Banks and credit unions offering 5% or higher on savings accounts

You can find 5% interest on your money at online banks and credit unions, though the rate changes weekly and depends on how much you deposit and how long you keep the money there. The banks offering the highest rates right now are mostly online-only operations — companies like Marcus, Ally, and American Express Personal Savings — because they have lower overhead costs than brick-and-mortar branches and pass some of that savings to you as higher interest.

Credit unions, which are member-owned financial institutions, sometimes offer competitive rates too. The best way to find current rates is to check comparison sites like Bankrate or DepositAccounts, which update daily. Rates change constantly, so a bank offering 5.35% today might offer 4.85% next month. When you find a rate you like, move quickly — but read the fine print first, because some accounts have minimum deposits or restrictions on how often you can withdraw money.

Key Takeaways

  • Online banks and credit unions currently offer the highest savings rates, often 5% or higher, because they have lower costs than traditional banks.
  • Interest rates change weekly, so you should check comparison sites like Bankrate or DepositAccounts before opening an account.
  • High-yield savings accounts are FDIC-insured up to $250,000, meaning your money is protected even if the bank fails.
  • Money market accounts and certificates of deposit (CDs) sometimes offer higher rates than savings accounts, but they restrict when you can withdraw your money.
  • The difference between 4.5% and 5.5% compounds over time, so shopping around for even half a percentage point more can add hundreds of dollars over a year.

How high-yield savings accounts work

A high-yield savings account is a regular savings account that pays you more interest because the bank invests your money in short-term loans and bonds. You can deposit money whenever you want, and you can withdraw it whenever you want — though some banks limit you to six withdrawals per month before charging a fee. The interest compounds daily or monthly, meaning you earn interest on your interest.

The catch is that the rate is not locked in. Your bank can lower it anytime, and usually does when the Federal Reserve lowers interest rates. Right now, rates are high because the Federal Reserve has kept interest rates elevated to fight inflation. When the Fed eventually lowers rates, bank rates will follow. If you find a 5% account today, do not assume it will stay at 5% forever.

Money market accounts and certificates of deposit

A money market account is a hybrid between a checking account and a savings account. It usually pays higher interest than a regular savings account, sometimes matching or beating high-yield savings rates. The tradeoff is that you get a limited number of withdrawals per month — usually three to six — before the bank charges you a fee. Some money market accounts also come with a debit card or checkbook, which makes them feel more like checking accounts.

A certificate of deposit (CD) is a different animal. You give the bank a sum of money and agree to leave it there for a set period — three months, six months, one year, or longer. In exchange, the bank locks in a higher interest rate for that entire period. The longer you commit your money, the higher the rate usually is. The downside: if you withdraw the money before the term ends, the bank charges you a penalty that can wipe out most or all of your interest. CDs make sense if you know you will not need the money for a specific amount of time.

What to check before opening an account

Before you move your money, verify that the bank is FDIC-insured or the credit union is NCUA-insured. FDIC and NCUA are federal agencies that may provide your deposits up to $250,000 if the bank or credit union fails. Nearly all legitimate banks and credit unions carry this insurance, but it is worth confirming on their website or by calling them. If a bank is not insured, your money is at risk.

Check the minimum deposit required to open the account and to earn the advertised rate. Some banks require $25,000 or more to get the highest rate, while others have no minimum. Read the withdrawal rules — how many times per month can you take money out without a penalty, and what is the penalty if you exceed that limit. Look for monthly fees. A bank charging $10 per month will eat into your interest gains, especially on smaller balances.

Finally, check how the bank handles your deposits. Most online banks let you link an external checking account and transfer money electronically, which takes one to three business days. Some banks still require you to mail a check or use a wire transfer, which is slower and may cost money.

The difference between APY and interest rate

Banks advertise two numbers: the interest rate and the APY (annual percentage yield). The interest rate is what the bank pays you. The APY is what you actually earn when interest compounds. If a bank pays 5% interest compounded daily, your APY will be slightly higher — maybe 5.13% — because you earn interest on your interest every single day.

Always compare APY, not the interest rate, because APY tells you the real amount you will earn. The difference sounds small, but on $10,000 over a year, the difference between 5% APY and 5.13% APY is about $13. On $100,000, it is $130.

Why rates are high right now and what might change

Interest rates are currently elevated because the Federal Reserve raised its benchmark rate to fight inflation. Banks pass this increase to savers by offering higher rates on savings accounts. This is unusual — for most of the 2010s, savings rates were below 1%. The current environment is a rare window where your money actually earns meaningful interest.

This will not last forever. When inflation comes down and the Fed lowers rates, bank rates will follow. You cannot predict exactly when this will happen, but it is worth knowing that today's 5% rate is not permanent. If you have money sitting in a checking account earning 0.01%, moving it to a 5% savings account now means you will earn thousands of dollars in interest over the next year or two, even if rates eventually drop.

Frequently Asked Questions

Is my money safe in an online bank?

Yes, as long as the bank is FDIC-insured. Online banks are regulated by the same federal agencies as traditional banks, and your deposits are insured up to $250,000. The only real difference is that you cannot walk into a physical branch, but you can call customer service or use their website and app.

Can I move my money out anytime I want?

With a high-yield savings account, yes — you can withdraw money anytime without penalty. With a CD, no — you will pay a penalty if you withdraw before the term ends. The penalty varies by bank and by CD term, but it is usually a few months of interest. Read the CD terms before you buy.

What happens if the bank fails?

If the bank is FDIC-insured, the federal government reimburses you up to $250,000. This has happened only a handful of times in recent decades, and depositors have always been made whole. Your money is safer in an insured bank than it is sitting at home.

Do I have to pay taxes on the interest I earn?

Yes. Interest income is taxable as ordinary income. The bank will send you a 1099-INT form at the end of the year showing how much interest you earned, and you report that on your tax return. If you earn more than $10 in interest, the bank is required to send you the form.

Should I put all my money in a CD to lock in today's rate?

Only if you will not need the money before the CD matures. CDs are best for money you know you will not touch for a specific period — a down payment you are saving for in two years, or an emergency fund you want to grow. For money you might need sooner, a high-yield savings account gives you flexibility without sacrificing much interest.