The best APY on savings accounts changes weekly, and it depends on the type of account you open

Annual Percentage Yield (APY) on savings accounts ranges from nearly 0% at traditional banks to 4.5% or higher at online banks and credit unions, as of early 2024. The difference matters: on $10,000, the gap between 0.01% APY and 5% APY is roughly $500 per year. The highest rates are almost always at online-only banks because they have lower overhead costs than brick-and-mortar branches. Credit unions sometimes match or beat online bank rates for members. Traditional banks—the ones with physical locations—typically offer the lowest rates.

The catch is that the "best" rate today may not be the best rate next month. Banks change their APY in response to Federal Reserve decisions, and rates have moved sharply over the past two years. Before you move your money, check the current rate at the institution you're considering, not the rate you saw advertised last week.

Key Takeaways

  • Online banks and credit unions currently offer the highest APY on savings accounts, often 4% to 5.5%, while traditional banks typically offer less than 1%.
  • APY rates change frequently and are tied to Federal Reserve policy, so the highest rate today may drop within weeks or months.
  • High-yield savings accounts, money market accounts, and certificates of deposit (CDs) all offer different rates and different rules about when you can withdraw your money.
  • The bank's FDIC or NCUA insurance status matters more than the rate—your deposits are protected up to $250,000 per account type at insured institutions.
  • Moving money between banks takes three to five business days via ACH transfer, so plan ahead if you want to lock in a rate before it drops.

High-yield savings accounts versus money market accounts versus CDs

A high-yield savings account (HYSA) is a regular savings account with a higher APY. You can deposit and withdraw money whenever you want with no penalty. The tradeoff is that the rate can drop at any time—the bank can lower it without notice. Online banks like Marcus, Ally, and American Express Personal Savings currently offer rates in the 4% to 5% range, though this changes frequently.

A money market account is a hybrid between a savings account and a checking account. It typically offers a higher APY than a regular savings account but lower than a high-yield savings account. You get a debit card or checkbook, but you're usually limited to six withdrawals per month (this rule varies by bank). Money market accounts are useful if you want some access to your money but don't need it constantly.

A certificate of deposit (CD) locks your money away for a set period—usually three months to five years. In exchange, the bank pays you a fixed APY that won't change, even if rates drop. If you withdraw before the term ends, you pay a penalty (typically a few months of interest). CDs are best if you know you won't need the money and want to lock in a rate before it falls.

Where to find the current highest rates

The highest rates are published on comparison sites like Bankrate, DepositAccounts, and DepositAccounts, which update daily. These sites list rates by account type and let you filter by FDIC insurance status. You can also check individual bank websites directly, though they don't always display the rate prominently on the homepage—you may need to click into the account details.

Credit unions often have competitive rates but don't always advertise them widely. If you're a member of a credit union, call or log into your account to see what they're currently offering. Some credit unions offer rates as high as online banks, especially on CDs. You can find credit unions in your area through the CO-OP Network or Alliant Credit Union's locator tool.

Be cautious of promotional rates. Some banks offer a high APY for the first few months, then drop it sharply. Read the fine print to see when the promotional period ends and what the regular rate will be after that.

How APY changes and why rates move

Banks set their APY based partly on what the Federal Reserve does with its benchmark interest rate. When the Fed raises rates, banks usually raise the APY they pay on savings. When the Fed cuts rates, banks usually cut APY within days or weeks. The Fed has raised rates significantly since 2022, which is why savings account rates are much higher now than they were in 2021.

Individual banks also compete for deposits. If one online bank raises its rate to 5%, competitors often follow within a week or two to avoid losing customers. This competition is why online banks tend to have higher rates—they need deposits to grow, and they can't rely on physical branch traffic the way traditional banks do.

The rate you see advertised is not may provide to stay the same. Banks can lower APY on savings accounts and money market accounts at any time, usually with 30 days' notice. CDs are different—once you lock in a rate, it stays the same for the entire term, no matter what happens to market rates.

FDIC and NCUA insurance protects your money up to $250,000

Before you move money to chase a higher rate, confirm that the bank or credit union is insured. FDIC insurance (Federal Deposit Insurance Corporation) covers deposits at banks up to $250,000 per account type. NCUA insurance (National Credit Union Administration) covers deposits at credit unions up to $250,000 per account type. If the institution fails, your money is protected up to that limit.

Most online banks and credit unions are FDIC or NCUA insured. You can verify this on the FDIC's or NCUA's website by searching for the institution's name. If a bank is not insured, the rate doesn't matter—your money is at risk.

The $250,000 limit applies per account type per institution. This means if you have a savings account and a CD at the same bank, each is insured separately up to $250,000. If you have $300,000 to save, you can split it between two banks to keep all of it insured.

How long it takes to move money and lock in a rate

Transferring money from one bank to another via ACH (Automated Clearing House) takes three to five business days. If you see a rate you like, move your money as soon as possible—rates can drop before the transfer clears. Some banks offer faster transfers (same-day or next-day) if you initiate the transfer through their website, but standard ACH is the default.

If you're opening a CD, the rate is locked the moment you fund the account, not when you initiate the transfer. So if you start an ACH transfer on Monday and it clears on Thursday, you get the rate that was in effect on Thursday, not Monday. If rates are falling and you want to lock in a high rate, consider using a wire transfer or depositing a check, which can be faster than ACH.

For high-yield savings accounts and money market accounts, the rate can change at any time after you open the account. You're not locked in. If the bank lowers the rate after you deposit your money, your APY drops automatically.

The difference between APY and APR

APY (Annual Percentage Yield) includes the effect of compound interest—interest earned on interest. APR (Annual Percentage Rate) does not. Banks use APY for savings accounts because it shows you the real return you'll get. If a savings account offers 5% APY compounded daily, you'll earn slightly more than 5% over a year because interest is added to your balance daily and then earns interest itself.

When comparing savings accounts, always look at the APY, not the interest rate. The APY is what you'll actually earn. Banks are required to display APY prominently, so if you see only an interest rate, ask the bank for the APY.

Frequently Asked Questions

Can I move my money if the rate drops after I deposit it?

Yes. High-yield savings accounts and money market accounts have no penalty for withdrawals. You can move your money to a different bank anytime. CDs are different—if you withdraw before the term ends, you pay an early withdrawal penalty, usually equal to a few months of interest. Check the CD's terms before you buy.

What's the difference between a savings account and a money market account?

A money market account usually offers a higher APY and gives you a debit card or checkbook, but limits you to six withdrawals per month. A savings account has no withdrawal limit but typically offers a lower rate. If you need frequent access to your money, a high-yield savings account is usually better.

Do I have to pay taxes on the interest I earn?

Yes. Interest earned on savings accounts, money market accounts, and CDs is taxable income. Banks send you a 1099-INT form at the end of the year if you earned $10 or more in interest. You report this on your tax return. The higher the APY, the more interest you'll owe taxes on.

Is it worth moving my money for a 0.5% higher rate?

It depends on how much money you have and how long you're keeping it there. On $50,000, a 0.5% difference is $250 per year. On $10,000, it's $50 per year. If the rate is likely to drop soon, moving might not be worth the effort. If the rate is stable or rising, it's usually worth it.

What happens if the bank fails after I deposit my money?

If the bank is FDIC insured, your deposits are protected up to $250,000 per account type. The FDIC will transfer your account to another bank or pay you directly. You won't lose money. Verify the bank's FDIC status before you deposit.