Savings accounts, especially high-yield accounts, offer the opportunity to earn a solid interest rate on your balances. APYs fluctuate regularly, though, and it can be difficult to know if you are earning a competitive return.
According to data from the Federal Deposit Insurance Corporation (FDIC) published in February 2025, the national average savings rate is 0.41%. Still, you can earn much higher rates on some accounts. Generally, any rate over 4% is highly competitive, though you’ll need to watch out for changes due to inflation.
Key Insights
- Savings APYs shift with Fed rate changes and inflation trends.
- Many banks still pay below inflation, eroding purchasing power.
- Online banks often offer 3.5–5% APYs, far above the 0.41% average.
Interest on Savings: What’s a Good Rate and How Does it Work?
“Interest rates are higher than they have been in years. Anything above 4% is pretty competitive right now, but it changes as the environment changes,” says Rebecca Bradshaw Palmer, CFP and head of financial guidance at Fruitful, a financial membership.
It’s true: While national average savings rates have fallen slightly from highs in 2024, the average interest rate on a savings account is still much higher than it has been in the last few years. Unfortunately, many experts expect rates to continue to drop throughout 2025, with economic uncertainty playing a role in any larger shifts.
That is because APYs on savings accounts are tied to the federal funds rate, which changes to combat inflation. When inflation is high, the Federal Reserve raises the federal funds rate to try and tame rising costs, and interest rates also go up. As inflation slows, the Fed may cut rates in response.
“With the Federal Reserve's periodic revision of the [federal funds] rate, you'll notice that banks often reciprocate by adjusting their savings account interest rates. However, not all banks do this simultaneously or by similar margins,” explains Gary Zimmerman, founder and CEO of MaxMyInterest.
Because of this, it’s important to keep an eye on the overall economic climate to predict rates, in addition to comparing APYs on top savings accounts.
Good Interest Rate Savings: An Example
High interest rates are good news for savvy savers, allowing them to earn a return on their balances. A savings account with a high APY can earn you a solid return over time, thanks to compounding interest.
For instance, say you put $10,000 in a high-yield savings account with a 4% interest rate. Assuming interest is compounded monthly, you can expect to earn about $408 in interest over the course of a year, without depositing any additional money. Over five years, that number goes up to more than $2,210. If you continue to add money to your balance each month, your earnings could be even higher.
Unfortunately, APYs on savings accounts are variable, so shifts in your interest rate could affect your return. Additionally, savings accounts don’t always offer the best return on investment, compared to investing in stocks or bonds.
“Many banks are paying an interest rate that’s less than the inflation rate, which means you’re actually losing real purchasing power every day. This is why it’s important to pay attention to where you’re keeping your money, to make sure that you’re not falling behind. Your money should be working hard for you, protecting you against inflation,” advises Zimmerman.
Even with lower rates of return than other investment options, high-yield savings can be a good choice for money you need frequent access to, like emergency funds.
Tips for Earning a Good Interest Rate on Your Savings
Keep larger balances in high-yield accounts: Rather than keeping the majority of your money in checking, Palmer recommends finding a higher-earning savings account and keeping most of your money there.
Shop around constantly. “To earn the best rates, you need to shop around constantly. Listing services don’t always display all the best rates, nor do they help you earn more as rates change. If you want to earn as much as you can on your cash, it makes sense to open multiple online savings accounts and then move your money to whichever bank is willing to pay you the most each month,” says Zimmerman. Palmer adds that you shouldn’t be afraid to move your money somewhere you can earn a better return.
Read the fine print. Your savings account should work for you, both in terms of interest rate and other restrictions. Before opening an account, keep an eye out for terms like promotional rates that end after a few months, balance restrictions or tiered earnings, withdrawal limits and monthly fees that can reduce your overall return.
Frequently Asked Questions
1. How Much Will $1,000 Make in a High-Yield Savings Account?
It depends on your interest rate, compounding schedule and how rates fluctuate over time. If you keep a $1,000 balance in an account with a 4% interest rate for one year, and rates don’t change, you can earn about $40 in interest with a monthly compounding schedule.
2. Where Can I Get 5% Interest on My Savings Account?
No major national banks are offering 5% APY on savings accounts, though you may be able to find higher rates at credit unions or smaller local institutions.
3. What Is a Good Interest Rate on a Savings Account?
A good savings account rate beats the national average. Many online banks and credit unions offer 4–5% APY, so if you’re earning under 1%, consider switching to a higher-yield account.
