The bank with the highest rate changes weekly, so there is no permanent answer

Interest rates on savings accounts shift constantly based on what the Federal Reserve does and what each bank decides to offer. A bank offering 4.5% one month might drop to 4.25% the next. The bank with the highest rate today will not necessarily have it next week. This means the real question is not which bank to pick, but how to find the current highest rate and how often you need to check.

Online banks almost always beat brick-and-mortar banks on savings rates because they have lower overhead costs. A Chase branch might offer 0.01% while an online bank offers 4.5% on the same type of account. The difference compounds quickly: $10,000 earning 0.01% makes $1 per year, while $10,000 at 4.5% makes $450 per year.

Key Takeaways

  • Online banks consistently offer higher rates than traditional banks, sometimes 200 to 400 times higher on the same account type.
  • The highest rate available changes weekly or monthly, so comparing rates once and staying with that bank for a year will cost you money.
  • Rate-tracking websites like Bankrate, DepositAccounts, and NerdWallet update daily and let you filter by account type and minimum deposit.
  • Moving money between banks takes three to five business days, so you can switch to a higher rate without losing the interest you already earned.
  • A bank's rate can drop suddenly after you open an account, so checking rates every few months protects you from falling behind.

How to find the current highest rate

Start with a rate-tracking website rather than visiting individual bank sites. Bankrate, DepositAccounts, and NerdWallet all update their rate listings daily and let you sort by account type (high-yield savings, money market, certificate of deposit). You can filter by minimum deposit requirement, which matters because some banks offer their best rates only on accounts with $25,000 or more.

When you find a rate that looks good, check the bank's own website to confirm it has not changed since the tracking site last updated. Then look at the bank's name and whether it is FDIC-insured. FDIC insurance protects your money up to $250,000 per account type per bank, so this matters. Most online banks are FDIC-insured, but a few are not.

Read the fine print about whether the rate is may provide or promotional. A promotional rate might be 4.75% for the first three months, then drop to 2.5%. A may provide rate stays the same for as long as you keep the account open (though the bank can lower it with notice). The tracking websites usually note which rates are promotional, but confirm on the bank's site.

Banks currently offering competitive rates

As of early 2024, online banks like Marcus, Ally, American Express Personal Savings, and Wealthfront Cash Account have been among the highest-rate options, typically in the 4.2% to 4.75% range. However, this changes frequently. A bank that offers 4.5% today might offer 4.0% in six months if the Federal Reserve lowers interest rates.

Credit unions sometimes offer rates competitive with online banks, and they may have lower minimum deposits. You can search for credit unions in your area through CO-OP or Allpoint networks, which let you use ATMs nationwide even if your credit union is small.

Do not assume a big bank name means a good rate. Wells Fargo, Bank of America, and Chase typically offer savings rates under 0.5%, even though they have thousands of branches. The convenience of a nearby branch costs you money in lost interest.

What happens when you move money to a higher-rate bank

Transferring money between banks takes three to five business days through an ACH transfer (the standard electronic method). You do not lose the interest you already earned at your old bank—interest accrues daily and is paid on the balance you held. If you had $10,000 earning 0.5% at Bank A for 15 days, then moved it to Bank B earning 4.5%, you get paid the 0.5% interest for those 15 days, then start earning 4.5% on the full $10,000 at Bank B.

Some people worry about moving money frequently, but there is no penalty for switching banks or moving your savings around. Banks do not charge you for transferring money out. The only limit is that you can make six withdrawals per month from a savings account under federal rules, though most banks have stopped enforcing this.

Set a calendar reminder to check rates every three months. If your current bank's rate drops more than 0.5% below the highest available rate, moving your money takes less than a week and will earn you significantly more over a year.

Certificates of deposit versus high-yield savings

If you do not need the money for a set period, a certificate of deposit (CD) often pays more than a savings account. A CD locks your money away for three months, six months, one year, or longer, and in exchange the bank pays a higher rate. A high-yield savings account might pay 4.5%, but a one-year CD might pay 5.0% or 5.2%.

The trade-off is that withdrawing money from a CD before the term ends costs you a penalty, usually a few months of interest. If you withdraw early from a one-year CD paying 5%, you might lose three months of interest (about 1.25% of your balance). So only lock money in a CD if you are certain you will not need it.

Some banks offer CD ladders, where you open multiple CDs with different maturity dates so that some money becomes available every few months. This lets you lock in higher rates while keeping some liquidity.

Why rates change and what the Federal Reserve has to do with it

Banks set their own rates, but they are influenced by what the Federal Reserve does. When the Fed raises its benchmark interest rate, banks have more room to pay higher rates on savings. When the Fed lowers rates, banks lower what they pay you. The Fed has raised rates significantly since 2022, which is why savings rates are much higher now than they were in 2020 and 2021.

Banks also compete with each other. If Marcus offers 4.75% and Ally offers 4.5%, some customers will move their money to Marcus, so Ally might raise its rate to stay competitive. This competition is why online banks pay more than big banks—they need to attract deposits without the advantage of physical branches.

Rates can also drop if a bank decides it has enough deposits and does not need to attract more customers. A bank might offer 4.75% for a month, then drop to 3.5% once it has collected enough money. This is why checking rates periodically protects you.

Frequently Asked Questions

Can I move my money to a new bank if rates drop after I open an account?

Yes. There is no penalty for closing a savings account or moving your money. Banks do not charge you to transfer funds out. If your bank's rate drops significantly, you can move to a higher-rate bank in three to five business days without losing any interest you already earned.

What if I do not have a lot of money to deposit?

Most online banks have no minimum deposit requirement or require only $1 to $25. A few banks require $25,000 or more to access their highest rates, but many offer competitive rates on accounts with $0 minimum. Check the tracking websites and filter by minimum deposit to find banks that match your situation.

Is my money safe if I move it to a smaller online bank?

If the bank is FDIC-insured, your money is protected up to $250,000 per account type, regardless of the bank's size. Most online banks are FDIC-insured. Check the bank's website for the FDIC insurance statement, usually in the footer or FAQ section. If a bank is not FDIC-insured, avoid it.

How much more money will I actually make with a higher rate?

The difference compounds over time. On $10,000, the difference between 0.5% and 4.5% is $400 per year. On $50,000, it is $2,000 per year. On $100,000, it is $4,000 per year. Over five years at those rates, you would earn roughly $2,000 versus $24,000. The higher the rate and the longer you hold the money, the bigger the difference.

Do I need to worry about a bank going out of business?

FDIC insurance covers you if a bank fails. Your deposits up to $250,000 per account type are protected and will be transferred to another bank or paid to you. Bank failures are rare, and FDIC insurance has protected depositors since 1933. Check that the bank is FDIC-insured, and you do not need to worry.