Savings rates are falling, but they remain higher than they were before 2022

Savings account interest rates have been declining since mid-2023, when the Federal Reserve stopped raising its benchmark interest rate. The highest rates available on savings accounts and money market accounts have dropped from around 5.35% in mid-2023 to roughly 4.5% to 5.0% as of late 2024, depending on the bank and account type. Rates continue to move downward, though the pace has slowed.

The direction of rates depends on what the Federal Reserve does next. If the Fed cuts its benchmark rate further, savings rates will fall. If the Fed holds steady or raises rates, savings rates may stabilize or tick upward. Banks set their own rates based on the Fed's moves, but they do not move in lockstep — some banks cut rates faster than others, and some hold higher rates longer to attract deposits.

The practical effect: if you opened a savings account in 2023 when rates peaked, your rate has likely dropped. If you are shopping for a new account now, you will earn less than you would have a year ago, but still more than you would have earned in 2021 or earlier.

Key Takeaways

  • Savings rates have fallen from their 2023 peak of around 5.35% to current rates between 4.5% and 5.0%, and are expected to continue declining if the Federal Reserve cuts rates further.
  • Your existing savings account rate may have dropped if your bank lowered it, though some banks hold promotional rates longer than others.
  • Online banks and credit unions typically offer higher rates than traditional brick-and-mortar banks, even as rates fall across the industry.
  • Rate changes happen on the bank's schedule, not yours — you can shop for a better rate and move your money, but you cannot force your current bank to match competitors.

Why rates rise and fall with Federal Reserve decisions

The Federal Reserve sets a target range for the federal funds rate, which is the interest rate banks charge each other for overnight loans. This rate influences everything downstream, including what banks pay you on savings. When the Fed raises its rate, banks have more incentive to pay higher rates on deposits to attract money. When the Fed cuts its rate, banks have less incentive to compete for deposits, so they lower what they pay you.

From March 2022 to July 2023, the Fed raised its benchmark rate nine times, pushing it from near zero to 5.25% to 5.50%. During that period, savings rates climbed steeply. Since July 2023, the Fed has cut rates three times (as of late 2024), and savings rates have fallen in response. The lag between a Fed move and a bank's response varies — some banks adjust within days, others wait weeks or months.

This is why timing matters if you are moving money between accounts. A rate you see today may not be the rate you see in three months, and locking in a rate now protects you only if your bank does not lower it later (which they can do, usually with notice).

How to find the highest rates available right now

Online banks consistently offer the highest savings rates because they have lower overhead than physical branches. As of late 2024, online banks and online divisions of traditional banks offer rates in the 4.5% to 5.0% range on high-yield savings accounts, while brick-and-mortar banks typically offer 0.01% to 0.5%. Credit unions sometimes match or beat online bank rates, especially if you are a member of a large credit union network.

Money market accounts and certificates of deposit (CDs) may offer slightly different rates than savings accounts at the same bank. A CD locks your money for a set term (three months to five years, typically) in exchange for a may provide rate. A money market account works like a savings account but may require a higher minimum balance and offer check-writing privileges. Compare all three at the banks you are considering, because the highest rate is not always on the savings account.

Rate comparison sites show current rates across multiple banks, but they update at different intervals — some daily, some weekly. Call the bank directly or log into their website to confirm the rate before you move money, because advertised rates can change between when a site updates and when you open the account.

What happens to your rate if you already have an account

If you opened a savings account when rates were high, your rate has likely dropped. Banks lower rates on existing accounts without your permission, though they must notify you in advance (usually 30 days). You will see the new rate reflected in your next statement or in your online account dashboard.

You have no obligation to stay with your current bank if the rate drops. You can open a new account elsewhere and transfer your balance. The only cost is your time — there is no fee to move money between banks, though it typically takes three to five business days for an ACH transfer to complete. Some banks offer a grace period where they hold the old rate for a few weeks after you open the account, but this is rare and not may provide.

If you want to stay with your current bank, you can ask whether they offer a promotional rate or a higher-tier account with better terms. Some banks have tiered savings accounts where you earn more if you maintain a higher balance. It is worth asking, but do not expect the bank to match a competitor's rate — they usually will not.

The difference between falling rates and a falling Fed rate

These are related but not identical. The Federal Reserve's benchmark rate is what the Fed controls. Savings account rates are what banks choose to pay you, based partly on the Fed's rate and partly on how much they need deposits. When the Fed cuts its rate, savings rates usually fall, but not always by the same amount or on the same timeline.

For example, if the Fed cuts its rate by 0.25%, a bank might cut savings rates by 0.25%, or by 0.50%, or by nothing at all (at least for a few weeks). Banks that are flush with deposits may cut rates aggressively because they do not need to attract more money. Banks that are short on deposits may hold rates steady or cut them slowly to keep customers.

This is why you see different rates at different banks even when the Fed's rate is the same. It is also why shopping around matters — the bank paying 5.0% today might pay 4.5% in three months, while a competitor might still pay 4.8%. Rates move independently, and the best deal changes.

How to protect yourself if rates keep falling

If you believe rates will continue to fall, a CD locks in today's rate for a set period. A one-year CD at 4.5% to 4.8% guarantees that rate for 12 months, even if savings rates drop to 3.0% by next year. The tradeoff is that your money is locked up — you cannot withdraw it without paying an early withdrawal penalty, usually a few months of interest.

A CD ladder spreads your money across multiple CDs with different maturity dates (three months, six months, one year, two years). As each CD matures, you can renew it at the current rate or move the money to a savings account. This gives you flexibility if rates rise unexpectedly, and it ensures you are not stuck with a low rate if rates fall sharply.

For money you need to access regularly, a high-yield savings account remains the best option because you can withdraw anytime without penalty. The rate will drop as the Fed cuts, but you will not be locked into a low rate if the Fed reverses course and raises rates again.

Frequently Asked Questions

Will savings rates go back up?

Rates will rise if the Federal Reserve raises its benchmark rate, which happens when inflation picks up or the economy overheats. The Fed cannot predict this far in advance, and neither can banks. If you need certainty, a CD locks in today's rate. If you can tolerate uncertainty, a savings account lets you benefit if rates rise again.

Should I move my money to a different bank right now?

If your current bank is paying less than 4.0% and online banks are paying 4.5% or higher, moving makes sense — you will earn more interest with no risk or cost. If your current rate is competitive (within 0.25% of the best available), moving may not be worth the effort. Check what your bank is paying, compare it to three online banks, and decide based on the difference.

Do I lose money if my rate drops?

No. Your principal (the money you deposited) stays the same. You simply earn less interest going forward. If you had $10,000 earning 5.0% and the rate drops to 4.0%, you earn $100 less per year, but you still have your $10,000.

What if I lock money in a CD and rates go up?

You are stuck with the CD rate until it matures. If you need the money early, you pay an early withdrawal penalty. If you can wait, the CD matures and you can open a new one at the higher rate. This is the tradeoff of a CD — certainty now, but no flexibility if conditions change.

Are money market accounts better than savings accounts?

Money market accounts often pay slightly higher rates than savings accounts at the same bank, but they usually require a higher minimum balance and limit how many times you can withdraw per month. If you do not need frequent access and can meet the minimum, a money market account may pay more. Otherwise, a savings account is simpler.