High-yield savings accounts and money market accounts currently offer the highest interest rates available to regular savers
The highest interest you can earn on money you keep in a bank comes from high-yield savings accounts and money market accounts. These accounts pay significantly more than a regular savings account at a traditional bank — often 4 to 5 percent annually, compared to 0.01 percent or less at many large banks. The catch is straightforward: your money stays in the account and earns interest over time. You can withdraw it whenever you need it, but the rate you earn depends entirely on where you keep the money.
Interest rates change constantly, so the "highest" rate today may not be the highest next month. The accounts that pay the most are usually online banks — companies that have no physical branches and lower costs to run. Because they spend less on buildings and staff, they pass more of their profits to customers in the form of higher interest rates.
Key Takeaways
- Online banks and credit unions typically pay 4 to 5 percent annual interest on high-yield savings accounts, while traditional brick-and-branch banks often pay less than 1 percent.
- Money market accounts work similarly to savings accounts but may require a larger opening deposit and offer check-writing or debit card access.
- Certificates of deposit (CDs) lock your money away for a set time period but pay higher rates if you can leave the money untouched.
- Your deposits are protected up to $250,000 per account type at FDIC-insured banks, so the bank's size does not affect the safety of your money.
- Interest rates vary by institution and change weekly, so comparing rates across multiple banks before opening an account takes 15 minutes and can earn you hundreds of dollars more per year.
How high-yield savings accounts work
A high-yield savings account is a regular savings account that pays more interest. You deposit money, the bank holds it, and you earn interest on the balance. You can add money whenever you want and withdraw it whenever you want — there are no penalties for taking your money out early, unlike with CDs.
The interest rate is variable, meaning it can change. Banks adjust their rates based on what the Federal Reserve does with its benchmark interest rate. When the Fed raises rates, banks raise what they pay you. When the Fed lowers rates, banks lower what they pay you. This happened dramatically in 2022 and 2023 — rates on high-yield savings jumped from near zero to 4 or 5 percent in a matter of months.
You access the account online or through a mobile app. Most online banks do not have physical locations, so you cannot walk in with cash. You transfer money in from another bank account, and transfers usually take one to three business days. Some online banks partner with ATM networks so you can withdraw cash without fees.
Money market accounts and where they fit
A money market account is a hybrid between a savings account and a checking account. It pays interest like a savings account but may come with a debit card or checkbook so you can spend the money directly. The interest rate is usually slightly lower than a high-yield savings account at the same bank, because you have more access to your money.
Money market accounts often require a higher opening deposit — sometimes $2,500 or $10,000 — compared to high-yield savings accounts that may have no minimum. If you have a larger sum sitting idle and want some access to it without moving it around, a money market account can make sense. But if you are comparing rates, check both the savings and money market rates at each bank, because the savings account may pay more.
Certificates of deposit for locked-away money
A certificate of deposit (CD) is an agreement where you give the bank a sum of money for a fixed period — three months, six months, one year, five years — and the bank pays you a set interest rate for that entire time. The rate does not change. In exchange, you agree not to touch the money until the term ends. If you withdraw early, you pay a penalty, usually a few months' worth of interest.
CDs currently pay higher rates than high-yield savings accounts because the bank knows exactly how long it has your money. A one-year CD might pay 5 to 5.5 percent, while a high-yield savings account pays 4.5 to 5 percent. The longer the term, the higher the rate — a five-year CD might pay 4.5 to 5 percent depending on the bank.
CDs make sense if you have money you will not need for a specific time period. If you might need the money sooner, the early withdrawal penalty can wipe out months of interest, so a high-yield savings account is safer.
Credit unions versus banks
Credit unions are member-owned financial institutions that often pay higher interest rates than banks because they are not trying to maximize profit for shareholders. You have to be a member to open an account, but membership is often free or costs a small one-time fee. Many credit unions let you join if you live or work in a certain area, or if you belong to a specific employer or organization.
Credit union savings accounts and money market accounts can pay rates comparable to online banks. Credit unions are insured by the National Credit Union Administration (NCUA), which works the same way as the FDIC — your deposits are protected up to $250,000 per account type. If you already belong to a credit union, check what they are paying before opening an account elsewhere.
How to compare rates and find the highest option
Interest rates change weekly, sometimes daily. The highest rate today may not be the highest next week. To find the current highest rates, visit rate-comparison websites like Bankrate, DepositAccounts, or NerdWallet, which update rates multiple times per day. These sites let you filter by account type, minimum deposit, and whether you need a physical location nearby.
Once you find an account that interests you, visit the bank's website directly to confirm the rate and check the terms. Read the fine print about how often interest is compounded (daily is better than monthly), whether there are monthly fees, and how you deposit and withdraw money. Some online banks charge fees if your balance drops below a certain amount, or if you make too many transfers out of the account.
Open an account at the bank offering the rate you want. The process takes 10 to 20 minutes online. You will need your Social Security number, a government ID, and proof of address (a recent utility bill or bank statement). Then transfer money from your current bank account into the new account.
Safety and FDIC insurance
Money in a savings account, money market account, or CD at an FDIC-insured bank is protected up to $250,000 per account type, per person, per bank. This means if the bank fails, the government guarantees you get your money back up to that limit. The bank's size does not matter — a small online bank with one employee is just as protected as a large national bank with thousands of branches.
Credit unions are insured by the NCUA with the same $250,000 limit per account type. If you have more than $250,000 to deposit, you can spread it across multiple banks or account types to stay fully protected. For example, you could have $250,000 in a savings account at Bank A and $250,000 in a savings account at Bank B, and both would be fully insured.
What to watch out for
Rates are variable on savings and money market accounts, so the rate you earn today will not last forever. When the Federal Reserve lowers interest rates, banks lower what they pay you. This has happened before — in 2020, rates on high-yield savings accounts dropped to near zero. If rates fall again, your earnings will fall with them.
Some banks advertise a high introductory rate that drops after a few months. Read the terms carefully to see when the rate changes and what it changes to. A bank offering 5 percent for the first three months and then 0.5 percent after that is not actually offering you 5 percent.
Avoid any account that charges monthly maintenance fees, transfer fees, or requires a very high minimum deposit you cannot afford to keep there. These fees eat into your interest earnings. The best accounts have no monthly fees and low or no minimum deposits.
Frequently Asked Questions
Can I move my money between accounts if rates change?
Yes. You can withdraw money from one account and deposit it into another at any time. High-yield savings accounts have no early withdrawal penalties. CDs do charge a penalty for early withdrawal, but you can move money between savings accounts and money market accounts freely. Keep in mind that transfers between banks take one to three business days.
What if I need the money in an emergency?
High-yield savings accounts and money market accounts let you withdraw money whenever you need it. CDs charge a penalty if you withdraw before the term ends, usually a few months of interest. If you think you might need the money within a year, keep it in a high-yield savings account instead of a CD.
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, and you report that on your tax return. The interest is taxed as ordinary income at your regular tax rate.
Is my money safe in an online bank?
Yes, as long as the bank is FDIC-insured. Check the bank's website or call to confirm it is FDIC-insured — nearly all legitimate online banks are. Your deposits are protected up to $250,000 per account type, the same as at a traditional bank. Online banks are regulated by the same federal agencies as brick-and-mortar banks.
What happens if interest rates drop after I open an account?
The rate on your savings or money market account will drop along with the market. You can move your money to a different bank offering a higher rate, but transfers take a few days. If you have a CD, your rate stays the same until the term ends, which protects you if rates fall but locks you in if rates rise.