High-yield savings accounts and money market accounts pay the most right now
High-yield savings accounts (HYSAs) and money market accounts currently offer the highest interest rates available to regular savers. As of late 2024, these accounts pay between 4% and 5.35% APY, depending on the bank and market conditions. Traditional savings accounts at brick-and-mortar banks typically pay 0.01% to 0.05% APY—roughly 100 times less.
The difference matters. On $10,000, a traditional savings account earns about $1 per year. The same $10,000 in a high-yield account earns $400 to $535 per year. Over five years, that gap compounds into hundreds of dollars in real money you keep.
High-yield accounts work like regular savings accounts: your money is liquid, you can withdraw it without penalty, and deposits are insured by the FDIC up to $250,000. The catch is that rates change. Banks set their rates based on what the Federal Reserve does with its benchmark rate, so when the Fed cuts rates, your earnings drop too.
Key Takeaways
- High-yield savings accounts and money market accounts pay 4% to 5.35% APY, while traditional bank savings accounts pay less than 0.1% APY.
- Online banks offer higher rates than brick-and-mortar banks because they have lower overhead costs and pass savings to depositors.
- Certificates of deposit (CDs) lock your money away for a set term but pay slightly higher rates than savings accounts—currently 4.5% to 5.5% APY depending on length.
- Interest rates move with Federal Reserve decisions, so the highest rate today may drop within months if the Fed cuts its benchmark rate.
- Your deposits are FDIC-insured up to $250,000 per account type per bank, so moving money to chase higher rates carries no safety risk.
Why online banks pay more than traditional banks
Online-only banks have no physical branches, no tellers, and no real estate costs. They pass those savings directly to customers through higher interest rates. A bank like Marcus, Ally, or American Express Personal Savings has the same FDIC insurance as Chase or Bank of America, but can afford to pay you 10 to 100 times more interest because they spend less to operate.
Traditional banks keep rates low partly because they profit from the gap between what they pay you and what they charge borrowers. A brick-and-mortar bank paying you 0.01% on savings while charging 7% on a car loan keeps the 6.99% spread. An online bank competing on rate alone narrows that spread to stay competitive.
This does not mean online banks are risky. The FDIC insurance is identical. Your money is just as protected at an online bank as at Wells Fargo. The only real difference is convenience: you cannot walk into a branch, but you can move money instantly through their app or website.
Certificates of deposit lock in a rate for a may provide return
A certificate of deposit (CD) is a savings product where you agree to leave money untouched for a set period—typically three months to five years—in exchange for a fixed interest rate. Current CD rates range from 4.5% to 5.5% APY depending on the term length and the bank.
The trade-off is access. If you withdraw money before the CD matures, you pay an early withdrawal penalty. The penalty varies by bank and term—some charge three months of interest, others charge six months or more. A one-year CD at 5.2% APY might have a penalty of $260 on a $10,000 deposit, so breaking it early costs real money.
CDs make sense if you know you will not need the money for a specific period. A five-year CD locks in today's rate even if the Fed cuts rates next year, so you are protected against future rate drops. But if you might need the cash sooner, a high-yield savings account is safer because you can withdraw without penalty.
Money market accounts combine checking features with higher rates
A money market account is a hybrid between a savings account and a checking account. It pays interest like a savings account—currently 4% to 5.35% APY at online banks—but also comes with a debit card and check-writing ability, like a checking account.
The catch is that federal rules limit you to six withdrawals per month (though this rule is rarely enforced now). Most people use money market accounts as a high-yield savings account with occasional check-writing capability, rather than as a primary checking account. The interest rate is the main draw.
Money market accounts are FDIC-insured the same way savings accounts are, so your deposits up to $250,000 are protected. The rates track closely with high-yield savings accounts because they are competing for the same customers.
Treasury bills and bonds pay less but carry zero credit risk
U.S. Treasury bills, notes, and bonds are loans you make to the federal government. They pay interest, and the government is backed by the full faith and credit of the United States—meaning default risk is essentially zero. Current Treasury rates are lower than high-yield savings accounts: a one-year Treasury bill pays around 4.8% to 5.2%, while a three-year Treasury note pays around 4.0% to 4.5%.
The advantage is safety. A bank can fail and your deposits are insured only up to $250,000. The U.S. government cannot fail in the same way, so Treasury securities carry no credit risk. The disadvantage is that your money is less liquid. You can sell a Treasury before it matures, but the price fluctuates with interest rates, so you might get less than you paid.
For most savers, high-yield savings accounts are simpler: they pay nearly as much, your money is always accessible at full value, and the FDIC insurance is sufficient. Treasuries make more sense if you have more than $250,000 to park or if you want to eliminate bank failure risk entirely.
How to compare rates across banks and account types
Interest rates change constantly, so the highest rate today may not be the highest next week. To find current rates, check the websites of online banks directly—Marcus, Ally, American Express Personal Savings, Discover, and Synchrony all publish their rates publicly. Bankrate and DepositAccounts also aggregate rates across hundreds of banks so you can compare in one place.
When comparing, look at the APY, not just the interest rate. APY (annual percentage yield) includes the effect of compounding, so it is the true number that matters. A bank advertising "5% APY" will earn you more than one advertising "4.9% APY," even if the difference seems small.
Also check the minimum deposit. Some banks require $1 to open; others require $25,000. If you have $5,000 to save, a bank requiring $25,000 minimum is not an option. Read the fine print on early withdrawal penalties for CDs, and confirm that the bank is FDIC-insured (nearly all are, but it is worth verifying).
Rates will drop when the Federal Reserve cuts its benchmark rate
The Federal Reserve sets a benchmark interest rate that influences all other rates in the economy. When the Fed raises its rate, banks raise the rates they pay on savings. When the Fed cuts its rate, banks cut savings rates too. This happens with a lag—usually within weeks or a few months—but it always happens.
If you lock money into a CD now at 5.2% APY, you keep that rate for the full term even if the Fed cuts rates and high-yield savings accounts drop to 2%. That is the value of a CD: you are protected against future rate cuts. But if you keep money in a high-yield savings account, your rate will fall when the Fed cuts, so you earn less going forward.
No one can predict when the Fed will cut rates, so do not try to time it. If you need the money within a year or two, a high-yield savings account is more flexible. If you are certain you will not touch the money for five years, a five-year CD locks in today's rate and removes the guesswork.
Frequently Asked Questions
Can I move money between high-yield accounts to chase the highest rate?
Yes. There is no penalty for opening a new high-yield account at a different bank and moving your money. The only cost is time—transfers take one to three business days. If you have $50,000 and one bank pays 5.35% while another pays 4.75%, moving it saves you about $300 per year. Whether that is worth the effort is up to you.
What happens to my interest if I withdraw money before the month ends?
Most high-yield savings accounts pay interest monthly, so if you withdraw on day 15, you still earn interest for those 15 days. The exact calculation depends on the bank's method, but you do not lose accrued interest by withdrawing early. CDs are different—early withdrawal triggers a penalty, not a loss of interest.
Is my money safe in an online bank paying 5% APY?
Yes. Online banks are FDIC-insured the same way traditional banks are. Your deposits up to $250,000 are protected even if the bank fails. The higher rate is not a sign of risk; it is a result of lower operating costs. Verify the bank is FDIC-insured before you deposit, but nearly all online banks are.
Should I split my money across multiple banks to get more FDIC coverage?
Only if you have more than $250,000. FDIC insurance covers $250,000 per depositor per bank per account type. If you have $500,000, you can put $250,000 in a savings account at Bank A and $250,000 at Bank B, and both are fully insured. Below $250,000, splitting across banks does not add protection—it just complicates your life.
Do I have to pay taxes on interest earned in a high-yield account?
Yes. Interest is taxable income. Banks send you a 1099-INT form at tax time showing how much interest you earned. You report this on your tax return and pay income tax on it at your regular rate. This is true for all savings accounts, CDs, and Treasury securities. The tax is owed whether or not you withdraw the money.