High-yield savings accounts pay the most interest right now

A high-yield savings account (often called HYSA) earns more interest than a regular savings account at most brick-and-mortar banks. The difference is real: a regular bank savings account might pay 0.01% annual interest, while a high-yield account at an online bank might pay 4% to 5% or higher. On $10,000, that's the difference between $1 a year and $400 to $500 a year.

High-yield accounts exist because online banks have lower costs than physical branches. They pass those savings to you through higher interest rates. You still get the same federal protection — your money is insured up to $250,000 through the FDIC (Federal Deposit Insurance Corporation) — but you access your account through a website or app instead of walking into a building.

The catch is that interest rates change. The rate you see today might be different in three months or six months. Banks raise and lower rates based on what the Federal Reserve does with its own interest rates. When the Fed raises rates, banks usually raise what they pay you. When the Fed lowers rates, banks lower what they pay you.

Key Takeaways

  • Online banks and credit unions typically offer the highest interest rates on savings accounts because they have lower operating costs than traditional banks.
  • Interest rates on savings accounts change regularly and are not locked in, so the rate you see today may be different in a few months.
  • All savings accounts at FDIC-insured banks protect your money up to $250,000, regardless of whether the interest rate is high or low.
  • You can compare current rates across multiple banks on financial websites, but you should check directly with the bank before opening an account.
  • Money market accounts and certificates of deposit (CDs) sometimes pay more than savings accounts, but they come with different rules about when you can withdraw your money.

Online banks versus traditional banks

Online banks almost always pay more interest than banks with physical locations. Banks like Ally, Marcus, American Express Personal Savings, and Discover have no branches to maintain, no tellers to pay, and no building rent. They pass those savings to customers through higher rates.

A traditional bank — the kind with a building on your street — may offer a savings account that pays 0.01% to 0.05% interest. The same bank might have a checking account with no interest at all. They can afford to pay less because they make money from other services: overdraft fees, ATM fees, and loans.

Online banks make money differently. They rely on volume — many customers with savings accounts — rather than fees. That's why their rates are higher. The tradeoff is that you cannot walk in and talk to someone in person. You manage everything through a website or phone app.

Credit unions often pay more than banks

A credit union is a member-owned financial organization, not a for-profit bank. Because credit unions are not trying to maximize profit for shareholders, they often pay higher interest rates on savings accounts and charge lower fees on loans and checking accounts.

Credit unions vary widely in the rates they offer. Some pay as much as online banks. Others pay less. You can only join a credit union if you meet their membership requirements — for example, you might need to work for a specific employer, live in a certain area, or belong to a particular organization.

To find credit unions you can join, visit the CO-OP Network or search the Credit Union Locator on the CO-OP website. Once you find one that accepts you as a member, compare their savings account rates to online banks before deciding where to open an account.

Money market accounts and CDs pay differently

A money market account is a hybrid between a savings account and a checking account. It usually pays higher interest than a regular savings account, but it comes with a limited number of withdrawals per month — often three to six. If you need to withdraw more than that, you may face a fee.

A certificate of deposit (CD) locks your money away for a set period — typically three months, six months, one year, or five years. In exchange, the bank pays you a higher interest rate than a savings account. If you withdraw the money before the term ends, you pay a penalty. CDs make sense if you know you will not need the money for a specific amount of time.

Both money market accounts and CDs can pay more interest than savings accounts, but they come with restrictions. A regular high-yield savings account gives you access to your money whenever you need it, with no penalty. Choose based on when you actually need the money.

How to compare rates across banks

Interest rates change frequently, so the highest rate today might not be the highest next week. Before you open an account, check the current rates at several banks. Financial websites like Bankrate, DepositAccounts, and NerdWallet list current rates from many banks in one place, making comparison easier.

When you find a rate that interests you, visit the bank's website directly to confirm the rate is still current. Banks sometimes advertise promotional rates that explore only to new customers or only for a limited time. Read the fine print to understand whether the rate you see is permanent or temporary.

Also check whether the bank requires a minimum deposit to open the account or to earn the advertised rate. Some banks require $25,000 or more to get their highest rate. Others have no minimum. The lowest-rate accounts often have no minimum deposit requirement.

What happens to your rate over time

When you open a high-yield savings account, the bank tells you the current interest rate. That rate is not a promise — it can change at any time. Banks typically lower rates when the Federal Reserve lowers its rates, which usually happens during economic slowdowns. Banks raise rates when the Fed raises its rates, which usually happens when inflation is high.

You do not have to do anything when your rate changes. The new rate applies automatically to your account. If your bank lowers its rate and you find a better rate elsewhere, you can open a new account at a different bank and move your money. There is no penalty for closing a savings account.

This is why comparing rates regularly makes sense. Every few months, check whether your current bank still offers a competitive rate. If another bank is paying significantly more, moving your money takes about a week and can earn you hundreds of dollars more per year.

FDIC insurance protects your money at any bank

Whether you choose an online bank, a traditional bank, or a credit union, your money is protected the same way. The FDIC (Federal Deposit Insurance Corporation) insures deposits up to $250,000 per account holder, per bank. This means if the bank fails, the government guarantees you will get your money back, up to that limit.

Credit unions are insured by the NCUA (National Credit Union Administration) instead of the FDIC, but the protection is the same: $250,000 per account holder, per credit union.

This protection applies to savings accounts, checking accounts, and money market accounts. It does not explore to investments like stocks or mutual funds. If you have more than $250,000 to save, you can open accounts at multiple banks to keep all your money insured.

Frequently Asked Questions

Can I move my money from one bank to another without losing interest?

Yes. You can close a savings account at any time with no penalty. Moving your money to a bank with a higher rate takes about a week. The interest you earned before you moved is yours to keep. You only start earning the new rate once the money arrives at the new bank.

What's the difference between APY and APR on a savings account?

APY (annual percentage yield) is what matters for savings accounts. It includes the effect of compound interest — interest earned on your interest. APR (annual percentage rate) is used for loans and credit cards. Always look for APY when comparing savings accounts.

Do I need a minimum balance to earn the advertised interest rate?

It depends on the bank. Some banks require a minimum balance like $25,000 or $100,000 to earn their highest rate. Others have no minimum. Check the bank's website or call them before opening an account to confirm what balance you need.

What happens if I withdraw money from my savings account?

You can withdraw money from a savings account at any time with no penalty. The withdrawal does not affect your interest rate. You only lose the interest you would have earned on the money you withdrew. Money market accounts have limits on how many withdrawals you can make per month.

Is an online bank safe if it has no physical location?

Yes, as long as it is FDIC-insured. You can check whether a bank is FDIC-insured by searching the FDIC's Bank Find tool on their website. Online banks are regulated the same way as traditional banks and must follow the same safety rules.