Banks and credit card companies are paying the highest interest rates right now, but the actual rate depends on what you're saving or borrowing

The highest interest rates available to consumers are not a single number — they shift based on what you're putting money into, who you're borrowing from, and what the Federal Reserve has done most recently. Right now, high-yield savings accounts at online banks are paying between 4% and 5.35% APY on deposits. Credit card companies, by contrast, are charging between 18% and 36% APR on balances you carry month to month. The gap between what you earn and what you pay is the real story.

The institutions paying the highest deposit rates are almost always online banks with no physical branches — names like Marcus, Ally, American Express Personal Savings, and Wealthfront. They can afford higher rates because they have lower overhead costs and compete directly on rate alone, since they can't offer you a teller or a lobby. Traditional brick-and-mortar banks typically pay 0.01% to 0.5% on regular savings accounts, which is why the difference matters.

Key Takeaways

  • Online banks currently pay the highest deposit rates, ranging from 4% to 5.35% APY on high-yield savings accounts, while traditional banks pay under 1% on regular savings.
  • Credit card APR — the rate you pay on borrowed money — ranges from 18% to 36% depending on your credit score and the card issuer, and is separate from deposit rates.
  • The Federal Reserve's interest rate decisions affect what banks can afford to pay depositors and what they charge borrowers, so rates change when the Fed moves.
  • Money market accounts and certificates of deposit (CDs) also pay competitive rates, though they require you to lock money away for a set period or accept withdrawal limits.
  • The highest rates are not always the best choice — a CD that locks your money for two years might pay 5.3% but leave you unable to access funds if you need them.

How the Federal Reserve sets the floor for what banks pay and charge

Banks don't decide their rates in a vacuum. The Federal Reserve sets a target range for the federal funds rate — the interest rate at which banks lend to each other overnight. When the Fed raises this rate, banks have to pay more to borrow, so they raise what they charge customers on loans and credit cards. When the Fed lowers the rate, banks can afford to lower what they pay depositors.

As of early 2024, the Fed's target range sits between 5.25% and 5.5%. This is why high-yield savings accounts are paying 4% to 5.35% — banks can afford to pay close to the Fed's rate because they're using your deposits to lend out at higher rates to other customers. Credit card companies charge 18% to 36% because they're taking on risk: some cardholders will default, so they price that risk into the rate.

The Fed meets eight times a year to decide whether to raise, lower, or hold the federal funds rate steady. When it moves, deposit rates and loan rates typically follow within weeks. This is why you'll see headlines about "rates rising" or "rates falling" — they're usually referring to what the Fed just did.

Online banks versus traditional banks: why the gap exists

A Chase savings account pays roughly 0.01% APY. A Marcus account pays 5.35% APY. Both are FDIC-insured up to $250,000, so the safety is identical. The difference is cost structure.

Traditional banks have thousands of branches, employees at teller windows, security systems, and real estate costs. They make money partly from deposits but also from in-person services — mortgage origination, business lending, wealth management. They can afford to pay low rates on savings because they're not competing on rate; they're competing on convenience and service.

Online banks have no branches. They have a website, a customer service phone line, and servers. Their entire business model is taking deposits at competitive rates and lending them out at higher rates. They have to pay high rates to attract deposits, because that's their only product. If you're looking for the highest rate on money you're willing to leave untouched for months, an online bank is where you'll find it.

Credit card rates: why they're so much higher than deposit rates

Credit card APR is not the same as the deposit rate a bank pays you. When you carry a balance on a credit card, you're borrowing money from the card issuer. They charge you interest on that borrowed amount — typically 18% to 36% depending on your credit score and the card's terms.

The highest rates go to people with lower credit scores or shorter credit histories. Someone with a 750+ credit score might get a card at 18% APR. Someone with a 600 credit score might get the same card at 28% APR. The card issuer is pricing in the risk that you won't pay back what you borrow.

Credit card rates are also higher than deposit rates because the bank is taking on more risk. A depositor can withdraw their money anytime. A credit card borrower might default entirely. The 18% to 36% rate reflects that risk, plus the bank's profit margin.

Money market accounts and CDs: competitive rates with strings attached

High-yield savings accounts aren't the only place paying competitive rates. Money market accounts typically pay 4.5% to 5.3% APY and function like savings accounts but often require a higher opening balance — sometimes $2,500 or more. Certificates of deposit (CDs) can pay 5% to 5.5% APY, but you agree to lock your money away for a set term — three months, six months, one year, five years.

The trade-off is liquidity. If you put $10,000 into a one-year CD at 5.3% APY and need the money after six months, you'll pay an early withdrawal penalty — often three to six months of interest. That penalty can wipe out your gains. Money market accounts let you withdraw anytime, but they often limit how many withdrawals you can make per month, and some require you to maintain a minimum balance or they drop your rate.

CDs pay slightly higher rates than high-yield savings because the bank knows your money will stay put. That certainty lets them lend it out with confidence. If you know you won't need the money for a specific period, a CD can be the highest-paying option available to you.

Savings accounts at credit unions: a smaller player with competitive rates

Credit unions are member-owned financial institutions, not corporations. They often pay rates competitive with online banks — 4.5% to 5.2% on savings accounts — because they return profits to members rather than shareholders. However, credit unions vary widely. Some pay excellent rates; others pay less than traditional banks.

Credit unions also have membership requirements. You might need to live in a specific county, work for a specific employer, or belong to a specific organization to join. The largest credit unions, like Navy Federal and Connexus, have broader membership but still require you to meet their criteria.

If you're already a member of a credit union, it's worth checking what they're paying. If you're not, you'd need to meet their membership rules before you can open an account. The rates are competitive but not always the absolute highest — online banks still typically edge them out.

What happens to rates when the Fed changes course

The Federal Reserve doesn't move rates constantly. It holds steady for months or years, then makes a series of moves in one direction. From 2022 to 2023, the Fed raised rates aggressively — nine times in a row — to fight inflation. Deposit rates climbed from near zero to 4% to 5%. Credit card rates climbed from 15% to 18% to 24% to 28%.

If the Fed starts lowering rates, the opposite happens. Deposit rates fall first — sometimes within weeks. Credit card rates fall more slowly, and some card issuers don't lower rates at all, even when the Fed cuts. This is why the highest rates you see today might not be the highest rates you see next year.

Locking in a high rate on a CD makes sense if you believe rates are about to fall. Keeping money in a high-yield savings account makes sense if you think rates might fall but you want to stay flexible. The rate environment matters as much as the rate itself.

Frequently Asked Questions

Why do online banks pay so much more than my current bank?

Online banks have no branches or tellers, so their costs are much lower. They compete entirely on interest rate because that's their only product. Traditional banks compete on convenience and service, so they can afford to pay lower rates. Both are equally safe — FDIC insurance covers deposits up to $250,000 at either type.

If I move my money to a high-yield savings account, can I get that rate locked in?

No. High-yield savings accounts have variable rates, meaning the bank can change the rate anytime. When the Fed cuts rates, your rate will fall too — usually within weeks. CDs lock in a rate for a set term, but you can't access the money without paying a penalty. High-yield savings give you flexibility at the cost of rate certainty.

What's the difference between APY and APR?

APY is the rate you earn on money you deposit — it includes compounding. APR is the rate you pay on money you borrow. A 5% APY savings account earns you money. A 24% APR credit card costs you money. They're opposite directions of the same concept.

Are the highest rates always the best choice?

Not necessarily. A CD paying 5.5% is only the best choice if you won't need the money for the full term. A high-yield savings account paying 5.2% is better if you might need access. A credit card at 18% is better than one at 28% only if you actually pay off the balance — carrying a balance at any rate costs you money.

When will deposit rates go down?

Deposit rates fall when the Federal Reserve lowers its target rate, which happens when inflation slows or the economy weakens. The Fed typically signals rate cuts months in advance. You can't predict exactly when, but watching Fed announcements gives you a sense of whether rates are likely to stay high or fall soon.