The best rate depends on what you're willing to do to get it

There is no single "best" bank because interest rates change weekly and vary by the type of account you open. A high-yield savings account at an online bank might pay 4% to 5% right now, while a brick-and-mortar bank down the street might pay 0.01%. The difference comes down to three things: whether the bank operates online or has physical branches, how much money you deposit, and how often you're willing to move your money around.

The highest rates are almost always at online banks and credit unions because they have lower costs than traditional banks with buildings and staff. But the tradeoff is that you can't walk in and deposit cash or talk to someone face-to-face. If that matters to you, your rate will be lower, and that's a real choice to make — not a failure on your part.

Key Takeaways

  • Online banks and online credit unions typically offer rates two to four times higher than traditional banks because they spend less money on branches and staff.
  • Rates change every week or two, so the "best" rate today may not be the best rate next month — check the current rate before you open an account, not the rate advertised last month.
  • Some banks offer higher rates only if you deposit a large amount upfront or set up automatic transfers, so read the terms before opening.
  • A savings account at a credit union may pay less than an online bank but more than a traditional bank, and you may have access to a physical branch.

How online banks offer higher rates than traditional banks

An online bank has no buildings, no tellers, and no branch staff. That saves millions of dollars per year. Because they save money, they can afford to pay you more of the interest they earn on your deposits. A traditional bank with 500 branches across the country has to pay rent, utilities, and salaries for all of those locations — money that comes out of what they can pay you.

The tradeoff is access. You cannot deposit cash at an online bank by walking in. You deposit by transferring money from another account, mailing a check, or using mobile deposit (taking a photo of a check with your phone). If you need to withdraw cash, you transfer it back to another account or use an ATM network that the bank partners with. For most people, this is fine. For people who deal in cash regularly or who want to talk to someone in person, a traditional bank might be worth the lower rate.

Where to look for current rates

Do not rely on a bank's website alone, because banks sometimes advertise old rates or highlight their best rate while burying the rate you'll actually get. Instead, use a rate-tracking website that updates weekly: Bankrate, DepositAccounts, or the FDIC's own rate search tool all show current rates from multiple banks side by side.

When you find a rate you like, click through to the bank's website and read the terms. Look for these details: the minimum deposit required to open the account, whether the rate changes if your balance drops below a certain amount, and whether the bank charges monthly fees. A 5% rate sounds great until you learn the bank charges $10 a month, which eats into your earnings.

Also check whether the rate is may provide or promotional. Some banks offer a high rate for three or six months, then drop it. The bank should tell you this clearly, but you have to read the fine print.

Online banks that historically offer competitive rates

Banks like Marcus (owned by Goldman Sachs), Ally, American Express Personal Savings, and Discover have consistently offered rates in the top tier, though the exact rate changes weekly. Credit unions like Connexus and Pentagon Federal Credit Union also offer high rates to members. None of these names means the rate is best today — you still have to check the current rate on a comparison site.

Some online banks require you to have a checking account with them before you can open a savings account, or they offer a higher rate if you do. Others have no such requirement. If you already have a checking account somewhere, you may not want to move it just for a slightly higher savings rate. That's a reasonable decision, and you can still get a competitive rate by opening a savings account at a different bank.

What happens when rates drop

Interest rates are set by the Federal Reserve, and when the Fed lowers its rate, banks lower theirs within days or weeks. Your rate will drop too. This is not the bank being unfair — it's how the system works. When rates were higher in 2023, banks paid more. As rates have come down, so have the rates they pay you.

You cannot lock in a rate forever. Some banks offer certificates of deposit (CDs), which do lock in a rate for a set time — six months, one year, five years — but you cannot withdraw the money without a penalty. A regular savings account has no lock-in, which means your rate can change, but you can also move your money whenever you want.

Moving money between banks without losing interest

If you find a bank offering a significantly higher rate than where you are now, you can move your money. The process is straightforward: open an account at the new bank, then transfer your money from the old bank. The transfer usually takes one to three business days. You don't lose interest during the transfer — you earn interest at the old bank until the money leaves, then at the new bank once it arrives.

Some people move their savings every few months to chase the highest rate. This works, but it takes time and attention. Others pick a bank with a solid rate and stay put. Both approaches are fine. The important thing is that you're earning something, not keeping your money in a checking account that pays 0%.

Credit unions as an alternative

A credit union is a member-owned bank, not a for-profit company. Because they don't have shareholders demanding profits, they can pay higher rates than traditional banks. However, credit unions are smaller and more specialized — you usually have to meet a requirement to join, like working for a certain employer or living in a certain area.

Credit union rates are often higher than traditional banks but sometimes lower than the very best online banks. The advantage is that many credit unions have physical branches and ATM networks, so you get some of the convenience of a traditional bank with better rates. If you're a member of a credit union already, check what rate they offer before opening an account elsewhere.

Frequently Asked Questions

Can I move my money to a higher-rate bank without penalty?

Yes. Savings accounts have no early withdrawal penalty. You can move your money anytime. The transfer takes one to three business days, and you earn interest at your old bank until the money leaves.

What if I need to access my money quickly?

Savings accounts let you withdraw anytime, though some banks limit you to six withdrawals per month (this rule varies). Online banks process transfers in one to three business days. If you need cash today, a traditional bank with branches and ATMs is more convenient, even if the rate is lower.

Is my money safe at an online bank?

Yes, if the bank is FDIC-insured. The FDIC is a government agency that guarantees deposits up to $250,000 per account per bank. Almost all banks display their FDIC insurance status on their website. Online banks are just as safe as traditional banks.

Do I have to keep a minimum balance to earn the advertised rate?

It depends on the bank. Some require a minimum deposit to open the account but no minimum to keep. Others require your balance to stay above a certain amount, or the rate drops. Always read the account terms before opening.

What's the difference between a savings account and a money market account?

A money market account usually offers a slightly higher rate than a savings account but may require a larger deposit. Both are safe and let you withdraw anytime. For most people, a high-yield savings account is simpler and the rate difference is small.