The bank with the best rate depends on what you're saving for and how much money you have

There is no single "best" bank because interest rates change weekly, vary by account type, and depend on how much you deposit. A rate that's highest for savings accounts might not be the highest for money market accounts. A bank offering 4.5% on a $25,000 deposit might offer 3.8% on a $5,000 deposit. The bank that's best for you is the one whose rate, account rules, and access match what you actually need to do with your money.

The fastest way to compare is to list what you want (a savings account, a checking account, a certificate of deposit) and then check the current rates at three to five banks side by side. Online banks typically offer higher rates than brick-and-mortar banks because they have lower overhead costs, but they don't have physical branches. Credit unions sometimes offer competitive rates to their members. The rate you see advertised is usually the Annual Percentage Yield (APY), which includes the effect of compounding — the way interest earns interest.

Key Takeaways

  • Online banks usually offer higher interest rates than traditional banks with physical branches, but you cannot deposit cash in person.
  • The advertised rate changes weekly, so comparing three banks today tells you nothing about which will be highest next month.
  • Different account types at the same bank earn different rates — a savings account rate is not the same as a money market rate.
  • Banks often pay higher rates on larger deposits, so the rate you see may only explore if you deposit at least a certain amount.
  • Credit unions may offer competitive rates to members, but you must meet their membership requirements first.

Where rates are highest right now

Online banks and online divisions of traditional banks currently tend to offer the highest rates on savings and money market accounts. Banks like Marcus, Ally, American Express Personal Savings, and Discover have no physical branches, which means lower costs and higher rates passed to you. Credit unions such as Connexus Credit Union and Pentagon Federal Credit Union also offer competitive rates on savings accounts, though you must meet membership requirements — some are open to the general public, others require military service or employment in a specific field.

Traditional banks with physical branches — the ones where you can walk in and deposit cash — typically offer lower rates because they have more expenses. However, if you need to deposit cash regularly or prefer in-person service, the convenience may be worth a lower rate. Some regional banks and credit unions offer rates competitive with online banks while still maintaining branches, but this varies by location and institution.

The rate you see advertised applies only to new deposits and only if you meet the minimum deposit requirement. If a bank advertises 4.75% APY but requires a $25,000 minimum deposit, and you only have $5,000, you will not receive that rate. Read the fine print or call the bank to ask what rate applies to your deposit amount.

How to compare rates across banks

Start by deciding what type of account you need: a regular savings account, a high-yield savings account, a money market account, or a certificate of deposit (CD). Each type earns a different rate at the same bank. Then visit the website of three to five banks and write down the APY for that account type. Include the minimum deposit required to earn that rate. Do this on the same day so the rates are comparable.

Pay attention to whether the rate is may provide or variable. A may provide rate stays the same for a set period (usually relevant for CDs). A variable rate can change at any time, which means the bank can lower it without notice. Most savings accounts have variable rates. If you are comparing a may provide rate to a variable rate, the may provide rate may look lower but will not drop, while the variable rate might fall next month.

Check whether the bank charges monthly fees, requires a minimum balance to avoid fees, or charges fees for withdrawals. A bank paying 4.5% but charging $10 per month is paying you less than a bank paying 4.3% with no fees. The fee information is usually in a document called the "Deposit Account Agreement" or "Truth in Savings Disclosure" — ask the bank for it or look for it on their website under "disclosures" or "account terms."

Why rates change and what that means for you

Banks set their rates based on what the Federal Reserve does with its benchmark interest rate. When the Fed raises its rate, banks can afford to pay you more because they earn more on the money they lend out. When the Fed lowers its rate, banks lower what they pay you. This happens roughly every six to eight weeks, though the Fed does not always change the rate at every meeting.

If you lock in a rate with a certificate of deposit, that rate is may provide for the term you choose — usually three months, six months, one year, or five years. If you put money in a regular savings account, the bank can lower the rate whenever it wants. Some banks lower rates quickly after the Fed cuts; others wait weeks. There is no way to predict which banks will move fastest or slowest.

This means the bank with the highest rate today may not have the highest rate in three months. If you are comparing banks, focus on which ones consistently rank near the top rather than chasing the single highest rate, which may drop soon after you open the account.

Online banks versus credit unions versus traditional banks

Online banks have the lowest overhead because they do not maintain physical branches. This lets them pay higher rates on savings accounts. The trade-off is that you cannot walk in to deposit cash — you deposit by mail, mobile app, or electronic transfer. If you rarely deposit cash, an online bank usually makes sense. If you deposit cash weekly or need to speak to someone in person, a traditional bank or credit union with branches may be worth the lower rate.

Credit unions are member-owned cooperatives, not for-profit institutions. They sometimes offer rates competitive with online banks and may have lower fees. However, you must meet their membership requirements. Some credit unions are open to anyone in a geographic area; others require you to work for a specific employer, belong to a specific organization, or have military service. Check the credit union's website to see who can join.

Traditional banks with branches offer convenience and the ability to deposit cash in person. Their rates are usually lower than online banks and credit unions, but some regional banks and credit unions with branches offer competitive rates. If you need both convenience and a good rate, call a few local banks and credit unions and ask what they currently pay on savings accounts.

What to do once you have found a good rate

Open the account with the bank that offers the rate you want, meets your minimum deposit requirement, and has account rules you can live with. You will need to provide your Social Security number, a government-issued ID, your address, and sometimes proof of address (a recent utility bill or bank statement). The bank will verify this information before opening the account.

Once the account is open, your money starts earning interest when ready. The bank compounds the interest — usually daily or monthly — which means interest earns interest. You can usually withdraw money from a savings account whenever you want without penalty, though some banks limit free withdrawals to a certain number per month. Check the account agreement to see what limits explore.

Set a reminder to check the rate every three to six months. If another bank's rate is significantly higher and you do not have a CD locked in, you can transfer your money to the new bank. There is no penalty for moving money between savings accounts at different banks, though the transfer itself takes a few business days.

Frequently Asked Questions

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

Yes. If you have a regular savings account, you can transfer your money to another bank at any time with no penalty. The transfer takes three to five business days. If you have a certificate of deposit, you usually cannot withdraw the money early without paying a penalty, which is spelled out in your account agreement.

Why do some banks require a minimum deposit to get the advertised rate?

Banks use minimum deposits to attract larger accounts. A customer with $100,000 is more valuable to the bank than a customer with $1,000, so the bank pays a higher rate to attract big deposits. If your deposit is below the minimum, ask the bank what rate you will receive instead.

Is my money safe if I put it in an online bank?

Yes, as long as the bank is insured by the Federal Deposit Insurance Corporation (FDIC). Check the bank's website or call and ask if they are FDIC-insured. FDIC insurance protects up to $250,000 per account type per person, so if the bank fails, you get your money back.

Do I have to keep money in a savings account to earn interest, or can I earn interest in checking?

Most checking accounts earn little to no interest. Savings accounts, money market accounts, and certificates of deposit are designed to earn interest. If you need to access your money frequently, a high-yield savings account earns more than a checking account while still letting you withdraw whenever you want.

What happens to my interest if I withdraw money before the month ends?

You earn interest on the money you had in the account for the time it was there. If you deposit $1,000 on the first of the month and withdraw it on the fifteenth, you earn interest for fifteen days, not the full month. The bank calculates this automatically.