Most savings accounts earn between 0.01% and 5.35% APY right now, depending on the bank and account type
The interest your savings account earns depends almost entirely on which bank you use and what type of account you open. A traditional savings account at a large national bank might earn 0.01% APY, meaning $10,000 would earn about $1 per year. A high-yield savings account at an online bank might earn 4.5% to 5.35% APY on the same $10,000, earning $450 to $535 per year. The difference is real money, and it comes down to how much the bank pays for deposits.
Banks set their own rates based on what the Federal Reserve does and what competitors offer. When the Fed raises its benchmark rate, banks eventually raise what they pay depositors—but not always by the same amount, and not always quickly. When the Fed cuts rates, banks drop their rates faster than they raised them. This is why the same account at two different banks can pay very different rates, and why the rate you see today might be different next month.
Key Takeaways
- National banks typically pay 0.01% to 0.05% APY on regular savings accounts, while online banks pay 4.5% to 5.35% APY on high-yield accounts.
- The rate you earn depends on the bank's business model and funding costs, not on how much money you deposit or how long you keep it there.
- Interest rates change monthly or quarterly, so a rate that is competitive today may not be in six months.
- Money market accounts and certificates of deposit sometimes pay higher rates than savings accounts, but they come with different rules about withdrawals.
Why different banks pay such different rates
A large national bank like Chase or Bank of America pays low rates because they have branches, customer service staff, and marketing costs. They also have a steady stream of customers who will keep money there regardless of the rate, so they do not need to compete on interest. They can afford to pay 0.01% because they make money on loans and fees, not on the spread between what they pay depositors and what they charge borrowers.
An online bank like Marcus, Ally, or Wealthfront has no branches and minimal overhead. They make money almost entirely on the spread between what they pay you and what they lend out. To attract deposits, they have to pay closer to what the market will bear. When the Fed's benchmark rate is high, they can pay high rates and still profit. When it drops, they drop their rates too—sometimes within days.
Credit unions and smaller regional banks fall somewhere in between. Some credit unions pay competitive rates because they return profits to members rather than shareholders. Others pay low rates because they have limited funding and do not need to attract deposits aggressively.
How the Federal Reserve's rate affects what you earn
The Federal Reserve does not set savings account rates directly. Instead, it sets the federal funds rate, which is the rate banks charge each other for overnight loans. When that rate is high, banks have more incentive to pay depositors more, because they can lend that money out at a higher rate and still make a profit. When the rate is low, banks have less incentive to pay you anything.
The relationship is not one-to-one. If the Fed raises its rate by 0.25%, your bank might raise your rate by 0.25%, or by 0.10%, or not at all. Large banks often lag behind, raising rates slowly when the Fed moves up and cutting them quickly when the Fed moves down. Online banks tend to move faster in both directions because they compete directly on rate.
The Fed's rate has moved significantly over the past few years. In 2021 and early 2022, it was near zero, and savings account rates were 0.01% to 0.05%. By late 2023, the Fed had raised rates to 5.25% to 5.50%, and high-yield savings accounts were paying 4.5% to 5.35%. If the Fed cuts rates in the future, you should expect savings account rates to fall as well.
Regular savings accounts versus high-yield accounts
A regular savings account is what most people have at their main bank. It has no minimum balance requirement, no withdrawal limits, and you can access your money when ready. The tradeoff is the rate: most national banks pay 0.01% to 0.05% APY. On $10,000, that is $1 to $5 per year.
A high-yield savings account is offered by online banks and some credit unions. It has the same features as a regular account—no withdrawal limits, when ready access, FDIC insurance—but pays 4.5% to 5.35% APY. The reason is straightforward that the bank needs to attract deposits and has lower costs. On $10,000, that is $450 to $535 per year. The only real drawback is that you have to bank online, which some people find inconvenient.
Money market accounts are a middle ground. They often pay rates between regular savings and high-yield accounts, but they may require a higher minimum balance and limit how many withdrawals you can make per month. Certificates of deposit (CDs) usually pay the highest rates, but your money is locked up for a set period—typically three months to five years—and you pay a penalty if you withdraw early.
How much interest actually accumulates over time
The difference between a 0.01% account and a 5% account is dramatic when you look at real numbers. Here is what $50,000 would earn over five years at different rates, assuming the rate stays constant and you do not add or withdraw money:
| Account Type | APY | Year 1 | Year 5 Total |
|---|---|---|---|
| National bank savings | 0.01% | $5 | $25 |
| Online high-yield savings | 5% | $2,500 | $13,814 |
The $50,000 earning 0.01% grows to $50,025 after five years. The same $50,000 earning 5% grows to $63,814. The difference is $13,789—money you would have earned straightforward by moving your account. This assumes rates stay constant, which they will not. But it shows why the choice of bank matters.
Interest compounds daily at most banks, meaning you earn interest on your interest. The effect is small at low rates but meaningful at high rates. A 5% APY account compounds to an effective annual rate of about 5.13%, so you earn slightly more than the stated rate.
What happens when interest rates change
Interest rates move in cycles. When the Fed raises rates, high-yield accounts respond quickly—sometimes within a week. When the Fed cuts rates, online banks cut their rates within days or weeks. National banks are slower to raise rates but faster to cut them, which is why their customers often lose out during rate cycles.
If you opened a high-yield account at 5.35% and the Fed cuts rates by 1%, your rate might drop to 4.35% or lower. This is not a penalty—it is how the market works. The bank is paying less because they are earning less on the loans they make with your deposits. If you want to lock in a rate, a CD is the only option, but you have to give up access to your money.
Rates can also move up. If you have money in a low-rate account and the Fed raises rates, you should shop around. Your bank will not automatically raise your rate to match competitors. You have to move the money yourself, which takes a few days but is free and straightforward.
How to find the current best rate
The best rate changes weekly as banks adjust their offerings. You can find current rates on comparison sites like Bankrate, DepositAccounts, or NerdWallet, which update daily. These sites show rates from dozens of banks and let you filter by account type and minimum balance.
When comparing rates, check three things: the APY (the annual percentage yield, which includes compounding), the minimum balance required, and whether the bank is FDIC-insured. All deposits up to $250,000 are protected by FDIC insurance at any bank that carries it, so this is a baseline safety feature, not a differentiator.
Online banks with the highest rates change frequently. In late 2024, banks like Marcus, Ally, American Express, and Wealthfront were among the highest payers, but this shifts as rates move. The best strategy is to check rates every few months and move your money if a competitor is paying significantly more.
Frequently Asked Questions
Why does my bank pay almost no interest?
Large national banks pay low rates because they have high operating costs and do not need to compete on interest to keep customers. They make money on loans and fees instead. If you want higher interest, you have to move your money to an online bank or credit union.
Is a high-yield savings account safe?
Yes, as long as the bank is FDIC-insured, which nearly all are. Your deposits are protected up to $250,000 per account type per bank. You can verify FDIC insurance on the bank's website or by searching the FDIC's bank database.
Can I lose money in a savings account?
No. A savings account earns interest or earns nothing, but the principal is protected by FDIC insurance. You cannot lose money unless the bank fails, in which case the FDIC covers you up to $250,000.
What if I need to move my money quickly?
High-yield savings accounts have no withdrawal limits and no penalties. You can move money out when ready using a transfer to another bank, which usually takes one to three business days. Some banks offer same-day transfers for a small fee.
Should I put all my money in a CD instead of a savings account?
CDs pay higher rates but lock your money up for a set period. If you need access to your money, a high-yield savings account is better. If you have money you will not touch for six months or longer, a CD ladder—opening multiple CDs with different maturity dates—can give you both higher rates and some flexibility.