1% is below average for savings accounts in most market conditions

Whether 1% is good depends on what banks are offering at the moment you're looking. In late 2023 and 2024, when the Federal Reserve held interest rates high, many online banks offered 4% to 5.35% APY on savings accounts. A 1% rate during that period would be poor — you'd earn roughly $10 per year on a $1,000 balance while other banks paid $40 to $50 on the same amount.

But rates change. If the Federal Reserve cuts rates significantly, the best available rates might drop to 2% or 3%, making 1% genuinely low. Conversely, if rates fall to historic lows (as they did in 2020 and 2021), 1% might be competitive or even above average for traditional banks.

The practical question is not whether 1% is objectively good, but whether it's the best you can find right now. You can check current rates at any major online bank's website — they update daily — and compare them to what your current bank offers.

Key Takeaways

  • A 1% rate is typically below what online banks offer, though the gap shrinks when the Federal Reserve cuts rates.
  • Your current bank may pay 1% because it's a traditional brick-and-mortar institution with physical branches, which costs more to operate than online-only banks.
  • You can move money to a higher-rate account without closing your existing account, and the transfer usually takes three to five business days.
  • The difference between 1% and 4% on $10,000 is $300 per year, so comparing rates is worth the time if you keep a substantial balance in savings.

Why your bank might offer 1% when others offer more

Banks that operate physical branches — Chase, Bank of America, Wells Fargo, and most regional banks — typically pay lower rates on savings accounts. They use deposits to fund loans and other business lines, but they also spend money on buildings, tellers, and customer service staff. That cost structure means they can afford to pay less on savings.

Online-only banks like Marcus, Ally, and American Express Personal Savings have no branches. They pass the savings from lower overhead directly to depositors in the form of higher rates. They make money on loans and other products, not on the spread between what they pay you and what they charge borrowers.

If you bank with a traditional institution and see 1%, you're paying an implicit fee for the convenience of walking into a branch. That may be worth it to you — many people value in-person service — but it's useful to know the cost.

How to find what rates are available right now

Visit the savings account page of at least three online banks and note the APY they display. Marcus, Ally, American Express, and LendingClub all publish rates on their homepages without requiring you to log in. Write down the rate and the date you checked it.

Then check your current bank's website or call and ask what they pay on a regular savings account (not a money market account or CD). Compare the three numbers. If your bank is paying 1% and online banks are paying 3% or more, you're leaving money on the table.

Rates change frequently — sometimes weekly — so a comparison is only valid for a few days. But you don't need perfect timing. Moving $10,000 from 1% to 4% gains you $300 per year, and that advantage compounds over time even if rates fall later.

Moving money to a higher-rate account

You do not have to close your current account to open a savings account elsewhere. You can keep your checking account and debit card where they are and move only your savings to a bank with a better rate.

To transfer money, log into your new bank's website and look for "Link External Account" or "Add Bank Account." You'll enter your current bank's routing number and your account number (both appear on a check or in your online banking portal). The new bank will send two small test deposits to your account — usually $0.01 and $0.02 — within one to two business days. You verify the amounts in your online banking, and the link is confirmed.

Once linked, you can transfer money between accounts. Most transfers take three to five business days. Some online banks offer faster transfers for a fee, but standard transfers are free.

What happens to your money during a transfer

Your money is insured by the FDIC (Federal Deposit Insurance Corporation) up to $250,000 per account at each bank. If you're moving $50,000 from Bank A to Bank B, both banks are separate FDIC entities. Your $50,000 is fully protected at Bank A until it leaves, and fully protected at Bank B once it arrives. There is no gap in coverage.

During the transfer itself — the three to five business days when the money is in transit — it's still in your account at the sending bank and therefore still insured there. You can see the pending transfer in both accounts' online portals.

If the sending bank fails during the transfer, the FDIC protects your balance as of the date the bank closed. If the receiving bank fails after the money arrives, the FDIC protects it there. You cannot lose FDIC-insured funds due to a transfer.

When 1% might actually be reasonable

If the Federal Reserve has cut rates to near zero and online banks are offering 0.5% to 1.5%, then 1% is competitive. This happened in 2020 and 2021, when the Fed responded to the pandemic by lowering rates. In that environment, a 1% rate was above average.

You should also consider your own situation. If you keep less than $1,000 in savings and rarely add to it, the difference between 1% and 4% is $30 per year — small enough that the convenience of your current bank might outweigh it. If you keep $50,000 or more, the difference is $1,500 per year, and moving it makes financial sense.

Some people also value having all their accounts in one place for simplicity, even if it costs them interest. That's a valid choice, but it should be a deliberate one, not an accident of not knowing what rates are available.

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 credit inquiry and does not affect your credit score. Transferring money between banks is not a credit event. Your credit score only changes if you apply for credit (a loan, credit card, or line of credit) or if you miss payments on existing debt.

Can I keep my checking account where it is and move only savings?

Yes. You can have a checking account at one bank and a savings account at another. Many people do this to get the best rate on savings while keeping their paycheck deposited and bills paid from their original bank. You'll have two online portals to log into, but transfers between them are simple and free.

What if rates drop after I move my money?

You keep the rate you locked in when you opened the account, at least for a while. Banks can lower rates on existing accounts, but they usually give you notice (often 30 days) before doing so. If rates drop and your new bank lowers its rate, you can move the money again to a bank with a better rate. There's no penalty for moving savings accounts.

Is there a minimum balance required to get the advertised rate?

Most online banks advertise the same APY regardless of balance — $1 or $100,000 earns the same percentage. But some banks pay a lower rate on balances below a certain threshold (often $25,000). Check the fine print on the bank's website before opening an account, or call and ask what rate applies to your balance size.

How often does interest get added to my account?

Interest is usually compounded daily and deposited monthly. That means the bank calculates what you've earned each day, adds it to your balance, and pays out the total once a month. Some banks compound and pay quarterly or annually, which earns you slightly less because you don't earn interest on the interest as often. Ask your bank how often interest is compounded and paid.