The best rate depends on what type of account you want and how much you can deposit

There is no single bank with the best rate for everyone. Online banks typically offer higher rates than brick-and-mortar banks because they have lower overhead costs. Credit unions sometimes match or beat online bank rates. The highest rates right now are on high-yield savings accounts and money market accounts, not traditional savings accounts. Rates change weekly, so the bank offering the best rate today may not be the best next month.

Your choice also depends on what you need the money for. If you want to lock in a rate for a set period, a certificate of deposit (CD) offers a fixed rate but requires you to leave the money untouched. If you need access to your money without penalty, a high-yield savings account is more flexible, though its rate can drop at any time.

Key Takeaways

  • Online banks and credit unions currently offer the highest savings rates, typically 4% to 5% on high-yield savings accounts, though rates vary by institution and change frequently.
  • CDs lock in a fixed rate for a specific term (3 months to 5 years), while high-yield savings accounts let you withdraw money anytime but the rate can change.
  • You can compare current rates across banks using rate-tracking websites like Bankrate, DepositAccounts, or NerdWallet, which update daily.
  • Credit unions may offer competitive rates and lower fees, but you must be a member, which sometimes requires living or working in a specific area or joining an organization.

How online banks offer higher rates than traditional banks

Online banks have no physical branches, so they spend less on rent, staff, and equipment. They pass those savings to customers through higher interest rates. Banks like Marcus (owned by Goldman Sachs), Ally Bank, and American Express Personal Savings are online-only and consistently rank among the highest-rate providers.

Traditional banks with physical locations—Chase, Bank of America, Wells Fargo—typically offer much lower rates on savings accounts, often under 0.5%. They use deposits to fund loans and other business lines, and they don't need to compete aggressively on savings rates because customers value branch access and name recognition.

The trade-off is convenience. You cannot walk into an online bank to deposit cash or speak to someone in person. Most online banks let you deposit checks by phone camera or transfer money from another bank account, but cash deposits require a workaround like a linked account at a partner bank.

Comparing high-yield savings accounts versus CDs

A high-yield savings account works like a regular savings account but pays much more interest. You can deposit and withdraw money anytime without penalty. The downside is that the bank can lower the rate whenever it wants. If rates drop, your earnings drop with them. Current rates on high-yield savings accounts range from around 4% to 5.35%, depending on the bank and the current interest rate environment.

A certificate of deposit (CD) locks in a fixed rate for a set term—typically 3 months, 6 months, 1 year, 3 years, or 5 years. You agree not to touch the money until the term ends. If you withdraw early, you pay a penalty, usually a few months' worth of interest. CD rates are often slightly higher than high-yield savings rates because the bank knows it can use your money for the full term. Current CD rates range from around 4.5% to 5.5% depending on the term length.

Choose a high-yield savings account if you might need the money within a year or two. Choose a CD if you are certain you will not need the money and want to lock in a rate before rates fall.

Where to find current rates and compare them

Interest rates change constantly, so you need a source that updates frequently. Bankrate, DepositAccounts, and NerdWallet all publish current rates from dozens of banks and update them daily or multiple times per day. You can filter by account type (high-yield savings, CD, money market), term length (for CDs), and minimum deposit.

When you find a rate you like, visit the bank's website directly to confirm the rate is still current and to understand the terms. Some banks offer promotional rates for new customers only. Others require a minimum deposit—often $1,000 to $25,000—to earn the advertised rate. Read the fine print before you open an account.

You can also call the bank's customer service line to ask about current rates and any promotions. Some banks offer higher rates if you set up automatic transfers or meet other conditions.

Credit unions as an alternative to banks

Credit unions are member-owned financial institutions that sometimes offer rates competitive with or better than online banks. They also tend to charge fewer fees and may be more flexible about overdrafts or early CD withdrawals. The catch is membership. You must meet specific criteria to join—you might need to live in a certain area, work for a particular employer, or belong to an organization like a professional association or military branch.

To find a credit union you can join, use the CO-OP Network locator or the Shared Branch locator on the Credit Union National Association website. Once you find one, ask about their current savings rates and CD terms. Some credit unions offer rates as high as online banks; others do not.

What to watch out for when comparing rates

The advertised rate is the annual percentage yield (APY), which includes the effect of compounding. This is the number to use when comparing banks. Do not confuse it with the annual percentage rate (APR), which is used for loans and does not include compounding.

Check the minimum deposit required to earn the advertised rate. Some banks offer one rate for deposits under $100,000 and a higher rate for larger deposits. Others have no minimum. If you have $5,000 to save and a bank requires $25,000 to earn the top rate, you will earn less.

Look at the bank's history of rate changes. If a bank cuts rates aggressively when the Federal Reserve lowers rates, you may earn less over time than at a bank that holds rates longer. You cannot predict the future, but you can see the past by checking rate-tracking websites' historical data.

How the Federal Reserve affects savings rates

Banks set their own rates, but they are influenced by the Federal Reserve's benchmark interest rate, called the federal funds rate. When the Fed raises rates, banks typically raise savings rates within weeks. When the Fed lowers rates, banks lower savings rates more slowly, but they do eventually follow.

The Fed has raised rates significantly since 2022, which is why savings rates are currently much higher than they were in 2020 and 2021. If the Fed lowers rates in the future, savings rates will fall too. This is why locking in a CD rate now can be valuable—you protect yourself against future rate cuts.

Frequently Asked Questions

Can I move money between banks if I find a better rate?

Yes. You can open a new account at a different bank and transfer your money there. The transfer usually takes 1 to 3 business days. There is no penalty for moving your money between banks (unless you have a CD and withdraw before the term ends). Many people move money to chase higher rates, and banks expect this.

Is my money safe in an online bank?

Online banks are regulated by the same federal agencies as traditional banks. Your deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per account type per bank. This means if the bank fails, you get your money back. Credit unions are insured by the National Credit Union Administration (NCUA) up to the same limit.

What is the difference between APY and APR?

APY (annual percentage yield) is the rate you earn on savings and includes the effect of compounding—earning interest on your interest. APR (annual percentage rate) is the rate you pay on loans and does not include compounding. Always compare savings accounts using APY, not APR.

Should I split my money across multiple banks?

You can, but it is not necessary. The FDIC insures up to $250,000 per account type per bank, so if you have more than $250,000 in savings, splitting it across banks protects the excess. Otherwise, keeping your money at one bank is simpler. Some people open accounts at multiple banks to chase promotional rates, which is fine as long as you can manage the accounts.

Do I have to keep money in a CD for the full term?

No, but you pay a penalty if you withdraw early. The penalty is usually 3 to 6 months of interest, though it varies by bank and CD term. Some banks offer "no-penalty CDs" with slightly lower rates but no early withdrawal penalty. If you think you might need the money, a no-penalty CD or a high-yield savings account is safer than a traditional CD.