3.75% APY is competitive but not the highest rate available

Whether 3.75% APY is good depends on what other banks are offering at the moment you're looking. As of late 2024, high-yield savings accounts at online banks regularly offer rates between 4.25% and 5.35%, while traditional brick-and-mortar banks typically pay 0.01% to 0.50%. A 3.75% rate sits in the middle—better than most physical banks, but lower than the top online options.

The rate you see today won't be the rate you see in six months. Banks raise and lower APY based on what the Federal Reserve does with interest rates. When the Fed raises its benchmark rate, banks compete harder for deposits and push their APY higher. When the Fed cuts rates, banks drop their APY to match. Your 3.75% account could be 4.5% next quarter or 2.8% the quarter after that.

The real question is not whether 3.75% is objectively good, but whether it's the best rate you can find right now for the type of account you need. If you need your money accessible without penalty, compare it to other no-penalty savings accounts. If you can lock money away for a term, a certificate of deposit (CD) might pay more. If you need to make frequent transfers, a money market account at that rate might work better than a savings account.

Key Takeaways

  • 3.75% APY is higher than traditional banks offer but lower than the highest-paying online savings accounts, which currently range from 4.25% to 5.35%.
  • APY changes frequently based on Federal Reserve decisions, so a rate that is competitive today may not be in three months.
  • The best rate for you depends on your account type—savings, money market, or CD—and how often you need to access the money.
  • Moving money between banks to chase slightly higher rates costs time and effort; staying put is often worth it if your current rate is within 0.5% of the market high.

How 3.75% compares across account types

A high-yield savings account at 3.75% will earn you more than a regular savings account at most banks. On $10,000, the difference between 3.75% and 0.05% is roughly $370 per year. That matters if you're holding money for an emergency fund or a goal a year or two away.

Certificates of deposit (CDs) with the same term length often pay slightly more than savings accounts at the same bank. If a bank offers 3.75% on a savings account, its one-year CD might pay 4.1% or 4.3%. The tradeoff is that you cannot touch the money without penalty until the term ends. For money you know you won't need for 12 months, a CD at 4.1% beats a savings account at 3.75%.

Money market accounts sometimes pay the same rate as savings accounts but offer check-writing or debit card access. If you want to earn 3.75% and still have the ability to write checks or transfer money easily, a money market account can do both. Not all banks offer this, so you may need to shop around.

When to move your money to a higher rate

If you find an account paying 4.5% or higher and you have $25,000 or more sitting in savings, the extra earnings may justify the time it takes to move the money. The difference between 3.75% and 4.5% on $25,000 is about $190 per year. If the transfer takes an hour of your time, that's a $190 hourly return—worth doing.

If you have less than $10,000 or the rate difference is smaller than 0.4%, staying put usually makes more sense. The effort of opening a new account, linking it to your checking account, and moving money is not worth $30 or $40 a year. Banks also sometimes offer sign-up bonuses for new accounts—$100 to $300 in some cases—which can make a move worthwhile even if the APY is only slightly higher.

Before you move, check whether your current bank has a rate increase coming. Some banks announce higher rates in advance. Also confirm that the new bank's rate is not a promotional rate that drops after three months. Read the fine print to see whether the rate applies to all balances or only to the first $100,000.

What happens to your rate if the Fed changes course

The Federal Reserve sets a target range for the federal funds rate, which is the interest rate banks charge each other for overnight loans. When the Fed raises this rate, banks have more incentive to offer higher APY to attract deposits. When the Fed cuts the rate, banks lower APY because they have less incentive to compete for deposits.

If you lock in 3.75% in a savings account, that rate is not locked. The bank can lower it whenever it wants, usually with 30 days' notice. If the Fed cuts rates by 1%, your 3.75% account might drop to 2.75% within weeks. This is different from a CD, where the rate is truly fixed for the term you choose.

Historically, when the Fed begins cutting rates, savings account APY drops faster than CD rates do. If you think rates are about to fall, moving money into a one-year or two-year CD at 3.75% locks in that rate for the full term. If you think rates are about to rise, keeping money in a savings account lets you benefit from the higher rates the bank will offer.

How much you'll actually earn at 3.75%

APY accounts for compounding, so the actual amount you earn is slightly higher than multiplying your balance by the rate. On $10,000 at 3.75% APY, you earn about $375 in the first year (assuming the rate stays constant and you don't add or withdraw money). On $50,000, you earn about $1,875. On $100,000, you earn about $3,750.

These numbers assume the rate does not change and you do not make deposits or withdrawals. In reality, most people add money to savings over time, which means the actual earnings are higher. If you deposit $500 per month into a $10,000 account at 3.75%, you'll earn closer to $600 in the first year because each deposit earns interest for the remaining months.

The earnings are also taxable as ordinary income. If you're in the 24% federal tax bracket, the $375 you earn on $10,000 becomes $285 after taxes. This is why high-yield savings accounts matter most for people with larger balances—the tax hit is smaller relative to the total earnings.

Where to find current rates and compare options

The best way to know if 3.75% is competitive is to check what other banks are offering right now. Websites like Bankrate, DepositAccounts, and NerdWallet list current APY for savings accounts, money market accounts, and CDs across dozens of banks. These sites update daily, so the rates you see are current.

When you compare, make sure you're looking at the same account type. A high-yield savings account at one bank should be compared to high-yield savings accounts at other banks, not to CDs or money market accounts. Also check the minimum balance required to earn the advertised rate—some banks require $2,500 or $25,000 to may have access to for their highest APY.

Call or visit the bank's website directly to confirm the rate before you open an account. Rates change frequently, and a rate you saw yesterday might be lower today. Also read the terms to see whether the rate applies to all your money or only to balances above a certain threshold.

Frequently Asked Questions

Will my 3.75% rate stay the same forever?

No. Banks can lower the rate on savings accounts at any time with 30 days' notice. If the Federal Reserve cuts interest rates, your bank will likely lower your APY within weeks. CDs are different—the rate is locked for the full term you choose.

Is it worth moving my money to get 4.5% instead of 3.75%?

It depends on how much money you have. On $25,000 or more, the extra 0.75% adds up to $190+ per year, which justifies the time to move. On $5,000, the difference is only $38 per year. Also check whether the new bank offers a sign-up bonus, which can make a small move worthwhile.

What's the difference between APY and APR?

APY (annual percentage yield) includes the effect of compounding and is what you actually earn on savings. APR (annual percentage rate) does not include compounding and is typically used for loans. For savings accounts, always look at APY, not APR.

Can I earn more than 3.75% without locking my money away?

Yes. Many online banks offer 4.25% to 5.35% APY on savings accounts with no lock-in period and no penalty for withdrawals. The tradeoff is that these rates can drop if the Federal Reserve cuts interest rates. If you want a may provide higher rate, a CD locks it in for the term you choose.

Should I move my money every time rates change?

No. Chasing rates costs time and effort. If your current rate is within 0.5% of the market high, staying put is usually worth it. If you find a rate that is 1% or more higher and you have a substantial balance, moving makes sense. Also consider sign-up bonuses, which can offset the hassle of switching banks.