What savings accounts pay right now

The interest rate on a savings account depends entirely on which bank you choose and what type of account you open. There is no single answer—rates vary from nearly zero at some large national banks to 4% or higher at online banks and credit unions. The rate your bank offers today may also change next month, because banks adjust rates based on what the Federal Reserve does and how much competition they face for deposits.

A high-yield savings account at an online bank typically pays more than a traditional savings account at a brick-and-mortar bank. As of early 2024, online banks were offering rates between 4% and 5.35% annual percentage yield (APY), while many large national banks were paying 0.01% to 0.05%. Credit unions often fall somewhere in between, though some offer competitive rates to their members. The difference matters: on $10,000, the gap between 0.01% and 4.5% is roughly $450 per year.

Your actual earnings also depend on how long you leave money in the account and whether the bank compounds interest daily, monthly, or quarterly. Daily compounding means you earn interest on your interest more often, which adds up over time—though the difference is small on accounts under $100,000.

Key Takeaways

  • Online banks and credit unions typically pay 4% to 5.35% APY on savings accounts, while large national banks often pay less than 0.1%.
  • Interest rates change regularly and vary by institution, so the rate you see today may be different next month.
  • The APY shown by a bank is the annual rate; your actual earnings depend on how much you deposit and how long you keep it there.
  • Daily compounding earns slightly more than monthly or quarterly compounding because interest accrues more frequently.
  • Money market accounts and certificates of deposit (CDs) may pay higher rates than savings accounts, but with different access rules.

Why rates differ between banks

Banks set their own savings rates based on three main factors: what the Federal Reserve's benchmark rate is, how much competition they face for deposits, and their own business model. Online banks typically pay more because they have lower overhead costs—no physical branches to maintain—so they can pass savings to customers. Large national banks often pay less because they rely on brand recognition and convenience rather than competitive rates to attract deposits.

When the Federal Reserve raises or lowers its benchmark rate, banks usually adjust their savings rates within days or weeks, though they do not always move in lockstep. Some banks raise rates quickly to attract new deposits but cut them slowly when rates fall. Others do the opposite. This is why checking your current rate and comparing it to other banks makes sense every few months, especially if rates have moved significantly.

How to calculate what you will earn

The APY listed by a bank is the rate you would earn if you left money untouched for a full year. To estimate your actual earnings, multiply your account balance by the APY as a decimal. For example, $5,000 at 4.5% APY earns roughly $225 in a year (5,000 × 0.045 = 225). If you deposit money partway through the year or withdraw it early, your earnings will be lower because the interest is calculated only on the balance you held for the full period.

Most banks calculate interest daily but credit it monthly or quarterly. This means your balance grows slightly each day, but you only see the total added to your account once a month or once every three months. The difference between daily and monthly compounding is small—usually a few dollars per year on typical account sizes—but it adds up over decades.

Some banks offer tiered rates, meaning the interest rate changes based on how much money you have in the account. A bank might pay 4.0% on balances up to $25,000 and 4.5% on balances above that. Read the fine print to see whether your rate will change if your balance crosses a threshold.

Savings accounts versus other deposit products

A regular savings account offers easy access to your money—you can withdraw it anytime without penalty—but the rate is usually lower than what you would get from a certificate of deposit (CD) or money market account. A CD locks your money away for a set term (three months, one year, five years) and pays a higher rate in exchange. If you withdraw early, you pay a penalty, usually equal to a few months of interest. A money market account sits between the two: it pays more than a savings account but less than a CD, and it allows limited withdrawals per month without penalty.

Choose a savings account if you need access to your money within the next few months or if you are building an emergency fund. Choose a CD if you know you will not need the money for a specific period and want to lock in a higher rate. Money market accounts work for people who want a higher rate but also want the flexibility to withdraw occasionally.

What happens when rates drop

When the Federal Reserve lowers its benchmark rate, banks typically cut their savings rates within one to four weeks. Your existing account rate may drop even if you do nothing—banks are not required to give advance notice, though many do. If your rate drops significantly and you have a large balance, it may be worth moving your money to a bank offering a higher rate. There is no penalty for moving money between savings accounts at different banks; the only cost is the time it takes to set up the transfer.

Some banks offer rate guarantees for a limited time, usually 30 to 90 days, meaning they promise not to lower your rate during that window. This can be useful if you expect rates to fall but want time to decide whether to move your money. Read the terms carefully—the may provide applies only to the rate, not to other fees or account features.

Fees that reduce your earnings

Even a high interest rate can be wiped out by account fees. Common charges include monthly maintenance fees ($5 to $15), overdraft fees ($25 to $35 per occurrence), and fees for falling below a minimum balance. Some banks charge fees for transfers or for using out-of-network ATMs. Before opening an account, check whether there are any monthly fees and what the minimum balance requirement is. Many online banks have no monthly fees and no minimum balance, which is why they are often the better choice for small savers.

If your account charges a $10 monthly fee and earns 4.5% APY on a $5,000 balance, the fee costs you $120 per year while interest earns you $225—so you net $105. The same account at a fee-free bank would net the full $225. Over time, fees compound in the opposite direction of interest, eating away at your earnings.

How to find the best rate for your situation

Start by listing what you need from a savings account: Do you need to access your money frequently, or can it sit untouched for months? Do you want to deposit a large lump sum or add small amounts regularly? Do you prefer banking online or in person? Once you know what matters to you, compare rates across online banks, credit unions, and traditional banks. Websites like Bankrate, DepositAccounts, and the Federal Deposit Insurance Corporation (FDIC) website list current rates at many institutions.

Check whether the bank is FDIC-insured (for banks) or NCUA-insured (for credit unions). This insurance protects your deposits up to $250,000 if the bank fails. Nearly all mainstream banks and credit unions carry this protection, but it is worth confirming before you move money. Once you have opened an account, revisit the rate every three to six months—if it has dropped significantly and other banks are paying more, moving your money takes less than an hour.

Frequently Asked Questions

Do I have to pay taxes on savings account interest?

Yes. Interest earned on a savings account is taxable income. Banks send you a 1099-INT form each January if you earned $10 or more in interest during the previous year. You report this on your tax return. The interest is taxed at your ordinary income tax rate, not at a special rate.

What is the difference between APY and APR?

APY (annual percentage yield) includes the effect of compounding and is what banks use for savings accounts. APR (annual percentage rate) does not include compounding and is used for loans and credit cards. For savings, always look at the APY, not the APR, because it shows what you will actually earn.

Can a bank lower my interest rate without warning?

Yes. Banks can change savings rates at any time without advance notice, though many send an email or letter a few days before the change takes effect. You have no contractual right to a fixed rate on a regular savings account. If your rate drops and you want a higher rate, you can move your money to another bank.

Is a high-yield savings account safe?

Yes, as long as the bank is FDIC-insured. Your deposits are protected up to $250,000 per account holder per bank. Online banks are just as safe as traditional banks—the only difference is that they have no physical branches. Check the FDIC website to confirm a bank's insurance status before depositing.

How often does interest get added to my account?

Most banks calculate interest daily but credit it monthly or quarterly. This means your balance grows every day, but you only see the total added once a month or once every three months. Some banks credit interest more frequently, but the difference in your earnings is small.