Savings account interest rates vary widely, and the rate you get depends on the bank, the account type, and how much money you keep in it

There is no single "average" savings account rate because banks set their own rates, and those rates change constantly. A savings account at a large national bank might pay you 0.01% per year on your balance, while an online bank might pay 4% or 5%. The difference between these two is enormous — on $10,000, you would earn $1 per year at the first bank and $400 to $500 per year at the second.

The rate you receive also depends on what type of account you open. A regular savings account typically pays less than a money market account or a certificate of deposit (CD), even at the same bank. Some banks offer higher rates only if you maintain a minimum balance or set up automatic deposits. The only way to know what rate you will actually receive is to check the specific bank's website or call them directly.

Key Takeaways

  • Large national banks typically offer rates between 0.01% and 0.05%, while online banks often offer rates between 3% and 5.5%.
  • The rate you receive depends on the bank, the account type (savings, money market, or CD), and sometimes on how much money you keep in the account.
  • Interest rates change frequently, so a rate advertised today may be different next month.
  • You can compare current rates by visiting bank websites directly or using rate comparison tools that show what different banks are offering right now.
  • The difference between a 0.01% rate and a 4% rate means hundreds of dollars per year in earnings on the same amount of money.

Why rates differ so much between banks

Banks that operate only online have lower costs than banks with physical branches. They do not pay for building leases, tellers, or branch managers. Because their costs are lower, they can afford to pay you more interest on your savings. A bank like Ally or Marcus has no branches at all, so nearly all of their savings goes back to customers in the form of higher interest rates.

Large national banks like Bank of America or Wells Fargo have thousands of branches and millions of customers. They make money in many ways — from loans, from fees, from investment services — so they do not need to pay high interest rates on savings accounts to attract customers. Many people keep their money at these banks for convenience, even if the interest rate is very low.

The Federal Reserve also influences rates across the entire banking system. When the Fed raises its benchmark interest rate, banks tend to raise the rates they offer on savings accounts. When the Fed lowers rates, bank rates usually fall too. This is why you might notice your savings account rate changing even though you have done nothing different.

How to find the current rate at your bank

The easiest way to find out what rate you are earning is to log into your online banking account and look for the account details or account summary page. The rate should be listed there, usually labeled as "APY" (annual percentage yield). If you cannot find it online, call your bank's customer service number or visit a branch and ask.

If you are thinking about opening a new account, visit the bank's website and look for the savings account page. The rate will be displayed prominently, often with a note about when it was last updated. Some banks show different rates for different account types or balance levels, so read carefully to understand which rate applies to you.

You can also use rate comparison websites to see what multiple banks are offering at the same time. These sites pull current rates from banks' websites and update them regularly. Keep in mind that the rates shown are the banks' advertised rates — you will receive that rate only if you meet any conditions the bank has set (like maintaining a minimum balance).

The difference between APY and interest rate

APY stands for annual percentage yield. It is the total amount of interest you will earn in one year, including the effect of compound interest (interest earned on your interest). The interest rate is the percentage the bank pays you, but it does not account for compounding.

For savings accounts, the difference between the two is usually small, but it matters. If a bank advertises an interest rate of 4.50%, the APY might be 4.60% because of compounding. Always look for the APY when comparing accounts, because that is the true amount you will earn.

What affects the rate you receive

Some banks offer tiered rates, meaning the interest rate changes based on your balance. You might earn 0.50% on balances up to $10,000, and 1.00% on balances above that. Other banks offer the same rate to all customers regardless of balance. Check your bank's terms to see if your balance size affects your rate.

Promotional rates are another factor. A bank might offer a higher rate for the first three months to attract new customers, then drop the rate to a lower level. If you are considering moving your money to a new bank for a higher rate, read the fine print to see whether the rate is temporary or permanent.

Account type also matters. A money market account might pay more than a regular savings account at the same bank. A CD (certificate of deposit) typically pays more than either, but you have to lock your money away for a set period — usually three months to five years — and you pay a penalty if you withdraw early.

How rates have changed recently

Interest rates on savings accounts have risen and fallen significantly over the past decade. In 2020 and early 2021, rates were very low — many savings accounts paid less than 0.10%. As the Federal Reserve raised its benchmark rate starting in 2022, banks began offering higher rates. By late 2023 and into 2024, online banks were offering rates in the 4% to 5% range.

These changes happen because of broader economic conditions, not because individual banks suddenly decide to be more generous. When inflation is high and the Fed is raising rates to combat it, banks raise savings account rates too. When the economy slows and the Fed lowers rates, bank rates fall as well.

What to do if your bank's rate is very low

If you have been with the same bank for years and your savings account rate is 0.01% or 0.05%, you are likely earning far less than you could elsewhere. Moving your money to an online bank or a credit union with a higher rate is straightforward. You open a new account, transfer your money, and close the old account if you want to.

Some people keep a small amount at their main bank for convenience (straightforward access to branches or ATMs) and move their larger savings to a higher-paying account elsewhere. This way you get both convenience and better interest earnings. There is no rule that says all your money has to be at one bank.

Before you move money, check whether there are any fees for closing your account or transferring funds. Most banks do not charge for this, but it is worth confirming. Also make sure the new bank is FDIC-insured (if it is a bank) or NCUA-insured (if it is a credit union), so your money is protected up to $250,000.

Frequently Asked Questions

Is the interest rate the same as APY?

No. The interest rate is what the bank pays you, but APY includes the effect of compound interest — interest earned on your interest. APY is always equal to or higher than the interest rate. When comparing accounts, use APY to see the true amount you will earn.

Why do online banks pay more interest than big banks?

Online banks have lower operating costs because they do not maintain physical branches. They pass those savings to customers through higher interest rates. Big banks make money through many channels and do not need to offer high savings rates to stay in business.

Can my bank lower my interest rate without warning?

Yes. Banks can change savings account rates at any time without notice. However, they usually announce rate changes on their website or through account statements. If you want to lock in a rate, consider a CD, which guarantees a fixed rate for a set period.

What happens to my interest if I withdraw money before the end of the year?

You earn interest only on the money you keep in the account. If you withdraw $5,000 from a $10,000 balance, you earn interest only on the remaining $5,000 for the rest of the year. Interest accrues daily or monthly depending on the bank, so you earn a small amount even if you withdraw partway through the month.

Is my money safe if I move it to a different bank for a higher rate?

Yes, as long as the new bank is FDIC-insured (banks) or NCUA-insured (credit unions). These insurance programs protect your money up to $250,000 per account. You can check whether a bank is insured by visiting the FDIC or NCUA website and searching for the bank's name.