Interest rates are the percentage of your money that a bank or lender pays you (or charges you) over a set period
When you put money in a savings account, the bank pays you interest — usually stated as an annual percentage rate, or APY. When you borrow money, you pay interest to the lender. The rate itself is just a number: 4.5%, 0.01%, 2.75%. That percentage is applied to your balance, and the result is what you earn or owe over a year (or whatever timeframe the rate covers).
The "average rate" you hear about is not a single fixed number. It changes constantly because banks set their own rates, and those rates move based on what the Federal Reserve does. A savings account at one bank might pay 4.2% APY while another pays 3.8%. A CD at a credit union might pay 5.1% while a CD at a national bank pays 4.6%. The rates also vary by how long you lock your money away — a 6-month CD pays less than a 5-year CD at the same institution.
Key Takeaways
- Interest rates are percentages applied to your balance; they vary by bank, account type, and term length, so there is no single "average" that applies to your situation.
- The Federal Reserve's policy rate influences what banks offer, but each bank sets its own rates independently based on competition and funding costs.
- Savings account rates, CD rates, and money market rates all move together when the Fed changes its benchmark, but the gap between them stays roughly the same.
- Checking the current rates at multiple banks takes 15 minutes and can mean hundreds of dollars more per year in interest earned.
Why there is no single "average" rate
Banks are not required to offer the same rate. Each one decides what to pay based on how much money it needs to attract, what it can earn by lending that money out, and what competitors are offering. On any given day, you might find savings account rates ranging from 0.01% at a large national bank to 4.5% at an online bank. Both are real current rates; neither is "wrong."
The same applies to CDs, money market accounts, and bonds. A 1-year CD at Bank A might pay 4.8% while a 1-year CD at Bank B pays 4.2%. The difference is real money: on $10,000, that 0.6% gap means $60 more in your pocket over the year. Over five years, the gap compounds.
How the Federal Reserve influences rates
The Federal Reserve sets a benchmark rate — the interest rate at which banks lend to each other overnight. This rate is not what you earn or pay directly. Instead, it acts as a signal. When the Fed raises its benchmark, banks tend to raise the rates they offer on savings accounts and CDs. When the Fed lowers its benchmark, banks tend to lower those rates.
The lag is not instant. After the Fed moves, it can take days or weeks for banks to adjust their published rates. Some banks move faster than others. Online banks often move first because they compete heavily on rate; large national banks sometimes move slower because they have more customers and less pressure to chase new deposits.
The Fed's benchmark rate and the rates you see on savings products are not the same number. If the Fed's benchmark is 5.25%, you will not earn 5.25% on a savings account. You might earn 4.5% or 4.75%, depending on the bank. The gap between the Fed's rate and what you actually earn is called the spread, and it varies by account type and institution.
How rates differ by account type and term
Savings accounts typically pay less than CDs because you can withdraw your money anytime. Money market accounts usually pay more than savings accounts but less than CDs. CDs pay more because you agree to lock your money away for a fixed period — 3 months, 6 months, 1 year, 5 years, or longer. The longer the term, the higher the rate, because the bank has your money for longer and can plan around it.
On the same day, at the same bank, you might see these rates:
| Account Type | Example Rate |
|---|---|
| Savings account | 4.2% APY |
| Money market account | 4.6% APY |
| 3-month CD | 4.8% APY |
| 1-year CD | 5.0% APY |
| 5-year CD | 5.2% APY |
These differences are normal and expected. They reflect the trade-off between access (savings accounts) and commitment (CDs). The rates also reflect what the bank thinks will happen to interest rates in the future — if the bank expects rates to fall, it may offer higher rates on longer-term CDs to lock in customers now.
Where to find current rates
The best way to know what rates are available is to check directly. Websites like Bankrate, DepositAccounts, and NerdWallet list current rates at hundreds of banks and credit unions, updated daily. You can filter by account type, term length, and minimum deposit. You can also visit individual bank websites and look at their rate pages.
When comparing, pay attention to the minimum deposit required. Some banks offer their highest rates only on accounts with $25,000 or more. Others have no minimum. A rate of 5.0% on a $25,000 minimum is not the same offer as a rate of 4.8% with no minimum if you only have $5,000 to deposit.
Also check whether the rate is may provide or promotional. Some banks offer a higher rate for the first 3 months, then drop it. The rate page should say whether the rate is permanent or temporary.
How rates move over time
Interest rates on savings products follow a pattern tied to the Fed's actions. When the Fed is raising rates, savings rates rise. When the Fed pauses or cuts rates, savings rates eventually fall. The timing is not exact — some banks lag behind — but the direction is consistent.
Over the past decade, rates have ranged widely. In 2021 and early 2022, savings account rates were near zero (0.01% to 0.05%). By late 2023, after the Fed raised rates aggressively, savings rates had climbed to 4% to 5%. The difference in earnings is enormous: on $50,000, earning 0.01% yields $5 per year, while earning 4.5% yields $2,250 per year.
Rates will continue to move based on economic conditions and Fed decisions. There is no way to predict exactly where they will go, but you can monitor them by checking rate comparison sites monthly or by signing up for rate alerts from banks you trust.
Frequently Asked Questions
Is there a "national average" interest rate I should compare against?
The Federal Reserve publishes data on average rates paid by banks, but this average is a lagging indicator — it reflects what banks were paying last week, not what they are paying today. It is more useful to compare rates at specific banks where you might actually deposit money. The rate that matters is the one you can actually get, not the national average.
Why do online banks pay more than big national banks?
Online banks have lower overhead costs — no physical branches, fewer employees — so they can afford to pay more to attract deposits. National banks have millions of existing customers and less pressure to compete on rate. Both models work; the choice depends on whether you value convenience (branch access) or higher earnings (online rates).
If I lock money in a CD at 5%, will I earn 5% even if rates fall?
Yes. The rate on a CD is fixed for the entire term. If you buy a 1-year CD at 5% APY, you will earn 5% whether rates fall to 2% or rise to 6%. That is the trade-off: you give up the ability to move your money in exchange for a may provide rate.
How often do banks change their advertised rates?
Banks can change rates daily, and many do. Online banks especially move rates frequently to stay competitive. You should check rates at least monthly if you are shopping for a new account, and weekly if you are trying to time a CD purchase around expected Fed moves.
Does my credit score affect the interest rate I earn on savings?
No. Interest rates on savings accounts, CDs, and money market accounts are the same for all customers at a given bank, regardless of credit score. Credit score matters for loans and credit cards, not for deposit accounts.