What makes a savings account interest rate "good" depends on what other banks are offering right now
There is no fixed number that makes an interest rate good or bad. A rate that was competitive six months ago might be below average today. The only real measure is how your rate compares to what other banks are currently paying on the same type of account.
Right now, you can find the current rates offered by major banks and online banks by visiting their websites directly or checking rate-tracking sites like Bankrate, DepositAccounts, or the Federal Reserve's data. Write down the rates you find, then compare your own bank's rate to those numbers. If your rate is lower than what at least half the banks you checked are offering, you are earning less than the market average.
The gap between a good rate and a poor rate can add up quickly. On a $10,000 balance, the difference between 0.01% and 4.5% annual interest is roughly $450 per year. Over five years, that same difference compounds to more than $2,300 in lost earnings.
Key Takeaways
- Interest rates change constantly, so a good rate today may not be good in three months — check your bank's current rate against competitors' rates regularly.
- Online banks typically offer higher rates than brick-and-mortar banks because they have lower overhead costs.
- The difference between a 0.01% rate and a 4.5% rate on $10,000 is roughly $450 per year in lost interest.
- Your money is insured up to $250,000 by the FDIC regardless of the interest rate, so a lower rate does not mean less safety.
- If your current bank's rate is in the bottom third of what you find when you search, moving your money to a higher-paying account usually takes less than a week.
Why online banks usually pay more than traditional banks
Online banks have no physical branches, no tellers, and no building leases. Those savings get passed to customers as higher interest rates. A traditional bank with hundreds of locations might offer 0.01% to 0.05% on a savings account. An online bank with no branches might offer 4% to 5% on the same type of account.
The trade-off is convenience. You cannot walk into an online bank and withdraw cash or talk to someone in person. You manage your account through a website or app, and transfers take one to three business days. For most people saving money rather than accessing it constantly, this trade-off is worth the higher rate.
Some traditional banks have started raising their rates to compete, especially if they also offer online banking. But most still lag behind online-only competitors. If your current bank is offering less than 1% on a savings account, you are almost certainly earning less than you could elsewhere.
How to track whether your rate stays competitive over time
Interest rates move in response to decisions by the Federal Reserve, which sets a target range for short-term lending rates. When the Fed raises its target, banks tend to raise savings account rates. When the Fed cuts rates, banks cut savings rates. These changes do not happen instantly — some banks move faster than others.
Set a reminder to check your bank's rate against competitors' rates every three months. You can do this in fifteen minutes by visiting three or four bank websites and writing down their current rates. If your rate has fallen more than 0.5% below the average of what you find, contact your bank and ask whether they plan to raise it. Some banks will match a competitor's rate if you ask.
If your bank will not raise your rate and you have found a significantly higher rate elsewhere, moving your money is straightforward. You open a new account at the higher-paying bank, transfer your balance, and close the old account. The entire process usually takes less than a week, and your money stays insured by the FDIC throughout.
The relationship between interest rates and account safety
A lower interest rate does not mean your money is less safe. All deposits in a savings account at an FDIC-insured bank are protected up to $250,000, regardless of whether the bank pays 0.01% or 5%. The FDIC insurance is the same whether you bank at a giant traditional bank or a small online bank.
Some people worry that online banks offering very high rates must be risky. This is not how it works. An online bank can afford to pay 4.5% because it has almost no operating costs, not because it is taking dangerous risks with your money. Before opening an account anywhere, you can verify that the bank is FDIC-insured by searching the FDIC's Bank Find tool on their website.
When a higher rate might not be worth the switch
If you have a very small balance — under $1,000 — the difference in interest earnings is small enough that convenience might matter more than rate. The difference between 0.01% and 4.5% on $500 is about $22 per year. If your current bank is more convenient or you use it for other services, staying put might make sense.
If you are planning to withdraw the money within a few months, interest earnings will be minimal no matter what rate you get. Interest compounds over time, so the longer your money sits, the more the rate matters. A six-month timeline is too short for rate differences to add up significantly.
Some banks offer promotional rates that are high for a limited time, then drop to a lower standard rate. Read the fine print before opening an account. A 5% rate that drops to 0.5% after three months is not as good as a steady 4% rate.
How to find the current best rates
Start by checking the websites of the largest online banks: Marcus by Goldman Sachs, Ally Bank, American Express Personal Savings, and Discover Bank. These are all FDIC-insured and have no monthly fees. Write down their current rates.
Then check one or two rate-tracking sites like Bankrate or DepositAccounts to see whether any smaller banks are offering higher rates. These sites update daily and let you filter by account type and FDIC insurance status.
Finally, check your current bank's website to see what rate you are actually earning. Many people do not know their own rate because banks do not advertise it prominently. Log into your account or call customer service and ask for your current annual percentage yield (APY).
Once you have three to five rates written down, you can see where you stand. If your current rate is in the top third, you are doing well. If it is in the bottom third, moving your money could earn you hundreds of dollars per year.
What happens to your interest if rates fall
If the Federal Reserve cuts rates, your bank will eventually cut the interest it pays on savings accounts. This happens to everyone — there is no way to lock in a high rate permanently. When rates fall, your earnings go down, but your money is still safe and still earning something.
This is why checking your rate every few months matters. If rates have fallen across the board, your bank's rate falling is normal. But if your bank's rate has fallen more than competitors' rates, you may have fallen behind and should consider moving your money.
Frequently Asked Questions
Is 4% interest good for a savings account right now?
Four percent is competitive with the best rates currently available from major online banks. Check what Marcus, Ally, and American Express are offering today — if they are at 4% or higher, your rate is good. If they are offering 4.5% or more and you are getting 4%, you could earn more elsewhere.
Should I move my money to a bank with a higher rate?
If the rate difference is more than 0.5% and you have at least $5,000 in the account, moving usually makes financial sense. The process takes less than a week, and your money stays insured throughout. Calculate the annual difference and decide whether it is worth the small inconvenience of switching.
Can my bank lower my interest rate without warning?
Yes. Banks can change savings account rates at any time without notice. This is why checking your rate every few months is important. You will not receive a notification that your rate has dropped — you have to look for it yourself.
What if I need the money in three months?
Interest earnings over three months will be small no matter what rate you get. On $10,000 at 4.5%, you would earn about $112 in three months. If your current bank is more convenient, staying put probably makes more sense than switching for a small amount of interest.
Do I lose FDIC protection if I move to a bank with a higher rate?
No. All FDIC-insured banks protect your deposits up to $250,000 equally. You can verify that any bank is FDIC-insured by searching the FDIC's Bank Find tool before you open an account. The insurance does not depend on the interest rate the bank pays.