The main ways to increase what your savings earns

The interest rate your bank pays you depends on three things you can actually control: the type of account you choose, the bank you use, and how much money you keep in the account. Banks that operate mostly online tend to pay higher rates than banks with physical branches, because they have lower costs to pass on to you. Some account types — like money market accounts or certificates of deposit — pay more than basic savings accounts. And a few banks pay higher rates once you reach a certain balance, though this is less common than it used to be.

The simplest move is to switch banks. If you have been at the same bank for years, you are probably earning less than half what you could earn elsewhere. A savings account at an online bank might pay 4% or 5% annual percentage yield (APY), while a traditional bank branch might pay 0.01%. That difference compounds over time — on $10,000, it means hundreds of dollars a year in your pocket instead of the bank's.

You cannot negotiate your rate the way you might negotiate a mortgage or car loan. Banks set their rates based on what the Federal Reserve does and what other banks are offering. But you can shop around, and you should do this every few months because rates change constantly.

Key Takeaways

  • Online banks typically pay two to five times more interest than traditional bank branches because they have lower operating costs.
  • Money market accounts and certificates of deposit often pay higher rates than regular savings accounts, though they may have restrictions on withdrawals.
  • Switching banks is usually the fastest way to earn more, and you can move your money without closing your old account first.
  • Rates change frequently, so checking what different banks are offering every few months can catch you earning significantly less than you could.
  • Banks do not negotiate interest rates with individual customers, but they do compete with each other for your deposits.

Online banks versus traditional banks

An online bank has no physical locations, which means it does not pay for building leases, tellers, or branch staff. Those savings get passed to you as higher interest rates. The trade-off is that you cannot walk into a branch to deposit cash or speak to someone face-to-face, though most online banks let you deposit checks by phone camera and offer customer service by phone or chat.

A traditional bank with branches pays lower rates because it has higher costs. You get the convenience of a physical location, but you pay for it in lower interest. Some people find this trade-off worth it — if you need to deposit cash regularly or prefer in-person service, a branch bank might make sense even at a lower rate. But if you are mainly moving money electronically and do not need a branch, an online bank will earn you significantly more.

Hybrid banks exist too — they have a few branches but operate mostly online, and their rates fall somewhere in the middle. Credit unions, which are member-owned rather than shareholder-owned, sometimes offer competitive rates, though this varies widely by location and membership.

Money market accounts and certificates of deposit

A money market account is a savings account that usually pays a higher rate than a basic savings account. In exchange, it often requires a higher minimum balance to open (sometimes $2,500 or more) and may limit how many withdrawals you can make per month. Some money market accounts also come with a debit card or checkbook, which makes them feel more like a checking account. The rate is variable, meaning the bank can change it whenever it wants.

A certificate of deposit (CD) is an account where you agree to leave your money untouched for a set period — typically three months, six months, one year, or five years. In exchange, the bank pays you a fixed rate that is usually higher than a savings account. The longer you lock your money away, the higher the rate tends to be. The catch is that if you withdraw before the term ends, you pay a penalty, which can eat into your earnings. CDs make sense if you have money you will not need for a while and want to lock in a may provide rate.

Both of these account types are still insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000, just like a regular savings account, so your money is protected if the bank fails.

How to compare rates across banks

Start by visiting the websites of banks you are considering and looking for the current APY on their savings accounts. Write down the rate, the minimum balance required, and any monthly fees. Do this for at least three to five banks so you can see the range. Online banks like Ally, Marcus, Discover, and American Express all publish their rates publicly on their websites — no account needed to see them.

Pay attention to the difference between APY and interest rate. APY (annual percentage yield) includes the effect of compounding, so it is the number that actually matters for your money. A bank might advertise a 4.5% APY, which means if you leave $1,000 in the account for a year and do not touch it, you will have $1,045 at the end (before taxes).

Check whether the rate is may provide or promotional. Some banks offer a high rate for new customers for a limited time, then drop it. Read the fine print to see when the promotional rate ends and what the regular rate will be. A rate that is may provide for as long as you hold the account is more reliable than one that can change at any time.

Moving your money to a higher-paying bank

Once you have chosen a new bank, you do not have to close your old account first. Open the new account, and then transfer your money over. Most banks can do an electronic transfer in one to three business days. You can also withdraw cash from your old bank and deposit it at the new one, though this is slower and riskier.

After the money arrives, you can close your old account if you want. There is no penalty for closing a savings account — banks only charge early withdrawal penalties on CDs. Keep your old account open for a few weeks if you are worried you forgot about any automatic deposits or payments tied to it.

If you have direct deposit set up with your employer, you will need to update it with your new bank's routing number. Your paycheck will not go to the old account automatically — you have to tell your employer where to send it. This usually takes one or two pay periods to take effect.

Why banks change rates and how often to check

Banks raise and lower their rates based on what the Federal Reserve does. When the Fed raises its benchmark rate, banks have more incentive to pay you higher interest to attract deposits. When the Fed lowers rates, banks lower what they pay you. The Fed does not set individual bank rates — it sets a range that influences the whole market, and banks compete within that range.

Rates can change weekly or even daily. A bank that was paying 4.5% last month might be paying 4.25% this month. This does not mean you should move your money constantly — switching banks has a small cost in time and attention. But checking rates every few months makes sense, especially if you have a large balance. If you find a bank paying 0.5% more than where you are now, that is worth moving for.

Set a reminder on your phone or calendar to check rates every three months. Spend fifteen minutes comparing three to five banks, and if one is paying significantly more, move your money. Over time, this habit will earn you hundreds or thousands of dollars more than staying put.

Minimum balances and fees that eat into your earnings

Some banks require a minimum balance to earn the advertised rate. If your balance drops below that minimum, the rate drops too — sometimes to nearly zero. Read the terms carefully to see what the minimum is and whether it applies to the whole account or just to earn the higher rate.

Monthly maintenance fees are less common than they used to be, but they still exist at some banks. A $5 or $10 monthly fee can wipe out a year's worth of interest on a small balance. Always check whether there are any monthly fees before you open an account. Most online banks have no monthly fees at all.

Some banks also charge fees for things like overdrafts, wire transfers, or paper statements. These are less relevant to a savings account (which you should not be overdrawing), but they matter if you use the bank for checking too. Factor in the full fee picture, not just the interest rate.

Frequently Asked Questions

Can I keep money at multiple banks to earn more interest?

Yes. There is no rule against having savings accounts at several banks. Some people keep a high-yield account at an online bank for most of their savings and a smaller account at a local branch for cash deposits. Your FDIC insurance covers up to $250,000 per bank, so if you have more than that, spreading it across banks also protects your money.

What if I need to withdraw money before a CD matures?

You can withdraw early, but you will pay a penalty. The penalty is usually a certain number of months of interest — for example, three months of interest on a one-year CD. On a small CD, this might only be a few dollars. On a large one, it could be significant. Read the CD terms to see what the penalty is before you buy.

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

Yes. Interest is taxable income. Your bank will send you a 1099-INT form at the end of the year if you earned $10 or more in interest, and you report it on your tax return. This is one reason to keep your savings in a regular account rather than a retirement account like an IRA — retirement accounts have different tax rules.

Will switching banks hurt my credit score?

No. Opening a savings account does not affect your credit score. Credit scores track borrowing and repayment, not deposits. You can open and close savings accounts without any impact on your credit.

What happens to my interest if rates drop after I open an account?

Your rate will drop too, unless you have a CD with a fixed rate. Savings account rates are variable, meaning the bank can change them whenever it wants. A CD locks in a rate for the full term, so if you open a one-year CD at 4.5%, you will earn 4.5% for the full year even if rates drop to 2%.