What makes a savings account rate "good" depends on what other banks are offering right now

There is no fixed number that makes a rate good or bad. A 4.5% APY on a savings account is excellent in one year and mediocre in another, because rates move with the Federal Reserve's decisions and what competing banks decide to pay. The only way to know if your rate is good is to compare it against what you can get elsewhere today.

The practical test: open a browser, visit the websites of five to ten banks you have not heard of, and write down what they are paying on savings accounts right now. If your current rate is higher than most of those, you are doing well. If it is lower, you are leaving money on your balance.

Banks that advertise heavily on television and have branches on every corner almost always pay less than online-only banks. This is not because they are dishonest — it is because they spend money on buildings and marketing instead of on interest rates. An online bank with no physical location can afford to pay you more.

Key Takeaways

  • Compare your current rate against at least five other banks' rates on the same day, because rates change weekly and vary widely between institutions.
  • Online banks typically pay 0.5% to 1.5% more APY than traditional banks with branches, because they have lower operating costs.
  • A rate that was good three months ago may be below average today, so checking once or twice a year takes five minutes and can add hundreds of dollars to your balance annually.
  • The difference between a 4.0% rate and a 5.0% rate on $10,000 is $100 per year, which compounds if you leave the money untouched.

Where to find current rates from multiple banks at once

You do not have to visit each bank individually. Websites like Bankrate, DepositAccounts, and DepositAccounts track rates across dozens of banks and update them daily. You can sort by APY from highest to lowest and see which banks are paying the most right now.

These comparison sites make money from banks that pay them when you click through and open an account, but the rates they display are real and accurate. The banks have no incentive to lie about their rates — the Federal Deposit Insurance Corporation (FDIC) requires them to disclose the true APY, and customers will leave if the rate does not match what was advertised.

When you find a rate that looks good, click through to the bank's own website and confirm the number before you move money. Rates can change between the time a comparison site updates and the time you explore, though usually only by a few hundredths of a percent.

How much difference does a higher rate actually make

The math is straightforward. If you have $10,000 in a savings account earning 1.0% APY, you earn $100 per year. If you move that same $10,000 to an account earning 5.0% APY, you earn $500 per year. The difference is $400 — money that stays in your pocket instead of the bank's.

Over five years, that gap grows. At 1.0%, your $10,000 becomes $10,510. At 5.0%, it becomes $12,763. The higher rate earned you $2,253 more, and you did nothing except choose a different bank.

The effect is smaller on smaller balances and larger on larger ones. A $1,000 difference in rate on $1,000 is $10 per year. On $100,000, it is $1,000 per year. If you have money sitting in a savings account, the rate matters more the longer you leave it there.

Why banks lower rates and when to move your money

Banks raise rates to attract new customers when the Federal Reserve raises its benchmark rate. They lower rates when the Fed cuts, or when they have enough deposits and do not need to compete for more. A bank that paid 5.0% last month might drop to 4.5% this month because they hit their deposit target.

You are not locked in. You can move your money to a different bank whenever you want, and there is no penalty for doing so. The only cost is the time it takes to set up a new account and transfer your balance — usually a few days and a few minutes of your time.

If you notice your bank has dropped its rate below what competitors are offering, moving is worth considering. You can keep your old account open (some banks charge fees for closing, though most do not) or close it once the transfer clears. There is no rule that says you have to stay with one bank forever.

The difference between APY and APR on savings accounts

APY (Annual Percentage Yield) is what you see advertised on savings accounts. It includes the effect of compounding — the way interest earned gets added to your balance and then earns interest itself. APR (Annual Percentage Rate) does not include compounding and is almost never used for savings accounts.

When a bank advertises a savings rate, it is always showing you APY. That is the number you should compare across banks, because it tells you the true amount you will earn in a year if you leave the money untouched. APR is mainly used for loans and credit cards, where you are paying interest instead of earning it.

Compounding happens automatically. You do not have to do anything. If your account earns 5.0% APY and you deposit $10,000, the bank calculates interest daily or monthly (depending on the bank), adds it to your balance, and the next period's interest is calculated on the new, higher balance. Over a year, this compounds to exactly the APY advertised.

How to decide if moving banks is worth the effort

Moving money takes about 15 minutes of active work spread over a few days. The question is whether the rate difference justifies that time. If you have $50,000 and can move it from a 1.0% account to a 4.5% account, you earn an extra $1,750 per year. That is worth 15 minutes of work.

If you have $2,000 and the difference is between 4.0% and 4.5%, you earn an extra $10 per year. Whether that is worth your time is up to you. Some people move for any difference. Others only move if the gap is at least 0.5% or 1.0%.

One practical approach: check rates once or twice a year. If your current bank has dropped more than 0.5% below the market average, move. If it is still competitive, stay. This takes five minutes and keeps you from leaving money on the table without obsessing over rate changes every week.

What to watch out for when comparing rates

Some banks advertise a high rate but only on balances above a certain amount — often $25,000 or $100,000. If you have less, you earn a much lower rate. Read the fine print on the bank's website, not just the headline number on the comparison site.

A few banks offer promotional rates that are high for three or six months, then drop to a much lower standard rate. These can be worth using if you plan to move the money anyway, but do not count on the promotional rate lasting. Check what the regular rate will be after the promotion ends.

Watch for monthly fees. Most online banks charge nothing to hold a savings account, but some charge $5 or $10 per month if your balance falls below a certain level. A 5.0% rate with a $10 monthly fee is worse than a 4.0% rate with no fee, because the fee costs you $120 per year.

Frequently Asked Questions

Is 5% APY on a savings account good right now?

Five percent is competitive with the highest rates available from online banks at most times, though the exact market rate changes weekly. Check a rate comparison site to see what five to ten banks are currently offering. If most are at 4.5% or lower, 5.0% is good. If most are at 5.5% or higher, it is below average.

Should I move my money if my bank drops its rate by 0.25%?

It depends on your balance and how much effort you want to spend. On $50,000, a 0.25% drop costs you $125 per year. On $5,000, it costs $12.50. If the new rate is still competitive with other banks, staying put is reasonable. If it has fallen well below the market, moving makes sense.

Do I lose money if I move my savings to a different bank?

No. Moving your balance from one bank to another does not cost you anything. The transfer takes a few days, and your money earns interest the whole time. You might lose a few cents if the timing of interest deposits does not align perfectly, but the loss is negligible.

What if I find a bank offering 6% APY?

Check the fine print carefully. A 6% rate might be a promotional offer that lasts only a few months, explore only to balances above $100,000, or come with monthly fees. Compare the total cost and benefit against a lower-rate account with no strings attached before you move your money.

How often should I check if my savings rate is still competitive?

Once or twice a year is enough for most people. Rates do not change daily in ways that matter to your balance, and checking too often can lead to moving money unnecessarily. Set a reminder for January and July, spend five minutes on a comparison site, and move only if your rate has fallen significantly behind.