02% APY pays you roughly $50 total. An online bank at 5.00% APY pays you roughly $13,000 total. That is not a small difference.
What happens when the Fed changes rates
The Federal Reserve meets eight times per year to review interest rates. When it raises or cuts rates, banks adjust what they pay depositors, but the timing varies. Online banks usually change rates within days. Traditional banks sometimes take weeks or longer.
If the Fed raises rates, your savings account rate will go up—but you may not see the increase when ready if you bank at a traditional institution. If the Fed cuts rates, your rate will go down. There is no way to lock in a rate on a savings account; the rate floats with the Fed's decisions.
CDs are different. When you open a CD, your rate is locked in for the entire term, regardless of what the Fed does. This is why CDs can be useful if you think rates are about to fall—you lock in today's higher rate before it drops.
Where to find current rates for different banks
Banks publish their current rates on their websites, usually in a rates or products section. The rate you see online is the rate you will receive when you open an account—there is no negotiation or hidden fine print.
Comparison sites like Bankrate, DepositAccounts, and NerdWallet update rates daily and let you filter by account type, minimum deposit, and other features. These sites do not charge you to compare; they make money when you click through to open an account.
When you compare rates, pay attention to the APY, not the interest rate. APY includes the effect of compounding, so it is the true number you will earn. Also check whether the rate applies to all deposits or only balances above a certain amount. Some banks pay 5.00% on the first $100,000 and 4.50% on anything above that.
Frequently Asked Questions
Do I lose money if I move my savings to a different bank?
No. Moving money between banks does not cost you anything and does not affect your balance. You can transfer money electronically from one bank to another in one to three business days. Your old account closes, and your new account opens with the full amount you transferred.
What if the bank lowers my rate after I open the account?
Banks can lower savings account rates anytime, and they do not have to ask your permission. You will receive notice before the change takes effect, usually 30 days in advance. If you do not like the new rate, you can move your money to a different bank. Rates on CDs are locked in, so a bank cannot lower your rate during the term.
Is my money safe in an online bank if it pays high interest?
Yes, as long as the bank is FDIC-insured. FDIC insurance covers up to $250,000 per account holder per bank, regardless of the interest rate the bank pays. You can check whether a bank is FDIC-insured on the FDIC's website or by looking for the FDIC logo on the bank's site.
Why do some banks pay more interest on money market accounts than savings accounts?
Money market accounts come with limited withdrawal access and sometimes check-writing privileges, which means the bank can keep your money invested more predictably. In exchange, banks pay a slightly higher rate. The trade-off is that you can usually make only three to six withdrawals per month before fees explore.
Can I earn interest on a checking account?
Some banks offer interest-bearing checking accounts, but the rates are almost always lower than savings accounts—typically 0.01% to 0.50% APY. Most people use checking accounts for spending, not saving, so the low rate reflects that. If you want to earn meaningful interest, move money to a savings account or money market account.