3.7% APY is competitive, but only if you're comparing it to the right accounts

Whether 3.7% APY is good depends on what you're comparing it to. If you're looking at a traditional bank savings account, 3.7% is well above average—most brick-and-mortar banks offer 0.01% to 0.05%. If you're comparing it to high-yield savings accounts at online banks, 3.7% is on the lower end of the current range, which typically runs from 4.0% to 5.3% depending on the bank and the week you check.

The real question is whether 3.7% matches what's available right now in the market. Interest rates change frequently, sometimes weekly. A rate that was excellent six months ago may be below average today. Before you decide, check what other online banks are currently offering—this takes ten minutes and can mean hundreds of dollars over a year.

Key Takeaways

  • 3.7% APY beats traditional bank savings accounts by a large margin but falls below the current high-yield savings average of 4.0% to 5.3%.
  • Interest rates shift regularly, so a rate that was competitive three months ago may no longer be, and you should compare current offers before opening an account.
  • The difference between 3.7% and 4.5% on $10,000 is roughly $80 per year, which compounds over time.
  • Some banks offer promotional rates that are higher for a limited time, then drop—read the terms to know when your rate changes.
  • Moving money between accounts is free and takes one to three business days, so switching to a higher rate is a practical option if your current account falls behind.

How 3.7% compares to what banks are offering now

As of early 2024, online banks and credit unions typically offer high-yield savings accounts in the 4.0% to 5.3% range. Some offer rates at the higher end, others at the lower end. A few offer promotional rates above 5.3% for new customers, though these usually drop after three to six months. The variation depends on the bank's funding needs, competition in their market, and whether they're running a promotion.

3.7% sits below this range. It's not a bad rate—it's still far better than what you'd earn at Chase, Bank of America, or Wells Fargo—but it's not the best you can find. If you have $10,000 in savings, the difference between 3.7% and 4.5% is about $80 per year. Over five years, that gap widens to roughly $400 to $500 when you account for compounding.

The gap matters more if you're saving a larger amount or planning to leave the money untouched for years. For smaller balances or shorter timeframes, the difference is modest.

Why rates vary between banks and what affects yours

Banks set savings rates based on the Federal Reserve's benchmark rate, but they don't all move in lockstep. Online banks, which have lower overhead than traditional branches, typically offer higher rates because they pass savings on to customers. Credit unions sometimes offer competitive rates to members. Banks also adjust rates based on how much money they need to attract—if a bank is flush with deposits, it may lower its rate. If it needs more, it raises it.

Your specific rate can also depend on the account type. Some banks offer one rate for standard high-yield savings and a different rate for money market accounts. A few offer tiered rates, where you earn more on balances above a certain threshold. Read the account terms before you open—the advertised rate may not be the rate you actually get.

Promotional rates are another factor. A bank might offer 5.0% for the first three months to new customers, then drop to 3.8% after that. If you're comparing rates, check whether the offer is permanent or temporary.

When 3.7% is worth keeping, and when you should look elsewhere

Keep your money at 3.7% if you value other features more than a slightly higher rate. Some people prefer a bank they already use, or one with a physical branch nearby, or one with good customer service. If switching accounts would cost you more in convenience than you'd gain in interest, staying put makes sense.

Move your money if you have a large balance and plan to keep it there for years. On $50,000, the difference between 3.7% and 4.5% is $400 per year. Over three years, that's $1,200 to $1,300 before compounding. The transfer itself is free and takes one to three business days—there's no penalty for moving.

Also consider moving if your bank has dropped its rate recently and shows no sign of raising it again. Banks sometimes cut rates gradually, and customers who don't pay attention end up earning far less than the market average. Check your account terms once every three months to see if your rate has changed.

How to find the current best rates and compare them fairly

Start by visiting the websites of major online banks—Ally, Marcus, American Express Personal Savings, Wealthfront, and others. Write down the current rate each one is offering. Look for the APY, not the APR (they're the same for savings, but the label matters for clarity). Check whether the rate is promotional or permanent.

Also check your current bank's website to see what it's offering. You may find that your bank has a high-yield savings product you didn't know about, or that it's offering a promotional rate to existing customers.

When you compare, make sure you're looking at the same account type. A money market account at one bank may offer a different rate than a high-yield savings account at another. Also check the minimum balance requirement—some banks require $25,000 or more to earn the advertised rate.

Once you've found a better rate, opening an account takes about ten minutes online. You'll need your Social Security number, a government ID, and your current bank's routing number and account number to set up a transfer. The money usually arrives within one to three business days.

What happens to your rate if the Federal Reserve changes its benchmark

When the Federal Reserve raises or lowers its benchmark rate, banks typically adjust savings rates within days or weeks. If the Fed raises rates, your savings rate usually goes up. If the Fed cuts rates, your rate usually goes down. The lag between a Fed move and a bank's response varies—some banks move immediately, others wait a few days.

This matters because it means a rate that's good today may not be good in six months if the Fed cuts rates. Conversely, if the Fed raises rates, your 3.7% account may fall further behind. You can't predict Fed moves, but you can stay aware of them by checking financial news or your bank's website every few months.

The math: what 3.7% actually earns you

On $1,000, 3.7% APY earns you about $37 per year (before taxes). On $10,000, it's about $370. On $50,000, it's about $1,850. These are rough figures—the exact amount depends on how often interest compounds (usually daily) and whether you add or withdraw money during the year.

Compare this to 4.5% APY: on $10,000, that's about $450 per year, or $80 more. On $50,000, it's about $2,250, or $400 more. The difference grows over time because you earn interest on your interest.

Remember that interest is taxable income. You'll receive a 1099-INT form at tax time if you earn $10 or more in interest during the year. The tax you owe depends on your tax bracket, but it reduces your net earnings.

Frequently Asked Questions

Is 3.7% better than keeping money in a checking account?

Yes, significantly. Most checking accounts earn 0% to 0.01% interest. Savings accounts, even at 3.7%, earn far more. If you have money you won't need for a few months, moving it to a savings account is worth doing, even at 3.7%.

Should I move my money if my bank just dropped its rate to 3.7%?

Check what other banks are offering first. If they're offering 4.5% or higher, moving makes sense, especially if you have a large balance. If the gap is small (under 0.3%), staying put may be worth it for convenience. But if your bank is consistently below market, switching is worth the ten minutes it takes.

What if I need the money in a few months—does the rate matter as much?

Less, but it still matters. On $10,000 for three months, 3.7% earns about $92, while 4.5% earns about $112—a $20 difference. For larger amounts or longer timeframes, the gap widens. If you know you'll need the money soon, prioritize a bank with no withdrawal limits or fees.

Can I lock in a rate so it doesn't go down?

No. Savings account rates are variable, meaning the bank can change them anytime. Certificates of deposit (CDs) do lock in a rate, but you can't withdraw the money without a penalty. If you want a may provide rate, a CD is the tool, but it comes with less flexibility.

How often should I check whether my rate is still competitive?

Every three to six months is reasonable. Set a calendar reminder to check your bank's website and compare it to two or three competitors. This takes ten minutes and can alert you if your rate has dropped or if a better option has emerged.