High-yield savings accounts currently pay the most interest
A high-yield savings account (HYSA) pays more interest than a standard savings account at a traditional bank. Right now, high-yield accounts at online banks pay between 4% and 5.35% annual percentage yield (APY), while brick-and-mortar banks typically offer 0.01% to 0.05% APY on regular savings accounts. The difference matters: on $10,000, a high-yield account earning 5% pays you $500 per year, while a traditional bank account earning 0.01% pays $1.
High-yield accounts work the same way as regular savings accounts—you deposit money, it sits there, and the bank pays you interest monthly or daily. The reason online banks pay more is that they have lower overhead costs than physical branches. They pass some of that savings to you as higher interest rates. Your money is insured the same way: up to $250,000 per account holder per bank through the Federal Deposit Insurance Corporation (FDIC).
Interest rates change constantly, sometimes weekly. The rate you see today may be lower next month or higher. Banks adjust rates based on what the Federal Reserve does with its benchmark interest rate. When the Fed raises rates, banks tend to raise savings rates too. When the Fed cuts rates, savings rates fall.
Key Takeaways
- High-yield savings accounts at online banks currently pay 4% to 5.35% APY, compared to 0.01% to 0.05% at traditional banks.
- You earn interest on your balance every month or every day, depending on the bank's compounding schedule, and the money stays accessible whenever you need it.
- FDIC insurance protects up to $250,000 per account holder per bank, so your money is safe even if the bank fails.
- Interest rates change based on Federal Reserve decisions, so the rate you lock in today will likely be different in six months.
- Money market accounts and certificates of deposit (CDs) may pay slightly more than high-yield savings, but they restrict how often you can withdraw.
How to compare rates across banks
Start by checking the current rates at online banks that offer high-yield savings. Banks like Marcus, Ally, American Express Personal Savings, and Capital One 360 publish their rates on their websites. Write down the APY, the minimum deposit required (if any), and whether the rate is promotional or permanent. A promotional rate might be 5.35% for the first three months, then drop to 4.5%—read the fine print.
Next, check what the rate actually means for your money. APY accounts for compounding, so a 5% APY means you earn 5% per year whether the bank compounds daily, monthly, or quarterly. Daily compounding is slightly better than monthly, but the difference on most balances is small. A $10,000 balance earning 5% APY compounds to $10,500 in one year regardless of the compounding frequency.
Look at fees. Most high-yield savings accounts have no monthly maintenance fee, no minimum balance fee, and no fee for transfers. If a bank charges a monthly fee or requires a $25,000 minimum, the higher interest rate may not be worth it. Confirm that the bank allows unlimited transfers out—some banks limit how many times per month you can move money without a fee, though federal rules on this have loosened.
Money market accounts and CDs pay more but with strings attached
A money market account is a hybrid between a checking account and a savings account. It typically pays slightly higher interest than a high-yield savings account—sometimes 5.5% to 5.75% APY—but it usually comes with a debit card and check-writing privileges. The catch: many money market accounts limit how many withdrawals you can make per month (often six), and some require a higher minimum balance to open.
A certificate of deposit (CD) locks your money away for a set period—three months, six months, one year, five years—and pays a fixed interest rate for that entire time. Right now, one-year CDs pay around 4.5% to 5.5% APY, and five-year CDs pay around 4% to 4.75%. The longer you lock the money away, the rate may go up or down depending on the bank. The trade-off is clear: you cannot touch the money without paying an early withdrawal penalty, usually three to six months of interest.
CDs make sense if you know you will not need the money for a specific period and want to lock in a rate before rates fall. High-yield savings accounts make sense if you might need the money sooner or want the flexibility to move it if rates drop at your current bank.
What happens when interest rates fall
When the Federal Reserve cuts its benchmark rate, banks lower their savings rates within days or weeks. A high-yield account paying 5.35% today might pay 4.5% in three months if the Fed cuts rates. This is not the bank being greedy—it is how the market works. Banks earn money by lending out deposits at higher rates than they pay you. When lending rates fall, they lower deposit rates too.
If you have money in a high-yield savings account and rates start falling, you have already locked in the current rate for as long as your money sits there. You do not lose the rate you have now. But any new deposits you make will earn the new, lower rate. If you have money in a CD, your rate is locked for the entire term—you keep earning the same rate even if the bank's new CDs pay less.
This is why some people "ladder" CDs: they open multiple CDs with different maturity dates so that part of their money matures every few months and can be reinvested at whatever the current rate is. It is a way to balance the safety of a locked rate with the flexibility to move money if rates change.
Banks that currently offer the highest rates
As of now, these online banks consistently rank at the top for high-yield savings rates, though rates change frequently and vary slightly by account type:
| Bank | Typical High-Yield Savings APY | Minimum Deposit | FDIC Insured |
|---|---|---|---|
| Marcus by Goldman Sachs | 4.70%–5.35% | $0 | Yes |
| Ally Bank | 4.20%–5.35% | $0 | Yes |
| American Express Personal Savings | 4.30%–5.35% | $0 | Yes |
| Capital One 360 | 4.20%–4.75% | $0 | Yes |
| Discover Bank | 4.35%–5.35% | $0 | Yes |
These rates are examples and change regularly. Check each bank's website directly for the current rate before opening an account. Some banks offer slightly different rates depending on your account type or deposit amount, so read the terms carefully.
Why your current bank probably pays less
If you have a savings account at a traditional bank—Chase, Bank of America, Wells Fargo, or a local credit union—it likely pays 0.01% to 0.05% APY. This is not because the bank is stealing from you; it is because traditional banks have physical branches, employees, and higher costs. They pass those costs to customers through lower interest rates and monthly fees.
Credit unions sometimes pay slightly higher rates than big banks, but usually still lower than online high-yield accounts. Credit unions are member-owned and nonprofit, so they may offer better rates on savings and lower rates on loans. If you belong to a credit union, check their savings rate—it might be worth comparing to an online bank.
Some people keep money at a traditional bank for convenience: they like having a physical branch to visit, or they use the bank's checking account and want everything in one place. That is a valid choice, but it costs you money in lost interest. On a $50,000 balance, the difference between 0.05% at a traditional bank and 5% at a high-yield account is $2,475 per year.
How to move money from your current bank to a high-yield account
Opening a high-yield savings account takes 10 to 15 minutes online. You will need your Social Security number, a government ID, your current address, and a way to fund the account (usually a bank transfer from your existing account). Most online banks let you link your current checking account and transfer money electronically within one to three business days.
You do not have to close your current bank account. Many people keep a checking account at their traditional bank for bills and everyday spending, and open a high-yield savings account at an online bank for money they want to save. This way you earn more interest on savings while keeping the convenience of a local branch for deposits and withdrawals.
If you want to move all your money at once, set up the transfer through your new bank's website. Most online banks have a feature to link your old account and pull money over automatically. Keep your old account open for at least a month to make sure all transfers go through, then close it if you want.
Frequently Asked Questions
Can I lose money in a high-yield savings account?
No. Your balance cannot go down unless you withdraw money. Interest rates can fall, so you earn less interest than before, but your principal is safe. FDIC insurance protects up to $250,000 per account holder per bank if the bank fails.
What is the difference between APY and APR?
APY (annual percentage yield) includes compounding, so it shows the actual amount you will earn in a year. APR (annual percentage rate) does not include compounding. For savings accounts, always look at APY because it is the real number.
If I open a CD, can I take my money out early?
Yes, but you will pay an early withdrawal penalty, usually three to six months of interest. If you open a one-year CD at 5% and withdraw after six months, you might lose $250 in interest (half of the annual $500). Check the bank's terms before opening a CD.
Do I have to pay taxes on savings account interest?
Yes. Interest earned on savings accounts is taxable income. The bank will send you a 1099-INT form at the end of the year if you earned $10 or more in interest. Report this on your tax return as ordinary income.
What happens if the bank goes out of business?
The FDIC takes over and pays you up to $250,000 of your balance. This has happened to hundreds of banks over the years, and depositors have always been paid in full up to the insurance limit. Your money is safer in an FDIC-insured account than it is under your mattress.