What savings accounts pay right now

Savings account interest rates vary by bank and change weekly. As of early 2025, traditional savings accounts at large banks (Chase, Bank of America, Wells Fargo) pay between 0.01% and 0.05% annual percentage yield (APY). Online banks and credit unions typically pay much more—between 4.00% and 5.35% APY—because they have lower overhead costs and compete harder for deposits.

The difference is real money. On $10,000, a traditional bank paying 0.02% APY earns you $2 per year. The same $10,000 at an online bank paying 4.50% APY earns $450 per year. That gap widens the longer your money sits and the larger your balance grows.

Rates change constantly. Banks raise or lower their APY based 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. There is usually a lag of a few weeks to a few months between a Fed move and a bank's response.

Key Takeaways

  • Online banks and credit unions currently pay 4.00% to 5.35% APY on savings accounts, while traditional brick-and-mortar banks pay 0.01% to 0.05%.
  • The interest you earn depends on three things: the APY the bank offers, how much money you have in the account, and how long it stays there.
  • Rates change weekly and follow the Federal Reserve's interest rate decisions, so the rate you see today may be different in a month.
  • Money market accounts and certificates of deposit (CDs) sometimes pay higher rates than savings accounts, but they come with different rules about when you can withdraw.

How the interest calculation actually works

Banks calculate interest using your APY and your daily balance. Most savings accounts compound interest daily, meaning the bank calculates what you owe you each day, and that interest gets added to your balance. The next day, you earn interest on the new, larger balance—including the interest from yesterday.

Here is the math: if your account has $10,000 and the APY is 4.50%, the bank divides 4.50% by 365 days to get a daily rate of about 0.0123%. On day one, you earn roughly $1.23. That $1.23 gets added to your balance, so on day two you earn interest on $10,001.23. Over a year, daily compounding means you earn about $460 instead of exactly $450—the extra $10 comes from earning interest on your interest.

The bank posts this interest to your account monthly, quarterly, or annually depending on the bank's schedule. You can see the exact posting date in your account agreement or by calling the bank. Some banks show you the interest earned so far in the current period; others show only what has been posted.

Why rates differ so much between banks

A traditional bank's overhead is high. They pay for physical branches, tellers, security, and real estate. To cover those costs and still make a profit, they keep most of the interest they earn on loans and investments, leaving very little for depositors. They also know many customers will not move their money even for a much higher rate elsewhere—switching banks takes effort, and many people do not check rates.

Online banks have no branches and no tellers. Their only cost is the website, customer service staff, and the technology to keep it running. They pass those savings to depositors by offering higher rates. They also compete aggressively because they have no other way to attract customers. A customer choosing between Bank of America and Ally Bank will pick Ally if the rate is significantly higher, because there is no branch loyalty to overcome.

Credit unions are member-owned, not shareholder-owned, so they return profits to members rather than to investors. Many credit unions pay higher rates on savings accounts than banks do. However, you usually have to work for a specific employer, belong to a specific organization, or live in a specific area to join a credit union. Some credit unions have opened membership to anyone, but most still have restrictions.

How to compare rates across banks

Check the APY, not the interest rate. APY (annual percentage yield) includes the effect of compounding, so it is the true number to compare. The interest rate alone does not tell you what you will actually earn.

Look at the minimum balance requirement. Some banks pay their advertised rate only if you keep a certain amount in the account—often $500, $1,000, or $2,500. If your balance drops below that, the rate drops sharply or you pay a monthly fee. Read the fine print before you open an account.

Check whether the rate is promotional. Some banks offer a high rate for the first three or six months, then drop it to a much lower rate. The bank will tell you this in the account terms, but it is easy to miss. If you see a rate that seems too good to be true, search for the bank name plus "promotional rate" to see if there is a catch.

Verify the bank is insured. The Federal Deposit Insurance Corporation (FDIC) insures deposits at banks up to $250,000 per account holder per bank. The National Credit Union Administration (NCUA) insures credit union deposits the same way. If a bank or credit union is not insured, your money is at risk if the institution fails. You can check FDIC insurance status on the FDIC website; for credit unions, check the NCUA website.

Money market accounts and CDs pay differently

Money market accounts are a hybrid between a savings account and a checking account. They usually pay a higher APY than savings accounts at the same bank, but they come with limits: you can make only a certain number of withdrawals per month (often three to six), and some require a higher minimum balance. If you need to access your money frequently, a money market account is not ideal.

Certificates of deposit (CDs) lock your money away for a set period—three months, six months, one year, five years, or longer. In exchange, they pay a higher APY than savings accounts. If you withdraw the money before the term ends, you pay a penalty, usually equal to a few months of interest. CDs make sense if you know you will not need the money for a specific period and want to lock in a rate before rates fall.

High-yield savings accounts are savings accounts that pay money market or CD-like rates without the restrictions. They have no withdrawal limits and no early withdrawal penalties. The trade-off is that the rate can change at any time—the bank can lower it without penalty. Savings accounts have the same feature, so this is not unique to high-yield accounts, but high-yield accounts are more likely to lower rates when the Fed cuts rates.

What happens to your interest when rates fall

When the Federal Reserve cuts its benchmark rate, banks eventually cut what they pay depositors. Online banks usually cut rates faster than traditional banks because they compete on rate. A traditional bank might wait several months after a Fed cut before lowering your rate; an online bank might do it within weeks.

Your existing balance does not lose money—the interest you already earned stays in your account. What changes is the rate on new deposits and the rate applied going forward. If you had $10,000 earning 4.50% APY and the bank cuts the rate to 3.00%, you keep the $10,000 plus all the interest you earned at 4.50%. Going forward, new interest is calculated at 3.00%.

This is why some people move money between banks when rates change. If your current bank cuts its rate significantly and another bank is still paying much more, moving your balance to the higher-paying bank makes sense. The process usually takes three to five business days, and you do not lose any interest during the transfer.

Frequently Asked Questions

Do I have to pay taxes on savings account interest?

Yes. Interest earned on a savings account is taxable income. Banks send you a 1099-INT form each January if you earned $10 or more in interest during the previous year. You report this on your tax return. The tax rate depends on your overall income and tax bracket.

What is the difference between APY and APR?

APY (annual percentage yield) includes the effect of compounding interest over a year. APR (annual percentage rate) does not. For savings accounts, always compare APY to APY. APR is used for loans and credit cards, where it tells you the cost of borrowing.

Can a bank change my interest rate without warning?

Yes. Banks can change savings account rates at any time without notice. Your account agreement gives them this right. However, they must notify you before the change takes effect, usually by email or mail. You can move your money to another bank if you disagree with the new rate.

Is it better to keep money in a savings account or invest it?

That depends on your time horizon and risk tolerance. Savings accounts are safe—your money is insured and you will not lose it. Investments like stocks and bonds can earn more over time but can also lose value in the short term. If you need the money within a few years, a savings account is safer. If you can leave it alone for ten years or more, investing may earn more.

How often does interest get added to my account?

Banks calculate interest daily but post it monthly, quarterly, or annually depending on the bank. Check your account agreement or call the bank to find out the posting schedule. Some banks let you choose when interest is posted.