Savings account rates move up and down based on what the Federal Reserve does
Yes, interest rates on savings accounts change. Your bank can raise or lower the rate it pays you on your savings whenever it wants, and most banks do this several times a year. The rate you see today is not locked in for the life of your account — it's a variable rate that shifts with market conditions and your bank's own decisions.
The main driver is the federal funds rate, which is the interest rate the Federal Reserve sets for banks to lend to each other overnight. When the Fed raises this rate, banks have more incentive to offer higher rates on savings accounts to attract deposits. When the Fed cuts the rate, banks typically lower what they pay you. But banks don't move in lockstep — some raise rates faster than others, and some cut rates faster than others.
Your bank also changes rates based on how much money it needs. If a bank has plenty of deposits, it may lower rates because it doesn't need to attract more customers. If it's short on deposits, it may raise rates to pull in more money. Competition matters too: if a rival bank down the street starts offering 4.5% and you're getting 2%, your bank may raise its rate to keep you from leaving.
Key Takeaways
- Banks can change savings account rates at any time without your permission, and most do so multiple times per year.
- When the Federal Reserve raises its benchmark rate, banks usually raise savings rates within weeks or months; when the Fed cuts, banks often cut faster.
- The rate you earn today may be different in 30 days, so checking your bank's current rate periodically helps you know whether to move money elsewhere.
- Online banks and credit unions often raise rates faster than traditional banks because they have lower overhead and compete harder for deposits.
- A rate may provide exists only if your bank explicitly offers a promotional rate with a stated end date — otherwise assume the rate can change anytime.
How the Federal Reserve's moves affect what your bank pays you
When the Federal Reserve raises its benchmark rate, banks' cost of borrowing goes up, so they have to pay more to attract deposits. Within a few weeks to a couple of months, most banks raise their savings rates. The increase is usually not dollar-for-dollar — if the Fed raises rates by 0.5%, your bank might raise your rate by 0.3% or 0.4%, keeping some of the gain for itself.
When the Fed cuts rates, banks cut what they pay you much faster — sometimes within days. This is because banks want to protect their profit margins. They can afford to wait and see if the Fed will raise again before cutting rates on deposits, but they cut immediately when rates fall because they know their borrowing costs are dropping right away.
The Fed has raised rates significantly since 2022, which is why savings rates climbed from near zero to 4% or higher at many banks. If the Fed starts cutting rates in the future, expect your savings rate to fall within weeks, even if the Fed's cuts are gradual.
Why different banks offer different rates even when the Fed hasn't moved
Two banks can offer completely different rates on the same day, even though they're both responding to the same Federal Reserve rate. This happens because each bank makes its own decision about how much it needs to pay to attract or keep deposits.
A large national bank with millions of customers and plenty of deposits may offer 1.5% because it doesn't need to compete hard for new money. An online bank with fewer customers may offer 4.5% because it needs deposits to grow and has lower overhead costs to cover. A credit union may offer 4.75% because it's member-owned and returns profit to account holders rather than shareholders.
Banks also change rates based on the type of account. A high-yield savings account might earn 4.5%, while a regular savings account at the same bank earns 0.01%. The bank is using the high-yield account to attract larger deposits and more sophisticated customers who shop around.
When your bank must notify you of a rate change
Banks are required to notify you before they lower your interest rate, but the timing and method vary. Most banks send an email or mail a notice 30 days before the rate drops, though some send it the same day the change takes effect. Read the terms of your account or your bank's website to see what notice period applies to you.
When a bank raises your rate, it usually does not send a notice — it just starts paying you more. You may not realize the increase happened unless you check your account statements or log into your online banking portal.
If your bank lowers your rate and you disagree with it, you have no recourse with the bank itself. Your only option is to move your money to a bank offering a better rate. This is why shopping around every few months makes sense, especially when the Fed is cutting rates.
Promotional rates and how long they actually last
Some banks offer a promotional rate — a higher-than-normal rate for a limited time, usually three to twelve months. For example, a bank might offer 5.0% for the first six months, then drop to 2.5% after that. The promotional period is the only time the rate is may provide; after it ends, the rate becomes variable again and can change whenever the bank decides.
Read the fine print on any promotional offer to see when the rate expires and what the regular rate will be after that. Some banks bury this information in the terms and conditions. If you don't see an end date, assume the promotional rate is not may provide and could change anytime.
Promotional rates are worth using if you're moving money anyway, but don't count on them lasting. Plan to move your money again when the promotional period ends if the bank's regular rate is no longer competitive.
How to track rate changes and move money when rates drop
The easiest way to track your rate is to check your bank's website once a month and compare it to what other banks are offering. Websites like Bankrate, DepositAccounts, and the FDIC's BankFind tool show current rates at hundreds of banks and credit unions. You don't need to check every day — monthly is enough to catch when your bank has fallen behind.
If your bank's rate drops and you find a better rate elsewhere, you can move your money by opening a new account at the higher-paying bank and transferring funds via ACH (automated clearing house). This usually takes one to three business days. You don't have to close your old account immediately — you can leave it open with a small balance or close it after the transfer clears.
Moving money between banks is free and has no tax consequences. You only pay taxes on the interest you earn, not on the transfer itself. If you move money between accounts at the same bank, the transfer is instant and shows up the same day.
Why rates on money market accounts and CDs move differently than savings accounts
Money market accounts work like savings accounts — the rate is variable and can change anytime. You'll see the same pattern: rates rise when the Fed raises, and fall when the Fed cuts, with banks cutting faster than they raise.
Certificates of deposit (CDs) are different. When you open a CD, the rate is locked in for the entire term — three months, one year, five years, whatever you choose. That rate will not change, no matter what the Fed does or what your bank decides. This is the trade-off: you get a may provide rate, but you can't access the money without paying an early withdrawal penalty.
If rates are falling, a CD locks in today's higher rate and protects you. If rates are rising, a CD locks you into a lower rate and you miss out on the increases. This is why the decision to open a CD depends on where you think rates are headed.
Frequently Asked Questions
Can my bank lower my interest rate without telling me?
Banks must notify you before lowering your rate, usually 30 days in advance, though some send notice the same day the change takes effect. Check your account agreement to see your bank's specific notice period. You won't receive a notice when rates go up — you'll only find out by checking your statements or logging in.
If I lock in a rate today, will it stay the same?
Only if you open a CD or your bank offers an explicit promotional rate with a stated end date. Regular savings accounts and money market accounts have variable rates that can change anytime. If your bank doesn't mention a may provide or end date, assume the rate can move.
Why did my bank lower my rate when the Fed hasn't cut?
Banks lower rates based on their own needs, not just the Fed's moves. If your bank has plenty of deposits, it may lower rates to reduce what it pays out. If a competitor is offering less, your bank may also cut to match. You can move your money to a bank still offering a higher rate.
How often should I check my savings rate?
Checking once a month is enough to catch when your bank has fallen behind. If you're in a high-yield account, rates move faster, so checking every two weeks during periods when the Fed is cutting can help you move money before your rate drops too far.
Do online banks change rates more often than traditional banks?
Online banks tend to raise rates faster than traditional banks because they compete harder for deposits and have lower overhead. They also cut rates faster when the Fed cuts. If you want the highest rate, online banks and credit unions are usually the first to move.