High-yield savings accounts pay the most interest of any savings product right now
A high-yield savings account (HYSA) pays roughly 4 to 5 percent annual interest, depending on the bank and the current rate environment. A regular savings account at a brick-and-mortar bank typically pays 0.01 to 0.05 percent. The difference is real money: on $10,000, a high-yield account earns $400 to $500 per year, while a regular account earns $1 to $5.
High-yield accounts are offered by online banks, credit unions, and a few traditional banks. They are not riskier than regular savings accounts—the Federal Deposit Insurance Corporation (FDIC) insures them up to $250,000 per account holder per bank, the same as any other savings account. The reason online banks can pay more is that they have lower overhead costs and pass the savings to depositors through higher interest rates.
Interest rates change constantly. The rates quoted here reflect the environment as of early 2024, but the Federal Reserve's decisions affect what banks can offer. Before opening an account, check the current rate on the bank's website—do not rely on rates from articles or comparison sites that may be outdated.
Key Takeaways
- High-yield savings accounts pay 4 to 5 percent annual interest, while regular savings accounts at traditional banks pay less than 0.1 percent.
- Online banks offer the highest rates because they have lower operating costs than branches and pass the savings to depositors.
- Money market accounts and certificates of deposit (CDs) may pay slightly more than high-yield savings accounts, but they have withdrawal restrictions or lock-in periods.
- FDIC insurance protects your money up to $250,000 at each bank, regardless of whether the account is high-yield or regular.
- Interest rates change based on Federal Reserve policy, so the rate you see today may not be the rate you earn next month.
How online banks pay more than traditional banks
Online banks have no physical branches, no tellers, and no building leases. Those savings add up. A traditional bank spends money on real estate, staff, and technology to run hundreds of locations. An online bank runs a website and a call center. The difference in cost per customer is substantial, and banks pass it along by paying higher interest rates on deposits.
This does not mean online banks are less safe. They are regulated by the same federal agencies as traditional banks and carry the same FDIC insurance. The trade-off is convenience: you cannot walk into a branch and speak to someone in person. Most online banks let you transfer money to and from external accounts, deposit checks by phone camera, and handle most tasks through a website or app.
Credit unions also offer high-yield savings accounts, sometimes at rates competitive with online banks. Credit unions are member-owned, not shareholder-owned, and may prioritize member returns over profit. Rates vary by credit union, so it is worth checking what your local credit union offers.
Money market accounts and CDs pay slightly more but come with strings
A money market account (MMA) is a hybrid between a savings account and a checking account. It typically pays interest slightly higher than a high-yield savings account—sometimes 4.5 to 5.5 percent—but limits how many withdrawals you can make per month. Federal rules allow up to six withdrawals per statement cycle; exceed that and the bank may charge a fee or close the account.
A certificate of deposit (CD) locks your money away for a set period—three months, six months, one year, five years, or longer—and pays a fixed interest rate for that term. Rates on CDs are often slightly higher than high-yield savings accounts because the bank knows it will have your money for a known period. The catch: if you withdraw before the term ends, you pay a penalty, usually equal to several months of interest. A one-year CD might pay 4.8 percent, but withdrawing after six months could cost you the interest you earned.
Money market accounts make sense if you need occasional access but do not need to withdraw frequently. CDs make sense if you know you will not need the money for a specific period and want a may provide rate locked in.
Comparing rates across banks and account types
| Account Type | Typical Interest Rate | Withdrawal Limits | FDIC Insured |
|---|---|---|---|
| Regular savings account | 0.01–0.05% | None | Yes |
| High-yield savings account | 4–5% | None | Yes |
| Money market account | 4.5–5.5% | 6 per month | Yes |
| Certificate of deposit (1-year) | 4.5–5% | None until maturity | Yes |
Rates vary by bank and change frequently. The rates shown are representative as of early 2024 but are not may provide. Before opening an account, visit the bank's website and look for the current Annual Percentage Yield (APY), which is the rate you will actually earn including compounding.
Some banks offer promotional rates for new customers—a higher rate for the first few months, then a drop to a standard rate. Read the terms carefully. A promotional 5.5 percent rate that drops to 3.5 percent after three months may not be better than a steady 4.5 percent elsewhere.
What happens to your interest if rates fall
Interest rates on high-yield savings accounts and money market accounts are variable, meaning they can change at any time. When the Federal Reserve raises rates, banks raise the rates they pay on deposits. When the Fed cuts rates, banks cut what they pay you. You have no control over this, and the bank does not have to give you advance notice.
CDs protect you from this uncertainty. When you open a CD, the rate is locked in for the entire term. If rates fall the next day, your CD still earns the rate you agreed to. If rates rise, you are stuck with the lower rate unless you pay a penalty to withdraw early.
This is why high-yield savings accounts are best for money you might need soon: you get a good rate now, and if rates rise further, your rate rises with them. CDs are best for money you are certain you will not touch for a specific period.
How to find the highest rates available
Rates change daily, so there is no permanent "best" bank. To find the current highest rates, visit rate-comparison websites like Bankrate, DepositAccounts, or the FDIC's own rate search tool. These sites let you filter by account type, state, and minimum deposit requirement.
Check the bank's own website to confirm the rate before opening an account. Comparison sites may lag by a day or two. Also look for the minimum deposit required to open the account and to earn the advertised rate—some banks require $25,000 or more to access their top rate.
Read the fine print about how interest is compounded. Most high-yield accounts compound daily, meaning interest is calculated and added to your balance every day. Daily compounding earns you slightly more than monthly or quarterly compounding because you earn interest on your interest more often.
Frequently Asked Questions
Can I move money between a high-yield savings account and a checking account without losing interest?
Yes. Transfers between your own accounts at the same bank do not affect interest. The interest rate applies to whatever balance sits in the savings account at the end of each day. Moving money out stops the interest on that amount, but moving it back in resumes it. Some banks limit how many transfers you can make per month, so check your account terms.
What if a bank fails—is my money still insured?
Yes. The FDIC insures deposits up to $250,000 per depositor per bank, even if the bank closes. If your bank fails, the FDIC transfers your money to another bank or sends you a check. This has happened only a handful of times in recent years, and depositors have always been made whole.
Is there a catch to high-yield savings accounts?
No catch, but there are trade-offs. You cannot access your money as easily as with a checking account—transfers take one to three business days. Some online banks have limited customer service. And rates are variable, so they can drop if the Federal Reserve cuts rates. But for money you do not need immediately, the higher interest outweighs these drawbacks.
Should I split my money between multiple banks to get more FDIC insurance?
Only if you have more than $250,000 to save. Each bank insures up to $250,000 per account holder, so if you have $500,000, you could put $250,000 at Bank A and $250,000 at Bank B and be fully insured at both. Below $250,000, keeping everything at one bank is simpler and earns the same interest.
Do I have to pay taxes on the interest I earn?
Yes. Interest income is taxable as ordinary 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 interest is taxed at your ordinary income tax rate, not at a capital gains rate.