Current savings account rates vary by bank and account type, from near zero at some large chains to 4.5% or higher at online banks

The interest rate your bank pays depends almost entirely on where you bank. A major national bank like Chase or Bank of America typically pays 0.01% to 0.05% annual percentage yield (APY) on a regular savings account. An online bank like Marcus, Ally, or Discover may pay 4.25% to 4.75% APY on the same type of account. The difference is real money: on $10,000, that's $1 to $5 per year at a big bank versus $425 to $475 at an online bank.

Rates change constantly and depend on what the Federal Reserve does with its benchmark interest rate. When the Fed raises rates, banks eventually raise what they pay depositors. When the Fed cuts rates, banks cut what they pay you. Right now, rates are higher than they were in 2020 and 2021, but lower than they were in mid-2023. Check your bank's website or call to see what they're paying today—the rate posted online is the one you'll actually earn.

The type of account also matters. Money market accounts sometimes pay slightly more than savings accounts at the same bank. Certificates of deposit (CDs) usually pay more than either, because you lock your money away for a set time. High-yield savings accounts are designed to pay more and are offered mainly by online banks, credit unions, and a few brick-and-mortar banks.

Key Takeaways

  • Online banks and credit unions typically pay 4% to 4.75% APY on savings accounts, while large national banks pay 0.01% to 0.05%.
  • The rate your bank pays changes when the Federal Reserve changes its benchmark rate, usually with a lag of a few weeks.
  • Money market accounts and CDs often pay more than regular savings accounts at the same institution.
  • The APY posted on a bank's website is the rate you will earn; rates are not negotiable and do not vary by customer.
  • Moving money to a higher-paying account can earn you hundreds of dollars per year on the same balance, with no risk to your principal.

Why big banks pay so little

Large national banks pay minimal interest because they do not need to compete for deposits. They have millions of customers with checking accounts, mortgages, and credit cards, so they can afford to pay almost nothing on savings. They also have physical branches, which cost money to run, and they use customer deposits to fund loans at much higher rates—the gap between what they pay you and what they charge borrowers is their profit.

Online banks have no branches and lower overhead, so they can afford to pay more and still make money. They also compete directly on rate, because rate is their only selling point. If you have $50,000 in a savings account at Chase earning 0.01%, you could move it to an online bank earning 4.5% and earn an extra $2,200 per year on the same money.

How to find the highest rate

Check the websites of online banks, credit unions, and online divisions of traditional banks. Common names include Marcus (owned by Goldman Sachs), Ally, Discover, American Express, and Synchrony. Credit unions like Connexus and Pentagon Federal also offer competitive rates. Bankrate, DepositAccounts, and the Federal Deposit Insurance Corporation (FDIC) website all publish current rates from multiple banks, updated daily or weekly.

When you compare, look at the APY, not just the interest rate. APY includes compounding—how often the bank adds interest to your balance—so it's the true annual return. A bank advertising 4.5% APY will earn you exactly that over one year if the rate does not change.

Read the fine print for minimum balance requirements, monthly fees, and withdrawal limits. Most online savings accounts have no minimum balance and no monthly fee. Some money market accounts require $2,500 or more to open. Some banks limit you to six withdrawals per month, though that rule is less common now.

What happens when the Fed changes rates

When the Federal Reserve raises its benchmark rate, banks usually raise what they pay on savings within a few days to a few weeks. When the Fed cuts rates, banks cut what they pay you much faster—sometimes the same day. This is because banks want to attract deposits when rates are rising but want to cut costs immediately when rates are falling.

If you lock money into a CD, the rate is fixed for the term, so Fed changes do not affect you. If you keep money in a savings account, the rate can change at any time, and the bank will notify you by email or mail before the change takes effect. You can move your money to a different bank if the rate drops too far.

Comparing savings accounts to other places for your money

A high-yield savings account is best for money you might need within a year or two. You earn interest, your money is liquid (you can access it quickly), and deposits up to $250,000 are insured by the FDIC at most banks or by the National Credit Union Administration (NCUA) at credit unions.

A CD pays more than a savings account but locks your money away. If you withdraw early, you pay a penalty—usually a few months of interest. CDs make sense if you know you will not need the money for a specific time, like six months or one year.

Money market funds and Treasury bills pay interest too, but they are not bank accounts and are not FDIC-insured. They carry different risks and are better for larger amounts or longer time horizons. A savings account is simpler and safer for most people.

How interest is calculated and when you see it

Banks calculate interest daily based on your balance and the APY, then add it to your account monthly or quarterly. If you have $10,000 in an account earning 4.5% APY, the bank divides 4.5% by 365 days to get a daily rate of about 0.0123%. Each day, it adds that amount to your balance. At the end of the month, it compounds—meaning next month's interest is calculated on your original balance plus the interest you already earned.

You see the interest as a deposit in your account. Some banks show it as a separate line item; others roll it into your balance. Either way, it's yours to keep. If you close the account or move the money, you keep all interest earned up to that point.

Interest is taxable income. At the end of the year, the bank sends you a 1099-INT form showing how much interest you earned. You report this on your tax return. If you earned $100 or more in interest across all accounts, you will receive a 1099-INT.

Moving money between banks without losing interest

You can move money from one bank to another without penalty or loss of interest. Use an external transfer (also called an ACH transfer) to move money from your old bank to your new bank. This usually takes three to five business days. During that time, your money is in transit and earning nothing, but the amount is small.

If you have a CD, you can move it to another bank when it matures (the term ends) without penalty. If you move it before maturity, you pay an early withdrawal penalty, usually three to six months of interest. Read the CD's terms before you buy it so you know the penalty.

Some banks offer CD ladders—you buy multiple CDs with different maturity dates so that one matures every few months. This lets you move money to a higher-paying bank gradually without locking everything away for years.

Frequently Asked Questions

Will my interest rate stay the same forever?

No. Banks can change savings account rates at any time, usually when the Federal Reserve changes its benchmark rate. The bank will notify you before the change. You can move your money to a different bank if the new rate is too low. CD rates are locked in for the term of the CD.

Is my money safe in an online bank?

Yes, if the bank is FDIC-insured. Check the FDIC website or the bank's website to confirm. Your deposits up to $250,000 are insured, meaning if the bank fails, the FDIC will return your money. Online banks are regulated the same way as brick-and-mortar banks.

Can I negotiate a higher rate with my bank?

No. Banks set rates based on market conditions and their own costs, not on individual customers. The rate posted on their website is what everyone gets. If you want a higher rate, you have to move your money to a bank that pays more.

What's the difference between APY and APR?

APY (annual percentage yield) includes compounding and is what you actually earn on savings. APR (annual percentage rate) does not include compounding and is used for loans and credit cards. Always look at APY when comparing savings accounts.

How often should I check rates and consider switching banks?

Check rates every few months, especially after the Federal Reserve changes its benchmark rate. If your current bank's rate drops more than 0.5% below the highest available rate, moving your money could earn you hundreds of dollars per year. The transfer takes a few days and costs nothing.