What's happening to savings rates this year

Savings account interest rates move when the Federal Reserve changes its benchmark rate, which it last raised in July 2023. Since then, the Fed has held rates steady, and banks have begun lowering the rates they offer on savings accounts. If you opened a high-yield savings account in late 2023, you likely saw rates around 4.5% to 5.35%. Those same accounts now pay between 4% and 5%, depending on the bank and the current month.

The direction of rates depends on what the Fed does next. If the Fed cuts rates, banks will cut savings rates further. If the Fed holds steady, rates may stay roughly where they are or decline slowly. If the Fed raises rates again, savings rates could climb. The Fed meets eight times per year to decide, and you can watch their announcements on the Federal Reserve's website.

The short answer: rates are not going up right now. They are either flat or declining slightly, depending on which bank you use and when you last checked.

Key Takeaways

  • Savings rates have fallen from their 2023 peak of 5%+ because the Federal Reserve has not raised rates since July 2023 and has signaled future cuts.
  • Your rate depends on your bank's decision, not just the Fed rate—some banks cut rates faster than others, and some hold rates longer to attract customers.
  • High-yield savings accounts still pay more than traditional savings accounts, even as rates decline, because they pass Fed rate changes to customers more quickly.
  • You can lock in a current rate by moving money to a high-yield savings account today, but that rate will likely fall over the next months if the Fed cuts rates.
  • Money market accounts and certificates of deposit (CDs) offer different rate structures—CDs lock in a rate for a set term, while money market rates adjust like savings accounts.

Why rates fell from their 2023 peak

In 2022 and early 2023, the Federal Reserve raised its benchmark rate aggressively to fight inflation. Banks responded by raising savings rates to attract deposits. By October 2023, some high-yield savings accounts paid 5.35% or higher. That was the peak.

The Fed stopped raising rates in July 2023 and has held steady since. When the Fed stops raising, banks no longer have a reason to compete for deposits by raising rates. Instead, they begin lowering rates to protect their profit margins. A bank that pays 5% on savings but can only lend money at 6% makes almost no profit. When rates stop rising, banks cut what they pay depositors.

Additionally, the Fed has signaled that it may cut rates in the coming months if inflation continues to fall. Banks anticipate these cuts and lower rates preemptively, because they know they will have to cut anyway once the Fed moves.

How to compare rates across banks right now

Savings rates vary by bank because each bank sets its own rate. A large national bank like Chase or Bank of America typically pays 0.01% to 0.05% on a regular savings account. Online banks like Marcus, Ally, and American Express Personal Savings pay 4% to 4.5% on high-yield savings accounts. Credit unions sometimes offer rates in between, depending on the union and your membership status.

To find the current highest rate, visit a rate-tracking site like Bankrate, DepositAccounts, or the FDIC's National Information Center. These sites update daily and let you filter by account type and bank. Write down the top three rates and check the banks' websites directly to confirm the rate applies to your deposit amount—some banks pay higher rates only on balances above $100,000.

The difference between a 4% account and a 4.5% account matters over time. On $10,000, the difference is $50 per year. On $100,000, it is $500 per year. If you have money sitting in a 0.05% account at a big bank, moving it to a 4.5% high-yield account costs nothing and takes one business day.

What happens if the Fed cuts rates

If the Federal Reserve cuts its benchmark rate, banks will cut savings rates within days or weeks. A typical pattern: the Fed cuts by 0.25%, and within one to two weeks, most online banks cut their savings rates by 0.25% as well. Some banks cut faster, some slower. A few banks hold rates steady for a month or two to attract customers, but eventually they cut.

This means a 4.5% rate today could become 4.25% within weeks of a Fed cut. Over a year, that costs you $25 per $10,000 in lost interest. If you expect the Fed to cut rates soon, locking in a rate today by moving money to a high-yield account still makes sense—you capture the current rate before it falls. But you should not expect the rate to stay at 4.5% for a full year.

Certificates of deposit (CDs) work differently. When you open a CD, the bank locks in your rate for the full term—three months, six months, one year, or longer. If you open a one-year CD at 4.5% today, you earn 4.5% for the full year, even if the Fed cuts rates and savings accounts drop to 3%. This is why CDs are useful when you expect rates to fall.

How savings rates compare to other account types

High-yield savings accounts, money market accounts, and CDs all pay interest, but they work differently. A high-yield savings account lets you deposit and withdraw money anytime, and the rate adjusts when the Fed or your bank makes a change. A money market account is similar but may require a higher opening balance and limits how many withdrawals you can make per month. A CD locks in a rate for a set term and penalizes you if you withdraw early.

Right now, high-yield savings accounts and money market accounts pay roughly the same rate—around 4% to 4.5%. CDs pay slightly higher rates because you give up access to your money. A one-year CD might pay 4.6% to 4.8%, while a high-yield savings account pays 4.3% to 4.5%. The difference shrinks as rates fall overall.

If you need access to your money within the next year, a high-yield savings account is the right choice. If you know you will not touch the money for six months or a year, a CD locks in a higher rate and protects you if rates fall further.

When to move money between accounts

Moving money from a low-rate account to a high-rate account makes sense if the difference is more than 0.5%. If your current account pays 0.05% and a high-yield account pays 4.5%, the difference is 4.45%—move the money today. The transfer takes one to two business days, and you start earning the higher rate immediately.

If you are deciding between two high-yield accounts that both pay 4.3% to 4.5%, the difference is small enough that other factors matter: which bank's website is easier to use, whether they offer a debit card, or whether you already bank there. A 0.2% difference on $10,000 is $20 per year—not worth switching if it means learning a new bank's system.

Timing matters less than you might think. Some people wait for the Fed to cut rates before moving money, hoping to lock in a rate before it falls. But rates fall gradually, and the difference between moving today and moving in two weeks is usually $5 to $10 on a $10,000 balance. If you have money in a low-rate account, move it now rather than waiting for a perfect moment.

Frequently Asked Questions

Will savings rates go back up to 5% or higher?

Only if the Federal Reserve raises rates again, which would happen if inflation spikes. The Fed's current plan is to hold rates steady or cut them, so rates are more likely to fall than rise over the next year. If you want to lock in a rate above 4.5%, do it now, because rates may not return to that level for several years.

Should I move money to a CD if I think rates will fall?

Yes, if you do not need the money for at least six months. A CD locks in your current rate for the full term, so you protect yourself against future cuts. If rates fall and you are stuck in a low-rate savings account, you lose money. A CD eliminates that risk, though you pay a penalty if you withdraw early.

Do all banks lower rates at the same time?

No. Large national banks cut rates faster because they have less competition for deposits. Online banks sometimes hold rates steady longer to attract customers. If your bank cuts rates but another bank does not, you can move your money. This is why checking rates monthly makes sense if you have a large balance.

What is the difference between APY and interest rate?

APY (annual percentage yield) includes the effect of compounding—interest earned on interest. Interest rate is the raw percentage. For savings accounts, APY is what matters because it shows what you actually earn over a year. Banks must display APY prominently, so use that number when comparing accounts.

Can I earn more by splitting money between multiple banks?

No. The rate you earn depends on the bank and account type, not on how much money you have or how many banks you use. Splitting $50,000 between two banks at 4.5% earns the same as keeping it all at one bank at 4.5%. The only reason to use multiple banks is if one bank's rate falls and another's stays high, or if you want to spread deposits across banks for FDIC insurance protection (each bank insures up to $250,000 per account holder).