A good APY depends on what your bank is offering and what you can find elsewhere

There is no single "good" APY—it moves with the Federal Reserve's interest rate decisions, which change several times a year. Right now, savings accounts at major banks (Chase, Bank of America, Wells Fargo) typically pay between 0.01% and 0.05% APY. Online banks and credit unions often pay 4% to 5.35% APY on regular savings accounts. The difference between 0.01% and 4.5% on $10,000 is roughly $450 per year, so where you keep your money matters.

The practical definition of "good" is: better than what you're getting now, and better than what competitors are offering for the same type of account. If your current bank pays 0.01% and you find an online bank paying 4.5%, that's a good move. If you're already at 4.5% and another bank offers 4.75%, the difference is small enough that switching may not be worth the effort of moving your money.

Key Takeaways

  • Major brick-and-mortar banks typically pay 0.01% to 0.05% APY, while online banks and credit unions often pay 4% to 5.35% APY on the same type of account.
  • APY rates change when the Federal Reserve adjusts its benchmark rate, so what's "good" today may shift in a few months.
  • The real comparison is between your current account and what you could move to, accounting for the time and hassle of switching.
  • Money market accounts and certificates of deposit (CDs) sometimes pay higher rates than savings accounts, but lock your money away or charge fees for early withdrawal.
  • Your bank's APY is may provide only for the current rate period; banks can lower rates without notice once that period ends.

Why rates vary so much between banks

A bank's overhead costs determine how much it can afford to pay you. A physical branch in a downtown office building costs money—rent, staff, utilities. An online bank has no branches, no tellers, and lower operating costs, so it can pass more of its earnings to depositors as interest.

Credit unions are member-owned nonprofits, not shareholder-owned corporations, so they also tend to pay higher rates on savings. They return profits to members rather than to investors. However, credit unions have membership requirements—you may need to live in a certain area, work for a specific employer, or belong to an organization to join.

Banks also use different strategies to attract money. Some offer high rates on savings to pull in deposits, then use that money to make loans. Others prioritize checking account customers and pay minimal interest on savings. Shopping around means reading the fine print on each bank's website, not just comparing the headline rate.

How to compare rates across different banks

Start by listing the banks you're considering and their current APY for a regular savings account. Write down the minimum balance required to earn that rate—some banks pay the advertised rate only if you maintain $25,000 or more. Check whether the rate is promotional (temporary) or standard. A promotional rate of 5% that drops to 0.5% after six months is not the same as a permanent 4.5% rate.

Next, check the bank's deposit insurance. The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 per depositor per bank. If you have more than $250,000, you need to split it across multiple banks or use a service like InvestFunds that spreads your deposit across multiple FDIC-insured banks. Credit unions are insured by the National Credit Union Administration (NCUA) up to the same $250,000 limit.

Finally, test the bank's customer service. Call or email with a question about your account. A bank that responds quickly and clearly is one you'll want to deal with if something goes wrong. Read recent reviews on sites like Trustpilot or Bankrate, but weight recent reviews more heavily than old ones—banks change their policies and service quality over time.

The difference between savings accounts, money market accounts, and CDs

A savings account lets you withdraw money anytime without penalty. You can add or remove funds as often as you want. The APY is usually lower than other products because the bank can't count on keeping your money for any set period.

A money market account is a hybrid. It pays higher interest than a savings account but limits the number of withdrawals you can make per month (often six). Some money market accounts also come with a debit card or checkbook, so you can access your money more easily than with a CD. The tradeoff is that rates are higher than savings but lower than CDs.

A certificate of deposit (CD) locks your money away for a set term—three months, six months, one year, five years. In exchange, the bank pays you a higher rate because it knows exactly how long it will hold your money. If you withdraw before the term ends, you pay an early withdrawal penalty, usually equal to a few months of interest. CDs make sense if you have money you won't need for a specific period and want to lock in a rate before rates fall.

What happens to your rate when the Federal Reserve changes policy

The Federal Reserve sets a benchmark interest rate that influences what banks pay on deposits and charge on loans. When the Fed raises its rate, banks usually raise the APY they offer on savings within weeks. When the Fed cuts its rate, banks usually cut savings rates within days or hours—they move faster downward than upward.

Your bank can change your rate at any time once the current rate period ends. Most banks don't lock in a rate permanently; they reserve the right to adjust it. You'll receive notice before the change (usually 30 days), but you have no legal right to keep the old rate. If your bank cuts its rate and you don't like the new one, you can move your money to a competitor.

This is why "good" is a moving target. A 4.5% rate is excellent when the Fed's benchmark is 5.25%, but it may be below average if the Fed raises rates to 6.5%. The best strategy is to check rates quarterly and move your money if a competitor offers significantly more.

Red flags that a rate is too good to be true

If a bank is advertising an APY that is 2% or more above every competitor, ask why. Legitimate reasons include a promotional period (which will end), a very high minimum balance requirement (which you may not meet), or a new bank trying to build deposits quickly. Illegitimate reasons include the bank being uninsured or operating as a scam.

Always verify that the bank is FDIC-insured or NCUA-insured. You can search the FDIC's bank database at fdic.gov or the NCUA's credit union locator at mycreditunion.gov. If a bank is not in either database, your deposits are not protected if the bank fails. Uninsured banks sometimes offer high rates because they take on more risk—and if they fail, you lose your money.

Watch for hidden fees. Some banks advertise a high APY but charge monthly maintenance fees, fees for falling below a minimum balance, or fees for transfers. A 5% APY with a $10 monthly fee is worse than a 4.5% APY with no fees if you have a small balance. Read the fee schedule before you open an account.

How to move your money without losing interest

If you decide to switch banks, plan the timing carefully. Interest accrues daily but is usually credited monthly. If you move your money on the 15th of the month, you'll miss half a month's interest at your old bank and won't start earning at your new bank until the next day. Moving on the first of the month minimizes the gap.

You don't have to close your old account immediately. Open the new account, transfer your money, and wait a few days to confirm the transfer went through. Then close the old account. Some banks charge a fee to close an account if you do it within a certain period (often 90 days), so check the terms first.

If you have automatic bill payments or direct deposits linked to your old account, update them before you close it. A missed bill payment or delayed paycheck is more costly than the interest you'll earn by switching banks.

Frequently Asked Questions

Is 4% APY on a savings account really available right now?

Yes, several online banks and credit unions currently offer rates between 4% and 5.35% APY on regular savings accounts with no minimum balance or withdrawal restrictions. These rates change frequently, so check current rates on the bank's website. Rates this high are available because online banks have lower overhead costs than traditional banks.

Should I move my money to a new bank for an extra 0.5% APY?

It depends on how much money you're moving and how much effort the switch requires. On $10,000, an extra 0.5% is $50 per year—worth it if switching takes an hour. On $1,000, it's $5 per year, probably not worth your time. Factor in any fees your old bank charges for closing an account or any hassle with updating automatic payments.

What if my bank lowers my APY after I open the account?

Banks can lower rates at any time, and they must notify you before the change takes effect (usually 30 days). You have no obligation to stay. If the new rate is lower than what competitors offer, move your money. You can also call your bank and ask if they'll match a competitor's rate—some will, especially if you have a large balance.

Is a CD a better choice than a savings account if rates are falling?

A CD locks in your rate for the term you choose, so if you believe rates will fall, a CD protects you. However, if rates rise and you need your money, you'll pay an early withdrawal penalty. A CD makes sense if you have money you won't need for a specific period and want certainty about your return.

Can I lose money in a savings account?

No, as long as your bank is FDIC-insured or your credit union is NCUA-insured. Your principal is protected up to $250,000 per institution. However, inflation can erode the purchasing power of your money—if inflation is 3% and your APY is 1%, you're losing 2% in real value each year. This is why comparing rates matters.