The banks offering the highest rates change month to month, and online banks consistently beat traditional brick-and-mortar banks

Right now, online banks and credit unions typically offer savings rates between 4.5% and 5.35% APY, while traditional banks with physical branches usually offer 0.01% to 0.5%. The difference matters: on $10,000, a 5% rate earns $500 per year, while a 0.5% rate earns $50. Online banks can offer higher rates because they have lower overhead costs—no branches, fewer staff, lower rent.

The highest rates are not permanent. Banks adjust their rates based on what the Federal Reserve does with its benchmark rate. When the Fed raises rates, banks raise savings rates. When the Fed cuts rates, banks cut them too, often within days. A bank offering 5.35% today might offer 4.8% in three months. This means the "best" bank for you depends on when you open the account and how long you plan to keep money there.

You cannot compare rates by walking into a branch or calling a toll-free number. You have to visit each bank's website and look at the rate listed for savings accounts. Some banks show the rate on the homepage; others bury it in a rates table. The rate shown is the APY—the annual percentage yield, which includes compounding.

Key Takeaways

  • Online banks and credit unions currently offer the highest savings rates, typically 4.5% to 5.35% APY, while traditional banks offer 0.01% to 0.5%.
  • Rates change whenever the Federal Reserve adjusts its benchmark rate, so the highest rate today may be lower in a few months.
  • You must check each bank's website directly to see current rates—rates are not standardized and vary by institution.
  • Opening an account online takes 10 to 20 minutes and requires an ID, Social Security number, and initial deposit (usually $0 to $25).
  • FDIC insurance covers up to $250,000 per depositor per bank, so splitting money across multiple banks protects larger balances.

Online banks versus traditional banks: why the gap exists

Online banks have no physical locations, which cuts their costs by 60% to 80% compared to a bank with branches. They pass some of those savings to customers in the form of higher interest rates. They also attract deposits by competing on rate alone—they cannot offer a convenient branch location or a relationship manager, so rate is their main selling point.

Traditional banks keep rates low because they make money from loans, not from paying interest on deposits. A customer's savings account is a liability to the bank—money it has to pay interest on. The bank then lends that money out at a higher rate (mortgages, car loans, credit cards) and pockets the difference. Online banks operate the same way, but they can afford to give customers a larger share of that spread because their costs are lower.

Credit unions are member-owned cooperatives, not for-profit corporations. Some credit unions offer rates as high as online banks because they return profits to members rather than to shareholders. However, credit unions have membership requirements—you might need to work for a specific employer, live in a specific county, or belong to a specific organization to join.

How to find the current highest rates

The fastest way is to visit the websites of the largest online banks and credit unions directly. Banks that frequently appear in rate comparisons include Marcus by Goldman Sachs, Ally Bank, American Express Personal Savings, Discover Bank, and Charles Schwab Bank. Each updates its rate on its own schedule, so you need to check multiple sites to see which is highest on the day you plan to open an account.

Rate comparison websites like Bankrate, DepositAccounts, and DepositAccounts track rates across hundreds of banks and update them daily. These sites are free and do not require you to enter personal information. The downside is that rates on comparison sites can lag by a few hours, so always visit the bank's own website to confirm the rate before you open an account.

When you compare rates, look for the APY, not the APR. APY includes the effect of compounding—interest earned on interest—so it is always slightly higher than the base rate. Also check the minimum deposit required to open the account and whether the rate applies to all balances or only balances above a certain threshold.

What happens when the Federal Reserve changes rates

The Federal Reserve sets a target range for the federal funds rate, which is the rate banks charge each other for overnight loans. When the Fed raises this rate, banks raise the rates they offer on savings accounts within days or weeks. When the Fed cuts rates, banks cut savings rates even faster—sometimes within 24 hours.

This means if you lock in a 5.35% rate today and the Fed cuts rates next month, your rate will drop too. Savings accounts do not have a fixed rate like a CD (certificate of deposit). Your rate can change at any time, and the bank only has to give you notice—usually 30 days—before the change takes effect.

The Fed has cut rates multiple times since 2023, and savings rates have fallen from 5.35% to the current 4.5% to 5.35% range. If the Fed continues to cut, rates will continue to fall. If the Fed raises rates again, rates will rise. There is no way to predict which will happen, so do not wait for rates to go higher—lock in the current rate if it meets your needs.

Opening an account and moving money

Opening a savings account at an online bank takes 10 to 20 minutes and requires a valid government ID, your Social Security number, and proof of your current address (a utility bill or bank statement). You will also need to fund the account with an initial deposit, which ranges from $0 to $25 depending on the bank.

You can fund the account by linking a checking account at another bank and transferring money via ACH (automated clearing house). This transfer usually takes one to three business days. Some banks also accept wire transfers, which are faster but may carry a fee. A few banks accept transfers from PayPal or other digital wallets.

Once the account is open, you can transfer money in and out whenever you want. There are no withdrawal limits on savings accounts (the old six-per-month rule was eliminated in 2020). However, if you withdraw money frequently, you lose the benefit of compound interest, so savings accounts work best for money you do not plan to touch for at least a few months.

FDIC insurance and account safety

All banks mentioned here are FDIC-insured, which means your deposits are protected up to $250,000 per depositor per bank. If the bank fails, the FDIC will reimburse you up to that limit. This protection applies even if the bank is online and you have never visited a physical location.

If you have more than $250,000 to save, you can split it across multiple banks to keep all of it insured. For example, $250,000 at Bank A and $250,000 at Bank B are both fully covered. You can also open multiple accounts at the same bank—a savings account and a money market account, for instance—and each is insured separately up to $250,000.

Online banks are as safe as traditional banks in terms of fraud and account security. They use encryption to protect your login information and offer two-factor authentication (a code sent to your phone) to prevent unauthorized access. If someone fraudulently transfers money out of your account, the bank will reimburse you if you report it within 60 days.

Alternatives if you want a may provide rate

If you want a rate that will not change, a CD (certificate of deposit) locks in a rate for a set period—usually three months to five years. CDs currently offer rates between 4.5% and 5.5% APY, depending on the term. The catch is that if you withdraw money before the term ends, you pay a penalty, usually equal to a few months of interest.

Money market accounts are a hybrid between savings accounts and CDs. They offer rates similar to savings accounts (currently 4.5% to 5.35%) but sometimes require a higher minimum balance ($2,500 to $10,000). The rate can change at any time, just like a savings account, so you do not get the may provide of a CD.

High-yield savings accounts are simply savings accounts at online banks that offer rates higher than traditional banks. There is no separate product category—the term just means a savings account with a competitive rate. All the banks mentioned earlier offer high-yield savings accounts.

Frequently Asked Questions

Can I move my money to a different bank if rates drop?

Yes. Savings accounts have no lock-in period, so you can withdraw all your money and transfer it to another bank whenever you want. There is no penalty. However, the transfer itself takes one to three business days, so you will miss a few days of interest during the move. If rates drop by 0.5% or more, the lost interest is usually worth it.

Do I need a checking account to open a savings account?

No, but it makes funding the account easier. You can open a savings account at one bank and link it to a checking account at another bank to transfer money via ACH. You can also fund it with a wire transfer from any bank, though some banks charge a wire fee.

What if I need the money in an emergency?

You can withdraw money from a savings account at any time with no penalty. The withdrawal takes one to three business days if you transfer to another bank, or one business day if you withdraw at an ATM (if the bank has ATM access). There is no lock-in period like there is with a CD.

Are online banks safe if I have never heard of them?

If the bank is FDIC-insured, your deposits are protected up to $250,000 even if the bank fails. You can check whether a bank is FDIC-insured by searching the FDIC's bank database on its website. Most online banks are FDIC-insured, but always verify before you open an account.

Will my rate stay the same if I keep money in the account for years?

No. Savings account rates are variable, meaning they can change at any time. The bank will notify you 30 days before a rate change, but you cannot prevent it. If you want a rate that does not change, open a CD instead, which locks in a rate for a set term.