What Is a Good Interest Rate on a Savings Account?

Thanks to a spike in interest rates the past few years, Americans have become more savvy when it comes to finding attractive rates. But what is a good interest rate on a savings account? And how can you get one?

[See: Best High-Yield Savings Accounts]

What Is a Good Interest Rate on a Savings Account?

In 2024, you’ll typically find the best savings interest rate offered by what’s known as a high-yield savings account. A high-yield savings account offers much higher than average annual percentage yields than a traditional savings account does.

In June 2024, the average interest rate for a savings account in the U.S. stood at 0.45%, according to the Federal Deposit Insurance Corp. By comparison, interest rates for some high-yield savings accounts exceed 5.00%.

Vanessa Potter, assistant vice president and branch manager at Addition Financial Credit Union, pegs the best interest rate for a savings account at 4.00% or more. “To find the best interest rates on savings accounts, you need to research and take your time during the process,” she advises.

The table below shows a sampling of recent rates for high-yield savings accounts.

Financial institution Name of savings account APY for high-yield savings
Bask Bank Interest Savings Account 5.10% with no minimum balance or deposit
BMO Alto Online Savings Account 5.10% with no minimum balance or deposit
BrioDirect High-Yield Savings Account 5.30% with minimum deposit of $5,000
CIT Bank Platinum Savings Account 5.00% with minimum deposit of $100 and minimum balance of $5,000
EverBank Performance Savings Account 5.05% with no minimum balance or deposit
My Banking Direct High Yield Savings Account 5.55% with minimum balance of $1.00 and minimum deposit of $500
Popular Direct Select Savings Account 5.15% with minimum balance of $0.01 and minimum deposit of $100

[Read: Best Online Banks.]

How to Get the Best Interest Rate for a Savings Account

Traditional brick-and-mortar banks typically provide lower interest rates, so if you’re hunting for the best interest rate for a savings account, your best bet is likely a high-yield savings account at an online-only bank.

Because online banks don’t operate branches staffed by workers, they can pass along these cost savings to depositors in the form of more generous interest rates. Data published by National Bureau of Economic Research shows that, following an interest rate increase carried out by the Federal Reserve, online banks tend to hike interest rates more than traditional banks. Online banks also attract younger, higher-income customers who are inclined to shop around for higher interest rates, and so they boost their rates to attract and keep customers.

According to Gary Zimmerman, founder and CEO of MaxMyInterest.com, “Brick-and-mortar banks typically pay rates that are well below the rate of inflation, which means you’re losing purchasing power every day.”

“While you might want to keep your main checking account at a brick-and-mortar bank, online banks have lower operating costs, and so they’re able to pay higher rates on savings,” he adds. “So savvy savers might want to open multiple accounts — a core brick-and-mortar checking account plus higher-yielding online savings accounts.”

Other types of savings accounts that might deliver attractive interest rates are money market accounts and certificates of deposit.

When you’re seeking a place to put your savings, look for financial institutions whose deposits are federally insured and that don’t charge monthly fees or require minimum balances, says Zimmerman. In addition, be sure the interest rates being advertised apply to all savings balances.

[Read: Best Savings Accounts.]

The Future of Savings Account Interest Rates

Unfortunately, the current era of sky-high interest rates for savings accounts may be coming to a close. Why? Because savings interest rates are expected to dip in 2024.

Following a series of 2022 and 2023 hikes in the benchmark U.S. interest rate aimed at cooling inflation, the Federal Reserve’s rate-setting committee is on track to carry out one interest rate cut in 2024. The current range for the benchmark rate is 5.25% to 5.50%. When the Fed committee decreases the benchmark rate, financial institutions tend to follow suit with decreases in interest rates for their savings accounts.

Ken Tumin, founder of DepositAccounts.com, says, “Growing signs of Fed rate cuts have already put downward pressure on CD rates. Savings account rates will likely start to fall as the Fed starts its rate cuts.”

Tumin says that ahead of a potential slump in savings interest rates, now is time to lock in appealing rates for high-yield savings accounts.

“The rate advantage of a high-yield savings account over an average savings account is the highest it has been in more than a decade,” he says. “The possibility of an economic slowdown later in 2024 makes it especially important to prioritize building an emergency fund. Opening a high-yield savings account now and taking advantage of today’s high rates can help grow your emergency fund.”

More from U.S. News

How Many Bank Accounts Should I Have?

How Much Money Should You Have in Savings?

How to Switch Banks: A Step-by-Step Guide

What Is a Good Interest Rate on a Savings Account? originally appeared on usnews.com

Update 06/21/24: This story was previously published at an earlier date and has been updated with new information.

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