Savings account interest rates vary by bank and account type, and they change constantly

The interest rate on a savings account depends on which bank you use, what type of account you open, and when you open it. There is no single "savings account rate"—banks set their own rates based on what the Federal Reserve does, how much competition they face, and how much they want to attract deposits. A savings account at one bank might pay 4.5% annual percentage yield (APY) while another pays 0.01% for the exact same type of account.

Right now, rates are higher than they have been in years because the Federal Reserve raised its benchmark interest rate starting in 2022. That pushed banks to offer better rates to attract savers. But this does not mean all banks raised their rates equally. Online banks and credit unions tend to offer higher rates than traditional brick-and-mortar banks, because they have lower overhead costs and need to compete harder for deposits.

The rate you see advertised is not may provide to stay the same. Banks can lower rates at any time, though they usually give you notice. Some accounts have promotional rates that are high for a limited time, then drop to a lower standard rate. Before you open an account, check what the regular rate will be after any promotional period ends.

Key Takeaways

  • Online banks and credit unions typically offer higher savings rates than traditional banks, often between 4% and 5.35% APY depending on current market conditions.
  • The rate your bank pays depends on Federal Reserve policy, the bank's own strategy, and how much competition exists in your area or online.
  • Promotional rates are often higher than the standard rate that kicks in after the promotional period, so read the fine print before opening an account.
  • Your rate can change at any time after you open the account, though banks must notify you before lowering it.
  • Money market accounts and certificates of deposit (CDs) sometimes pay higher rates than regular savings accounts, but with different rules about when you can withdraw your money.

How to find the current rates different banks are offering

The easiest way to compare rates is to visit bank websites directly and look for the savings account page. Most banks display their current APY prominently. You can check a handful of banks in an hour: your current bank, one or two online banks (like Marcus, Ally, or American Express Personal Savings), and your local credit union if you belong to one.

When you compare, make sure you are looking at the same type of account. A high-yield savings account will pay more than a regular savings account at the same bank. A money market account might pay differently than either. The APY listed should be the rate you get right now if you open the account today—not a promotional rate that expires in three months.

Rates change frequently, sometimes weekly. If you see a rate you like, you do not have to open the account when ready, but know that the rate could be lower by next week. Banks usually post rate changes on their website or send email notifications to existing customers.

Why online banks pay more than traditional banks

Online banks have lower costs because they do not operate physical branches. They do not pay for building leases, tellers, or branch managers. That savings gets passed to customers in the form of higher interest rates. An online bank can afford to pay 4.75% APY on savings because it spends far less on operations than a bank with 500 branches across the country.

Traditional banks pay lower rates partly because they have higher costs, but also because many customers do not shop around. If you have a checking account at a big bank and your savings account earns 0.01%, you might not realize you could earn 4.5% elsewhere. Banks rely on this inertia. They know some customers will not bother to move their money, so they do not have to compete as hard on rate.

Credit unions sometimes offer rates competitive with online banks because they are member-owned and do not have to generate profit for shareholders. However, not all credit unions offer high rates, and some have restrictions on who can join. Check your local credit union's website or call to ask what they are currently paying.

What happens to your rate if the Federal Reserve changes policy

The Federal Reserve sets a benchmark interest rate that influences what banks pay on savings. When the Fed raises its rate, banks usually raise the rates they pay on savings accounts within days or weeks. When the Fed lowers its rate, banks typically lower savings rates too—sometimes when ready, sometimes after a delay.

This means the rate you lock in today might not be the rate you earn forever. If you open a savings account at 4.5% APY and the Federal Reserve cuts rates, your bank will likely lower your rate to something like 3.5% or lower. You will receive notice before this happens, but you cannot prevent it. Your only option is to move your money to a bank that is still paying a higher rate.

The one exception is a certificate of deposit (CD). When you open a CD, the rate is locked in for the entire term—usually three months, six months, one year, or longer. If you open a one-year CD at 5% APY, you will earn 5% for the full year even if the Federal Reserve cuts rates and other banks drop their rates to 2%. The trade-off is that you cannot withdraw the money early without paying a penalty.

High-yield savings accounts versus regular savings accounts

A high-yield savings account is straightforward a savings account that pays a higher interest rate than a regular savings account at the same bank. There is no official definition—banks use the term "high-yield" to mean whatever they want it to mean. At some banks, high-yield means 4.5% APY. At others, it might mean 0.5% APY.

The difference comes down to the bank's strategy. Online banks almost always call their main savings product a high-yield savings account because the rate is their main selling point. Traditional banks often have a regular savings account that pays almost nothing (0.01%) and a high-yield version that pays more (maybe 0.5% to 1%). The high-yield version might require a higher minimum balance or have other restrictions.

For practical purposes, compare the actual APY, not the label. A "regular" savings account at an online bank paying 4.5% is better than a "high-yield" account at a traditional bank paying 0.75%. The name does not matter—the rate does.

Money market accounts and CDs as alternatives to savings accounts

A money market account is a hybrid between a savings account and a checking account. It usually pays a higher interest rate than a regular savings account, but it also comes with a debit card or checkbook so you can withdraw money more easily. The catch is that money market accounts often require a higher minimum balance—sometimes $2,500 or more—and they may limit how many withdrawals you can make per month.

A certificate of deposit (CD) locks in a fixed interest rate for a set period of time, usually ranging from three months to five years. CDs typically pay higher rates than savings accounts because you agree not to touch the money until the term ends. If you withdraw early, you pay a penalty—usually a few months of interest. CDs are useful if you know you will not need the money for a specific amount of time and want to may provide a rate.

If you need access to your money at any time, a high-yield savings account is usually the better choice. If you have money you will not need for six months or longer, a CD might pay more. Money market accounts fall in between—they pay more than savings accounts but less than CDs, and they give you more flexibility than a CD but less than a savings account.

How to decide which account makes sense for your situation

Start by asking yourself how soon you might need the money. If you are building an emergency fund that you might need to access in the next few months, a high-yield savings account is the right choice. You want the money available when ready, and a savings account lets you withdraw without penalty. The rate matters less than the access.

If you have money you will not need for at least six months, compare the rates on high-yield savings accounts and CDs. A CD might pay 0.5% to 1% more than a savings account, but you cannot touch it without paying a penalty. Do the math: if a savings account pays 4.5% and a six-month CD pays 5.25%, the CD earns you about $7.50 more per $10,000 over six months. That might be worth locking the money away, or it might not be—it depends on your comfort level.

Check the minimum balance requirement for each account. Some high-yield savings accounts have no minimum. Others require $500 or $1,000 to open. Some money market accounts require $2,500 or more. If you do not have the minimum, that account is not an option for you, no matter how good the rate is.

Frequently Asked Questions

Is the interest rate I see advertised the rate I will actually get?

The advertised rate is the rate you will get if you open the account today, but it can change after you open it. Banks can lower rates at any time, though they must notify you first. Some banks advertise a promotional rate that is higher for a limited time—read the terms to see when the promotional period ends and what the standard rate will be.

Can I move my money to a different bank if my rate drops?

Yes. You can withdraw your money from any savings account at any time without penalty. Open a new account at a bank with a higher rate, transfer your money, and close the old account. There is no cost to do this, and no limit on how many times you can switch banks. The only exception is a CD—if you withdraw before the term ends, you pay a penalty.

Why do some banks pay almost no interest on savings?

Traditional banks with many physical branches have higher costs and less pressure to compete on rate because many customers do not shop around. They know you might keep your savings account with them just because you have a checking account there. Online banks and credit unions have to compete harder, so they offer better rates to attract deposits.

What is the difference between APY and interest rate?

APY (annual percentage yield) includes the effect of compounding—the interest you earn on your interest. A bank might quote both an interest rate and an APY. The APY is the number that matters for comparing accounts, because it shows you the actual amount you will earn in a year.

Should I open a CD or keep my money in a savings account?

A CD pays more, but your money is locked away. If you will not need the money for at least six months and the CD rate is at least 0.5% higher than the savings rate, a CD might be worth it. If you might need the money sooner, or if the rate difference is small, a savings account gives you more flexibility.