High-yield savings accounts pay 4% to 5.35% APY right now, mostly at online banks

The banks paying the most interest are almost always online-only operations: Marcus by Goldman Sachs, American Express Personal Savings, Ally Bank, and Capital One 360 regularly sit at or near the top. Traditional brick-and-mortar banks—Chase, Bank of America, Wells Fargo—typically pay 0.01% to 0.05% APY on regular savings accounts, which is why the difference matters. A $10,000 deposit earns roughly $50 per year at a traditional bank versus $400 to $535 per year at a high-yield account.

The reason online banks pay more is simple: they have lower overhead. No branches, no tellers, no real estate. They pass that savings to depositors as interest. The tradeoff is that you cannot walk into a physical location or speak to someone in person—everything happens online or by phone. All deposits at these banks are insured by the FDIC up to $250,000 per account holder per institution, the same as any other bank.

Interest rates change constantly. A bank paying 5.35% today might drop to 4.75% next month if the Federal Reserve cuts rates. The reverse is also true: rates can climb if the Fed raises them. Check the current rate on the bank's website before you open an account, because the rate you see in an article or advertisement may be outdated by the time you read it.

Key Takeaways

  • Online banks pay roughly 10 times more interest than traditional banks because they have no physical branches and lower operating costs.
  • Current high-yield rates range from 4% to 5.35% APY, but this changes when the Federal Reserve adjusts its benchmark rate.
  • Money in any FDIC-insured account is protected up to $250,000, whether the bank is online or has branches.
  • You cannot deposit cash or get a cashier's check in person at an online bank, so consider whether you need those services before switching.
  • Some online banks offer additional features like no monthly fees, no minimum balance requirements, and free transfers to other banks.

How to compare rates across banks right now

The fastest way to see current rates is to visit each bank's website directly. Bankrate, DepositAccounts, and NerdWallet all list rates side by side, but they update on different schedules and sometimes lag behind what the bank actually offers. The bank's own website is always the source of truth.

When you compare, look at three things: the APY (annual percentage yield), any minimum balance requirement, and whether there are monthly fees. A bank offering 5.30% APY with a $25,000 minimum is not the same as one offering 5.20% APY with no minimum. The second one may actually earn you more money if you have $5,000 to deposit.

Some banks offer promotional rates—a higher APY for the first few months, then a drop. Read the fine print. If a bank advertises 5.50% APY but only for the first 90 days, your money will earn less after that period ends. The rate you see after the promotion is what matters for long-term savings.

Online banks versus money market accounts and CDs

A high-yield savings account lets you withdraw money anytime without penalty. Interest accrues monthly and is added to your balance. You can move money out the same day you need it.

A money market account works similarly but often requires a higher minimum balance (sometimes $2,500 or more) and may limit how many withdrawals you can make per month. The interest rate is usually slightly higher than a savings account to compensate for the restrictions. If you need frequent access to your money, a savings account is simpler.

A certificate of deposit (CD) locks your money away for a set period—three months, six months, one year, five years. In exchange, the bank pays a higher rate. If you withdraw before the term ends, you pay a penalty (usually a few months' worth of interest). CDs make sense if you know you will not need the money for a specific amount of time and want to lock in a rate before it drops.

What happens to your interest if rates drop

Interest on a savings account is not locked in. When the Federal Reserve lowers its benchmark rate, banks lower the APY they offer on new deposits and existing balances. This can happen within days. If you have $50,000 earning 5.35% and rates drop to 4.50%, your account will earn at the new, lower rate going forward.

This is why some people move money between banks when rates change. If Bank A drops from 5.35% to 4.75% and Bank B is still paying 5.20%, you can withdraw from Bank A and deposit at Bank B. The transfer takes three to five business days. You lose a few days of interest but gain a higher rate on the remaining balance.

CDs protect you from this. If you lock $10,000 into a one-year CD at 5.25%, you earn 5.25% for the full year even if rates fall to 2% tomorrow. The tradeoff is that you cannot access the money without paying a penalty.

Banks with no fees and no minimum balance

Most online banks do not charge monthly maintenance fees or require a minimum balance to earn the advertised rate. This is one of their main advantages over traditional banks. However, some still charge fees for specific actions: overdrafts, wire transfers, or paper statements.

Before opening an account, check the fee schedule. Look for banks that offer free incoming and outgoing transfers, no overdraft fees (or overdraft protection), and no monthly service charge. A few banks—Ally and American Express Personal Savings among them—charge no fees at all and have no minimum balance.

If you keep a very small balance (under $500), the difference between a bank charging $5 per month and one charging nothing is significant. At $5 per month, you lose $60 per year, which can wipe out the interest you earn on a small deposit.

When to move money between banks to chase higher rates

Moving money costs time and carries a small risk: if you initiate a transfer and the receiving bank has a delay, you might miss a few days of interest. For most people, this is worth it only if the rate difference is at least 0.50% APY and you have at least $5,000 to move. On $5,000, a 0.50% difference is $25 per year—enough to justify the effort.

If you have $50,000 or more, even a 0.25% difference is worth moving. On $50,000, that is $125 per year. The transfer takes three to five business days, so you lose at most a few dollars in interest during the move.

Set up a transfer through your new bank's website by providing your old bank's routing number and account number. The new bank will pull the money over, usually within three to five business days. Once the transfer is complete, you can close the old account if you want.

FDIC insurance and what it covers

Every deposit at an FDIC-insured bank is protected up to $250,000 per depositor per bank. If you have $300,000 at Marcus by Goldman Sachs, $250,000 is insured and $50,000 is not. If Marcus fails, you get $250,000 back from the FDIC.

The $250,000 limit applies per bank, not per account. If you have a savings account and a money market account at the same bank, they share the $250,000 limit. If you have accounts at two different banks, each bank's deposits are insured separately up to $250,000.

If you need to keep more than $250,000 safe and earning interest, split it across multiple FDIC-insured banks. Put $250,000 at Marcus, $250,000 at Ally, and $250,000 at American Express Personal Savings. Each deposit is fully insured.

Frequently Asked Questions

Can I get a higher rate by keeping a larger balance?

No. High-yield savings accounts pay the same APY regardless of balance size. A bank paying 5.20% pays that rate on $100 or $100,000. Some money market accounts offer tiered rates—higher APY for larger balances—but most online savings accounts do not.

What if I need to withdraw money before the year is over?

With a savings account, you can withdraw anytime with no penalty. With a CD, you pay an early withdrawal penalty, usually equal to a few months of interest. If you think you might need the money, use a savings account instead of a CD.

Do online banks ever go out of business?

Yes, but your money is protected. If an FDIC-insured bank fails, the FDIC takes over and returns deposits up to $250,000. You may have temporary access issues while the transition happens, but your money is safe. This has happened fewer than 10 times in the past 20 years.

How often do interest rates change?

Banks can change rates anytime, but most changes happen after the Federal Reserve meets (roughly every six weeks). When the Fed raises or lowers its benchmark rate, banks typically adjust their savings rates within days. Some banks move faster than others.

Is there a difference between APY and APR on a savings account?

Yes. APY (annual percentage yield) includes compounding—interest earned on interest. APR (annual percentage rate) does not. Banks always advertise savings rates as APY, so the number you see already accounts for compounding. APR is used for loans and credit cards.