What’s the Average Interest Rate for Savings Accounts?
Banks use the money you deposit into your savings account to make loans to other banks. In return, the bank pays you interest on your account balance. The more interest you earn, the more your money grows, so it’s worth doing your homework to make sure you’re earning the highest rate possible.
What Is the Interest Rate on a Savings Account?
The average savings account interest rate is 0.06% APY, but many of the largest financial institutions in the U.S. pay rates as low as 0.01% APY.
GOBankingRates has identified 10 of the best savings account interest rates available right now, with rates from 0.35% to 0.61%.
|Ally Bank||Online Savings Account||0.50%|
|American Express National Bank, Member FDIC||High Yield Savings Account||0.60%|
|Axos Bank||High Yield Savings||0.61%|
|Barclays Bank Delaware||Online Savings|
|CIT Bank||Savings Builder||0.55%|
|Discover Bank||Online Savings Account||0.60%|
|FNBO Direct||Online Savings Account||0.35%|
|Marcus by Goldman Sachs||Online Savings Account||0.70%|
|Sallie Mae Bank||SmartyPig||0.70%|
|Synchrony Bank||High Yield Savings||0.45%-0.75%|
|Vio Bank||High Yield Online Savings Account||0.50%|
|Today’s current interest rates.
Historical Savings Account Interest Rates
Over the last 50 years, interest rates have ranged from a high of 20% to a low of 0.25%, where they now sit Although this is the lowest level since December 2008, rates remained essentially unchanged from then until December 2015, when they began to creep up slightly, reaching 2%-2.50% in December 2018.
At the onset of the pandemic in the U.S., the Federal Reserve cut rates to stimulate the economy by encouraging Americans to borrow money. The more consumers borrow and ultimately spend, the more money they pump into the economy.
One potential drawback of injecting all that money into the economy is that it can spur inflation, where the price of consumer goods and services increases. The Fed can increase rates to keep inflation in check. However, the Fed believes that the economic benefits of low rates outweigh the risks of a certain level of inflation while the economy continues to recover from the effects of the pandemic, so it plans to keep rates low until early in 2023. That means you’re unlikely to see an increase in savings account rates until that time.
How To Find the Best Savings Account Rates
Banks are unlikely to increase their rates any time soon, but a savings account can still be a good place to park an emergency fund you don’t need immediate access to, especially if you bank with a financial institute with above-average rates.
Online banks often don’t pay for overhead costs like brick-and-mortar banks do, so they can pass those savings on to their customers. For example, Axos Bank offers an online savings account with some of the highest interest rates — over 10 times the average interest rate and more than 60 times the rates of some of the biggest banks in America.
Credit unions are another good option. They’re non-profit and member-owned, so paying competitive rates is a priority.
Wherever you bank, a high-yield savings account is often your best bet if you can meet the minimum balance requirement.
To get the best savings rate at a bank that meets all your needs, do your research. In addition to looking at interest rates, consider minimum opening deposit requirements and balance requirements as well as maintenance and other fees that can reduce the value of that higher rate.
Good To Know
Some banks offer relationship rewards to customers who have multiple linked accounts at the bank. For example, Bank of America offers several reward tiers that boost its Advantage Savings account rates 5% to 20%, depending on the tier, when you maintain a qualifying minimum balance across eligible accounts. Other rewards include discounts on credit cards and loan interest rates.
Alternatives to Savings Accounts
With interest rates so low, even the best savings account probably won’t earn enough to stay ahead of inflation. Consider safe alternatives for cash you don’t expect to need any time soon.
Certificates of Deposit
CDs are a no-risk alternative to a checking account. Although you can’t touch the money during the term of the CD, you can choose from a range of terms to find the one that gives you the best return for the commitment you’re comfortable making. Depending on the bank, terms can be as short as a few months or as long as 10 years. Interest rates depend on the size of the CD and the length of the term, with larger CDs and longer terms usually paying better rates.
Ally Bank, for example, offers terms of three months to five years, with no minimum deposit. The five-year CD earns 2.00%. While that won’t grow your nest egg by much, the rate is considerably higher than Ally’s current 0.50% online savings rate.
Education Savings Plans
A 529 plan can help you save for your children’s education and enjoy tax benefits to boot. As long as you use the money for a qualified education expense, your contributions and withdrawals are tax free.
Consider increasing your contributions to your individual retirement account or 401(k) — or opening a retirement account of you don’t already have one. A 401(k) can be especially lucrative if your employer matches your contributions.
Gabrielle Olya contributed to the reporting for this article.
All rates are the current interest rates today. This article was updated on May 4, 2022, to reflect Barclays current APY rate.
GOBankingRates is a personal finance and consumer interest rate website owned by ConsumerTrack, Inc., an online marketing company serving top-tier banks, credit unions, and other financial services organizations. Some companies mentioned in this article might be clients of ConsumerTrack, Inc., which serves more than 100 national, local and online financial institutions. Rankings and roundups are completely objective, and no institution, client or otherwise, paid for inclusion or specific placement. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author alone and have not been reviewed, approved, or otherwise endorsed by the companies included in the article. All fees and rates are subject to change at the issuers’ discretion. Some interest rates might be short-term or promotional offers only, and it is possible additional terms and conditions must be met in order to obtain the interest rates listed. Rates and availability might vary by region. Verify terms and conditions before opening an account.
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