Interest rates vary widely between banks, and the highest rates are usually at online banks rather than branches you can walk into
The bank with the best rate today may not have the best rate next month. Interest rates move constantly, set by each bank based on what the Federal Reserve does and what competitors are offering. Online banks tend to offer higher rates than traditional banks because they have lower costs — no building leases, fewer staff, no ATM networks to maintain. That savings gets passed to you as a higher rate on your savings account or money market account.
The difference between a 0.01% rate at a big national bank and a 4.5% rate at an online bank is real money. On $10,000, that gap means roughly $450 per year in extra interest. The catch is that online banks have no physical locations, so you cannot walk in with cash or speak to someone in person. For most people saving money, that trade-off makes sense.
Key Takeaways
- Online banks consistently offer higher savings rates than traditional banks because their operating costs are lower.
- The highest rates change weekly or monthly, so checking a rate comparison site before opening an account prevents you from locking in an outdated number.
- A high-yield savings account at an online bank is the simplest way to earn more interest without taking on investment risk.
- Some credit unions offer competitive rates to their members, but you must meet membership requirements first, which vary by location and employer.
How to compare rates across different banks
Rate comparison sites like Bankrate, DepositAccounts, and NerdWallet update their listings multiple times per week. These sites pull rates directly from banks' websites, so you are seeing real numbers. When you click through to a bank's page, verify the rate one more time — the site's listing may be slightly behind if a bank just changed its rate.
Pay attention to the minimum deposit required to earn the advertised rate. Some banks offer their highest rate only if you deposit $25,000 or more. Others have no minimum. The account type also matters: a high-yield savings account, a money market account, and a certificate of deposit (CD) all have different rates at the same bank, and they serve different purposes.
Check whether the rate is fixed or variable. A fixed rate on a CD stays the same for the entire term — three months, one year, five years, whatever you choose. A variable rate on a savings account can go up or down, and the bank can change it whenever they want. Right now, variable rates are high, but if the Federal Reserve lowers rates, your bank will likely lower yours too.
Online banks with historically competitive rates
Banks like Marcus, Ally, American Express Personal Savings, and Discover have consistently offered rates in the top tier for the past few years. That does not mean they will always be the highest — rates shift — but they have shown a pattern of competing aggressively for deposits. Each one is FDIC-insured, meaning your money is protected up to $250,000 if the bank fails.
These banks have no physical branches. You deposit money by transferring it from another bank account, and you withdraw the same way. If you need cash when ready, you can transfer to your checking account, but the transfer takes one to three business days. For money you are setting aside and not touching regularly, this delay is not a problem.
Some online banks offer perks beyond the rate itself. A few provide a small bonus when you open an account and deposit a certain amount, though these bonuses come and go. Read the terms carefully — bonuses sometimes require you to maintain a minimum balance or keep the account open for a set period, or the bonus gets clawed back.
Credit unions and local banks that compete on rates
Credit unions are member-owned financial institutions, not corporations. Some offer rates that match or beat online banks, especially on savings accounts and CDs. The catch is membership requirements. You might need to live in a certain county, work for a specific employer, belong to a particular organization, or have a family member who is already a member.
A few regional banks and community banks also offer competitive rates, particularly on CDs. These banks have physical locations, so you can deposit cash in person if that matters to you. The rates are usually lower than online banks, but not always — it is worth checking your local bank's website before assuming they cannot compete.
To find credit unions near you, use the CO-OP Network locator or search the Credit Union Locator on the CO-OP website. You can also ask your employer whether they sponsor a credit union — many large employers do.
What happens to your rate when the Federal Reserve changes rates
The Federal Reserve sets a target range for interest rates, and banks use that as a guide for what they pay you on savings. When the Fed raises its rate, banks usually raise savings rates too, but not when ready and not always by the same amount. When the Fed lowers its rate, banks lower savings rates faster than they raised them.
This matters because it means a bank offering 4.5% today might offer 3.8% in six months if the Fed cuts rates. Your money is still safe, but you earn less. If you think rates will drop, locking in a CD at today's rate protects you — you keep that rate for the entire CD term, no matter what happens to the market. If you think rates will rise, keeping your money in a variable-rate savings account means you benefit when the bank raises its rate.
The difference between savings accounts, money market accounts, and CDs
A high-yield savings account lets you deposit and withdraw money whenever you want, with no penalty. The rate is variable, meaning it can change. You earn interest on whatever balance you keep in the account. This is the most flexible option and the best choice if you might need the money within the next year.
A money market account works similarly to a savings account but usually offers a slightly higher rate in exchange for a higher minimum balance requirement. Some money market accounts also let you write checks or use a debit card, though that varies by bank. The rate is still variable.
A certificate of deposit (CD) is a contract where you agree to leave your money in the account for a set period — three months, six months, one year, five years, or longer. In return, the bank pays you a fixed rate that is usually higher than a savings account rate. If you withdraw the money before the term ends, you pay a penalty, usually a few months' worth of interest. CDs are best for money you know you will not need for a specific period.
Red flags when comparing rates
Be cautious of banks advertising an extremely high rate with a very short term. A CD offering 5.5% for three months might sound great, but when it matures, you will have to roll it into a new CD at whatever the rate is then — which could be much lower. Compare the three-month rate to other banks' three-month rates, not to their one-year rates.
Watch for accounts that require you to make monthly deposits or maintain a high minimum balance to keep the advertised rate. Some banks offer a promotional rate for the first few months, then drop it significantly. Read the fine print on the bank's website, not just the rate advertised on the comparison site.
Avoid banks that are not FDIC-insured or NCUA-insured (for credit unions). Your deposits are only protected if the bank fails and the insurance covers them. If a bank is not insured, you have no protection.
Frequently Asked Questions
Can I move my money between banks if I find a better rate?
Yes. You can transfer money from one bank to another at any time, with no penalty, as long as it is not a CD before the term ends. Most transfers take one to three business days. You can also open multiple accounts at different banks to spread your money across the highest rates.
What if I have more than $250,000 to save?
FDIC insurance covers up to $250,000 per depositor per bank. If you have more, you can split it across multiple banks to stay fully insured, or open accounts in different names (like a joint account with your spouse). Some banks also offer FDIC coverage for retirement accounts and trust accounts separately from regular savings accounts.
Do I have to pay taxes on the interest I earn?
Yes. Interest earned on savings accounts, money market accounts, and CDs is taxable income. The bank will send you a 1099-INT form at the end of the year showing how much interest you earned. You report this on your tax return. This is true regardless of which bank you use.
Is it safe to keep money in an online bank I have never heard of?
As long as the bank is FDIC-insured, your deposits are protected up to $250,000 if the bank fails. You can verify FDIC insurance on the FDIC's Bank Find tool on their website. Many online banks are newer companies, but insurance status is what matters, not the bank's age or size.
What if the rate drops after I open my account?
If you have a variable-rate account like a savings account, the rate can drop, and you have no recourse — the bank can change it whenever they want. If you have a CD, your rate is locked in for the entire term. This is why some people prefer CDs when rates are high — they protect you if rates fall.