1% APY is below what most banks offer today, but whether it's "good" depends on what you're comparing it to

A 1% annual percentage yield (APY) on a savings account is not competitive with what online banks and credit unions currently offer. As of now, many online savings accounts pay between 4% and 5.35% APY, and some money market accounts go higher. If your bank is paying you 1%, you're earning roughly one-fifth of what you could get elsewhere for the same deposit.

That said, 1% is still better than keeping cash in a checking account (which typically pays 0% to 0.01%) or under your mattress. The real question is whether you're staying with a bank that's paying you less than the market rate, and if so, why.

Key Takeaways

  • Online banks and credit unions currently pay 4% to 5.35% APY on savings accounts, making 1% significantly below market rate.
  • Big national banks often pay 1% or less because they rely on branch networks and checking account customers, not on competing for savings deposits.
  • Moving money to a higher-paying account takes 5 to 10 minutes and costs nothing, but you'll lose access to your current bank's branch network.
  • The difference between 1% and 5% on $10,000 is roughly $400 per year, so the move pays for itself quickly if you have substantial savings.
  • Rate changes happen frequently, so the best rate today may not be the best rate in six months—but switching is free and can be done anytime.

Why big banks pay so little

National banks like Chase, Bank of America, and Wells Fargo pay 1% or less on savings accounts because they don't need to compete for your savings. They make money from checking account fees, overdraft fees, mortgage origination, and investment products. Your savings account is almost an afterthought.

Online banks have no branches, no tellers, and no physical overhead. They compete almost entirely on interest rate. That's why they can afford to pay 5% when a brick-and-mortar bank pays 1%. The money you deposit goes straight into lending and investments, and the bank passes more of the profit back to you as interest.

Credit unions operate on a membership model and often prioritize member returns over shareholder profit, which also allows them to offer higher rates. If you're at a big national bank paying 1%, you're essentially subsidizing their branch network and their other business lines with your savings.

What 1% actually costs you over time

The gap between 1% and 5% looks small until you do the math. On $10,000, the difference is $400 per year. On $50,000, it's $2,000 per year. On $100,000, it's $4,000 per year.

That money compounds. If you leave $50,000 in a 1% account for five years, you'll earn roughly $2,550 total. In a 5% account, you'll earn roughly $13,600. The difference is over $11,000—money that belongs to you, not the bank.

The longer your money sits, the more the rate difference matters. Even if rates drop in the future, you'll still come out ahead by switching now rather than staying put.

How to find what's available right now

Savings account rates change weekly, sometimes daily. The best way to see what's currently available is to check a rate comparison site that updates frequently, or go directly to online banks' websites. Look for high-yield savings accounts (HYSA), which are standard savings accounts with higher rates—not a special product.

Common banks offering competitive rates include Ally, Marcus, American Express Personal Savings, Wealthfront Cash Account, and many credit unions. Rates vary slightly by bank and can depend on your deposit amount, though most don't have minimums. Some banks offer slightly higher rates if you set up automatic transfers or maintain a certain balance, but the difference is usually small.

Check the fine print for any restrictions: some accounts limit how many withdrawals you can make per month (though this is less common now), and some require a minimum opening deposit. Most online banks let you open an account in 10 minutes with just an email and a routing number from your current bank.

Moving money from a 1% account to a better rate

Switching is free and takes about 5 to 10 minutes. You'll need your current bank's routing number (on your checks or their website) and your account number. The new bank will ask for this information and can pull your money directly—you don't have to do anything on the old bank's end.

The transfer usually takes 1 to 3 business days. During that time, your money is in transit and earning nothing, but the lost interest is negligible. Once it lands in the new account, it starts earning the higher rate immediately.

You can keep your old account open or close it. Closing costs nothing, but some people keep a small balance in their original bank for convenience (to deposit checks at a branch, for example). There's no penalty for having accounts at multiple banks.

What happens if rates drop

Savings account rates are not locked in. Banks can lower them anytime, and they often do when the Federal Reserve cuts its benchmark rate. If you move to a 5% account and rates drop to 3%, you're still ahead of where you started at 1%—and you can always move again if a better rate appears elsewhere.

Rate shopping is a normal part of managing savings. People who take it seriously check rates every few months and move money when a significantly better option emerges. There's no loyalty bonus for staying, and no penalty for leaving, so there's no reason not to chase the best available rate.

The trade-off: convenience versus money

The main downside to leaving a big national bank is losing branch access. If you regularly deposit cash or checks in person, an online bank won't work for you—you'd need a credit union or a bank with branches. But if you deposit by phone, mail, or mobile app, branch access doesn't matter.

Some people also value having all their accounts in one place. If you have a mortgage, credit card, and checking account at Chase, moving your savings to Ally means logging into two different websites. That's a minor inconvenience, but it's real.

For most people, the extra $400 to $4,000 per year is worth the small hassle of managing two banks. But if you value simplicity and don't have much in savings, staying at 1% might be the right choice for you.

Frequently Asked Questions

Will moving my money to a new bank hurt my credit score?

No. Opening a savings account does not trigger a hard inquiry and does not affect your credit. Banks may do a soft check to verify your identity, but this doesn't show up on your credit report and has no impact on your score.

Is my money safe in an online bank?

Yes, as long as the bank is FDIC-insured. Check the bank's website for the FDIC logo and insurance confirmation. Your deposits are protected up to $250,000 per account, the same as at any other FDIC bank. Online banks are regulated the same way as brick-and-mortar banks.

Can I move my money back if I change my mind?

Yes. Transferring money out of a savings account is free and takes 1 to 3 business days, just like moving it in. You can move your money as many times as you want. There are no penalties or fees for switching banks.

What if the rate drops right after I move my money?

You're still ahead. Even if a 5% rate drops to 3% next month, you've already earned interest at 5% for that month, and you're still earning more than the 1% you started with. You can also move to a different bank if an even better rate appears.

Do I need a minimum balance to get the advertised rate?

Most online banks do not require a minimum balance to earn the full advertised rate. Some credit unions do. Check the specific bank's terms before opening an account, but generally, you can open with $1 and earn the full rate immediately.