Banks and credit unions offering 5% or higher on savings accounts

You can get 5% interest on your money through high-yield savings accounts at online banks and some credit unions. These accounts are FDIC-insured (up to $250,000 per depositor) and let you withdraw your money whenever you need it, unlike CDs or bonds. The rate you see advertised is the APY — annual percentage yield — which is what you actually earn in a year.

Online banks offer higher rates than brick-and-mortar banks because they have lower overhead costs. Banks like Marcus, Ally, American Express Personal Savings, and Wealthfront Cash Account have offered rates at or above 5% in recent months. Credit unions sometimes match or beat these rates through their own high-yield savings products. Rates change frequently — sometimes weekly — so the 5% available today may be 4.75% next month or 5.25% depending on Federal Reserve decisions.

To open an account, you typically need a Social Security number, proof of identity, and an initial deposit (often $0 to $25). The process takes 5 to 10 minutes online. Money deposited into a high-yield savings account is available immediately, though transfers to other banks take 1 to 3 business days.

Money market accounts that pay around 5%

A money market account is a hybrid between a checking account and a savings account. It usually comes with a debit card and check-writing privileges, but limits how many withdrawals you can make per month (often 6). The interest rate is typically competitive with high-yield savings accounts — many are currently at 5% APY or close to it.

Money market accounts are also FDIC-insured and work well if you want to keep some money accessible while earning interest. The trade-off is the withdrawal limit: if you need to move money out more than 6 times in a month, you may face a fee or the account may be converted to a regular checking account. Banks like Ally, Marcus, and Vanguard offer money market accounts at competitive rates.

Certificates of deposit (CDs) locked in at 5%

A CD is a savings product where you agree to leave your money untouched for a set period — usually 3 months, 6 months, 1 year, or 5 years. In exchange, the bank pays you a fixed interest rate, often higher than savings accounts. Many banks have offered 5% or higher on 1-year CDs in recent years.

The catch is that if you withdraw the money before the CD matures, you pay an early withdrawal penalty. The penalty varies by bank and CD term — it might be 3 months of interest or 6 months of interest. If you know you won't need the money for the full term, a CD locks in your rate and protects you from future rate drops. If rates fall to 3% next year, your 5% CD still pays 5%.

You can buy CDs directly from a bank, or use a CD ladder strategy where you buy multiple CDs with different maturity dates so that money becomes available at regular intervals. Some people use this to balance earning higher interest with keeping some cash accessible.

Key Takeaways

  • High-yield savings accounts at online banks currently offer 5% APY or close to it, with FDIC insurance and immediate access to your money.
  • Rates change frequently based on Federal Reserve decisions, so a 5% rate today may be different in a few weeks or months.
  • Money market accounts offer similar rates to high-yield savings but limit withdrawals to 6 per month and may charge fees if you exceed that.
  • CDs lock in a fixed rate for a set period and protect you if rates drop, but charge a penalty if you withdraw early.
  • All three options are FDIC-insured at banks and credit unions, meaning your money is protected up to $250,000 per account.

How to compare rates across banks

Interest rates change constantly, so the best way to find current 5% offers is to check rate comparison sites like Bankrate, DepositAccounts, or NerdWallet, which update daily. These sites let you filter by account type, FDIC insurance, and minimum deposit. You can also visit individual bank websites directly — most online banks display their current APY prominently on the homepage.

When comparing, look at the APY (not just the interest rate), any minimum deposit requirement, and whether there are monthly fees. Some banks waive fees if you maintain a certain balance or set up direct deposit. Read the fine print on money market accounts to confirm the withdrawal limit and what happens if you exceed it.

What happens to your interest if rates drop

If you have a high-yield savings account or money market account, the bank can lower your rate at any time without penalty. You can then move your money to a different bank offering a higher rate. This is why rates on savings accounts fluctuate — they are tied to what the Federal Reserve does with interest rates.

A CD protects you from this: once you buy a CD at 5%, that rate is locked in for the full term, even if rates drop to 2%. This is valuable if you think rates are about to fall. However, if rates rise to 6%, you are stuck earning 5% unless you pay the early withdrawal penalty.

Tax implications of earning 5% interest

Interest you earn on savings accounts, money market accounts, and CDs is taxable income. If you earn $500 in interest during the year, you must report it on your tax return. The bank will send you a 1099-INT form in January showing how much interest you earned.

The tax you owe depends on your income tax bracket. If you are in the 22% bracket, earning $500 in interest means you owe about $110 in federal income tax on that interest. State income tax may apply as well, depending on where you live. This is why the real return on your money is the interest rate minus your tax rate — a 5% return in a 22% tax bracket is closer to 3.9% after taxes.

Frequently Asked Questions

Is my money safe in a high-yield savings account at an online bank?

Yes, as long as the bank is FDIC-insured. Check the bank's website or the FDIC's bank search tool to confirm. Your money is protected up to $250,000 per account. Online banks are regulated the same way as traditional banks and must follow the same safety rules.

Can I withdraw money from a high-yield savings account whenever I want?

Yes, you can withdraw anytime without penalty. Transfers to another bank take 1 to 3 business days. Some banks let you link a debit card for faster access, though the interest rate may be slightly lower on accounts with debit cards.

What is the difference between APY and interest rate?

APY (annual percentage yield) includes the effect of compounding — earning interest on your interest. Interest rate is the base rate. If a bank compounds interest daily, the APY will be slightly higher than the stated interest rate. Always compare APYs, not interest rates, to see what you actually earn.

If I buy a 1-year CD at 5%, what happens when it matures?

When the CD matures, the bank deposits your principal plus interest into your account. You then have a grace period (usually 7 to 10 days) to decide what to do next. You can move the money to a savings account, buy another CD, or withdraw it. If you do nothing, many banks automatically renew the CD at the current rate, which may be higher or lower than 5%.

Do I need a minimum deposit to open a high-yield savings account?

Most online banks require $0 to $25 to open. Some require $1,000 or more. Check the specific bank's requirements before opening. Even if there is a minimum deposit, you can usually add more money later without restriction.