High-yield savings accounts earn the most money right now
A high-yield savings account earns more interest than a regular savings account at most banks. The difference comes down to the interest rate — the percentage of your money the bank pays you each year for letting them hold it.
Right now, high-yield accounts at online banks pay roughly two to five times more than traditional bank savings accounts. A regular savings account at a large bank might pay 0.01% per year. A high-yield account might pay 4% to 5% per year. On $10,000, that difference means earning $1 to $500 per year instead of $1.
The catch is straightforward: high-yield accounts are almost always at online-only banks, not at the branch banks you walk into. Online banks have lower overhead costs, so they pass some of that savings to you as higher interest rates.
Key Takeaways
- High-yield savings accounts at online banks currently pay 4% to 5% annual interest, while traditional bank savings accounts typically pay 0.01% to 0.05%.
- The interest rate you receive changes over time as the Federal Reserve adjusts its benchmark rate, so the highest-paying account today may not be the highest next year.
- Money in a savings account is insured up to $250,000 by the FDIC (Federal Deposit Insurance Corporation), whether the bank is online or in-person.
- You can move money between savings accounts without penalty, so you can switch to a higher-paying account whenever rates change.
How interest rates work and why they change
Banks set their savings rates based partly on what the Federal Reserve does. The Federal Reserve is the central bank of the United States, and it sets a benchmark interest rate that influences what all banks pay. When the Federal Reserve raises its rate, banks tend to raise what they pay you. When it lowers its rate, banks lower what they pay you.
This means the "best" high-yield account changes over time. An account paying 5% today might pay 3% in six months if the Federal Reserve cuts rates. The bank that pays the most right now might not pay the most next quarter. This is why checking the current rates before you move your money matters more than finding the account with the highest rate ever.
You can check current rates on comparison sites, but the rates listed there are snapshots — they change frequently. When you find an account you want to open, visit the bank's own website to see the rate they are offering that day.
Online banks versus traditional banks
Online banks pay more because they do not run physical branches. A branch costs money to staff, maintain, and heat. Online banks skip those costs and use the savings to pay depositors higher interest. You cannot walk in and talk to a teller, but you can move money through their website or app, and customer service is usually available by phone or chat.
Traditional banks — the ones with buildings in your neighborhood — typically pay much less interest on savings. They use the money they save on interest to fund their branches and in-person services. If you value being able to walk in and speak to someone face-to-face, you may choose a traditional bank even though you earn less interest. That is a reasonable trade-off; the choice depends on what matters to you.
Some credit unions also offer competitive savings rates. Credit unions are member-owned financial institutions that sometimes pay better rates than traditional banks, though usually not as high as online banks. If you belong to a credit union, it is worth checking what they offer.
Money market accounts and certificates of deposit
Two other account types sometimes pay more than regular savings accounts: money market accounts and certificates of deposit (CDs).
A money market account is a hybrid between a checking and savings account. It usually pays interest similar to a high-yield savings account, but it may come with a debit card or checkbook so you can withdraw money more easily. The trade-off is that some money market accounts have higher minimum balances or monthly fees. Read the fine print before opening one.
A certificate of deposit is a different animal. You give the bank a sum of money and agree to leave it there for a set time — three months, six months, one year, five years, or longer. In exchange, the bank pays you a higher interest rate than a savings account. The longer you lock your money away, the higher the rate usually is. The catch: if you take the money out before the time is up, you pay a penalty. CDs make sense if you know you will not need the money for a while, but they are not right if you might need it sooner.
What to look for when comparing accounts
Interest rate is not the only thing that matters. Before you open an account, check these details:
Minimum balance: Some accounts require you to keep a certain amount of money in them, or the interest rate drops. Others have no minimum. If you have $500 to save, an account requiring $25,000 will not work for you.
Monthly fees: Some accounts charge a monthly maintenance fee. A high interest rate does not help if you lose $5 or $10 per month to fees. Look for accounts with no monthly fees.
FDIC insurance: Make sure the bank is FDIC-insured. This means if the bank fails, the government protects your money up to $250,000. All legitimate banks are FDIC-insured, but it is worth confirming on their website.
How you access your money: Can you move money out whenever you want, or are there limits? Most savings accounts let you withdraw money freely, but some have restrictions. Check the bank's website or call and ask.
How much money you can actually earn
The amount of interest you earn depends on three things: how much money you have in the account, what interest rate the bank is paying, and how long the money sits there.
If you have $5,000 in a high-yield account paying 4.5% per year, you earn about $225 per year, or roughly $19 per month. If you have $20,000, you earn about $900 per year. If you have $100,000, you earn about $4,500 per year. The interest is calculated daily and added to your account monthly, so your balance grows slightly each month.
This is not a way to get rich, but it is better than earning nothing. If you have money sitting in a regular savings account earning 0.01%, moving it to a high-yield account earning 4.5% means the difference between earning $5 per year and earning $2,250 per year on $50,000. That is real money.
Frequently Asked Questions
Do I have to pay taxes on the interest I earn?
Yes. Interest earned in a savings account is taxable income. At the end of the year, the bank sends you a form called a 1099-INT showing how much interest you earned. You report this on your tax return. The interest is taxed as ordinary income at your regular tax rate.
Can I move my money to a different account if rates drop?
Yes. There is no penalty for moving money out of a savings account. You can transfer it to another bank's account whenever you want. This is different from a CD, where early withdrawal costs you a penalty. You can shop around and move to whichever bank is paying the best rate at any time.
What if the bank goes out of business?
Your money is protected up to $250,000 by FDIC insurance. If the bank fails, the government pays you back. This protection applies whether the bank is online or in-person, as long as it is FDIC-insured. Check the bank's website to confirm it displays the FDIC logo.
Is a high-yield savings account safe?
Yes, as long as the bank is FDIC-insured. Online banks are just as safe as traditional banks for deposit accounts. The main risk is not the bank failing — it is you forgetting about the account or losing track of where your money is. Keep your login information somewhere safe and check your account statements regularly.
How often do interest rates change?
Banks can change their rates whenever they want, though most change them when the Federal Reserve adjusts its benchmark rate. The Federal Reserve meets roughly every six weeks. Banks may raise or lower rates within days of a Federal Reserve announcement, or they may wait weeks. There is no set schedule, so check your bank's website periodically if you want to know the current rate.