Banks, credit unions, and online platforms offer different rates, and the highest payers change based on what you're saving and how long you lock your money away

The institution that pays the best rate depends on the account type. For high-yield savings accounts, online banks typically pay 4% to 5% APY, while traditional brick-and-mortar banks often pay under 1%. Credit unions may offer competitive rates on savings accounts and certificates of deposit (CDs), though rates vary by institution and membership. Money market accounts at online banks can match or exceed high-yield savings rates. For CDs, the rate depends on the term length — a 6-month CD pays less than a 5-year CD at the same bank, and rates shift weekly as market conditions change.

The best rate for you is not always the highest advertised rate. A bank offering 5.25% APY on a 12-month CD is only better than one offering 4.75% if you can actually leave the money untouched for a full year. Early withdrawal penalties can erase months of interest. Similarly, a savings account with a high rate but a $25,000 minimum balance does you no good if you have $5,000 to deposit.

Key Takeaways

  • Online banks and credit unions currently offer the highest savings rates, typically 4% to 5.5% APY on high-yield savings accounts, compared to under 1% at most traditional banks.
  • CD rates vary by term length and change weekly; a 5-year CD pays more than a 1-year CD, but you cannot withdraw early without a penalty.
  • The best rate for you depends on how long you can leave the money untouched and whether the account has a minimum balance requirement you can meet.
  • Money market accounts at online banks can match high-yield savings rates but may require higher minimum deposits.
  • Rates shift constantly, so comparing three to five institutions before depositing is worth the 15 minutes it takes.

High-yield savings accounts: where online banks lead

Online banks pay the most on everyday savings accounts because they have lower overhead costs than physical branches. Banks like Marcus, Ally, and American Express Personal Savings currently pay between 4% and 5.5% APY on high-yield savings accounts. Traditional banks with physical locations — Chase, Bank of America, Wells Fargo — typically pay 0.01% to 0.5% on regular savings accounts. The difference between 4.5% and 0.1% on $10,000 is roughly $440 per year.

High-yield savings accounts have no lock-in period. You can deposit and withdraw whenever you want without penalty. This makes them the right choice if you need access to your money within the next year or two. The tradeoff is that the rate can change at any time. A bank paying 5% today might drop to 4.5% next month if the Federal Reserve lowers interest rates. You are not locked into the rate you see when you open the account.

Most online banks require a minimum opening deposit of $0 to $25, though some have no minimum at all. Check the account details before opening. Also confirm that the bank is FDIC-insured, which means deposits up to $250,000 are protected if the bank fails.

Certificates of deposit: higher rates for longer commitments

CDs pay more than savings accounts because you agree to leave the money alone for a set period — typically 3 months, 6 months, 1 year, 3 years, or 5 years. A 5-year CD at an online bank might pay 4.5% to 5.25% APY, while a 6-month CD at the same bank might pay 4.75% to 5.1%. The longer the term, the higher the rate, though this is not always true — rates depend on what the Federal Reserve is expected to do and what the bank needs.

The catch is the early withdrawal penalty. If you need the money before the CD matures, the bank will subtract a penalty from your interest earnings or principal. A typical penalty is three to six months of interest. On a $10,000 CD earning 5% APY, a six-month penalty costs you roughly $250. Some banks offer no-penalty CDs, which pay slightly less (usually 4.5% to 5%) but let you withdraw without cost if rates drop and you want to move your money elsewhere.

CD rates change weekly as banks adjust to market conditions. If you are comparing rates, check multiple banks on the same day. Rates at online banks like Ally, Marcus, and Connexus Credit Union shift more frequently than rates at traditional banks, which update less often.

Money market accounts: savings rates with limited check-writing

Money market accounts combine features of savings accounts and checking accounts. They pay interest rates close to high-yield savings accounts — often 4% to 5.5% APY — but allow you to write checks or make transfers, though usually with limits. Many require a higher minimum balance than savings accounts, often $2,500 to $10,000.

The rate on a money market account is not fixed. Like savings accounts, it can change at any time. The main advantage over a high-yield savings account is the ability to write checks, which can be useful if you want to keep a portion of your emergency fund in a high-rate account but still access it by check. The main disadvantage is the higher minimum balance requirement, which locks up more of your money.

Credit unions: competitive rates and membership requirements

Credit unions are member-owned financial institutions that often pay competitive rates on savings accounts and CDs. Some credit unions pay 5% or more on savings accounts, though rates vary widely depending on the credit union and the account type. Credit unions also tend to charge lower fees and offer more flexible terms than banks.

The catch is membership. To open an account at a credit union, you must meet membership criteria — this might mean living in a certain area, working for a specific employer, or belonging to an organization. Some credit unions have opened membership to anyone, but most still have restrictions. If you already may have access to for membership at a credit union, it is worth checking their rates against online banks.

Credit unions are insured by the National Credit Union Administration (NCUA), which protects deposits up to $250,000, the same as FDIC insurance at banks.

Treasury securities: rates backed by the federal government

Treasury bills, notes, and bonds are loans you make to the federal government. They pay a fixed rate set at auction and are considered the safest investment because they are backed by the U.S. government. Treasury bills mature in four weeks to one year. Treasury notes mature in 2 to 10 years. Treasury bonds mature in 20 to 30 years. The longer the term, the higher the rate.

You can buy Treasury securities directly from TreasuryDirect.gov with no fees or minimum purchase amount (except $100 for some auctions). You can also buy them through a bank or brokerage, though you may pay a small fee. The rate you receive depends on when you buy — rates change at each auction, which happens on a regular schedule.

The main difference between Treasuries and bank accounts is liquidity. You can withdraw from a savings account anytime. If you sell a Treasury before it matures, you get whatever price the market will pay, which may be less than you paid if interest rates have risen. For money you know you will not need for several years, Treasuries can offer a higher rate than bank CDs.

How to compare rates across institutions

Start by deciding how long you can leave the money untouched. If you need access within a year, compare high-yield savings accounts and no-penalty CDs. If you can lock the money away for 3 to 5 years, compare CD rates. If you want the option to access the money but also want a high rate, compare money market accounts.

Next, check the minimum balance requirement. A bank offering 5.5% APY is useless if you only have $2,000 and the minimum is $25,000. Write down the rate, term, minimum balance, and any fees for each account you are considering. Then calculate the annual interest on your actual deposit amount. A 5% rate on $5,000 earns $250 per year. A 4.5% rate on $5,000 earns $225 per year. The difference is $25 — worth knowing, but not worth opening an account with a high minimum balance you cannot meet.

Check whether the bank is FDIC-insured (for banks) or NCUA-insured (for credit unions). Verify this on the FDIC or NCUA website, not on the bank's own site. Also read the account terms to confirm there are no hidden fees or restrictions that would make the account less useful to you.

Frequently Asked Questions

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

Yes. Interest earned on savings accounts, CDs, money market accounts, and Treasury securities is taxable income. The bank or institution will send you a 1099-INT form at the end of the year showing how much interest you earned. You report this on your tax return. The amount you owe in taxes depends on your tax bracket.

Can a bank lower my rate after I open a high-yield savings account?

Yes. High-yield savings accounts have variable rates, which means the bank can change the rate at any time. CD rates are fixed for the term of the CD, so the rate you lock in when you open the account stays the same until maturity. If you want a may provide rate, a CD is the right choice.

What happens if a bank fails and I have money in a savings account there?

The FDIC insures deposits up to $250,000 per depositor per bank. If the bank fails, the FDIC will pay you the full amount of your deposit, up to $250,000. This protection applies to savings accounts, CDs, money market accounts, and checking accounts. Make sure the bank displays the FDIC logo or check the FDIC website to confirm coverage.

Should I split my money across multiple banks to get higher rates?

If you have more than $250,000, splitting across multiple FDIC-insured banks makes sense for insurance purposes. If you have less than $250,000, you do not need to split for insurance. You can open accounts at multiple banks to compare rates or to take advantage of different account types, but there is no requirement to do so.

How often do CD rates change?

CD rates change weekly or more frequently as banks adjust to market conditions and Federal Reserve decisions. If you are shopping for a CD, check rates on the same day across multiple banks to get an accurate comparison. Rates can shift significantly over a few days.