Key Takeaways
- Savings accounts are paying up to 5.50% APY—their highest level in 20 years—thanks to the Fed's aggressive inflation-fighting campaign.
- Shopping around for a top APY means you can earn 10 to 12 times more than the national average rate, which is less than half a percent.
- $5,000 in one of today's best high-yield savings accounts could earn as much as $136 in just six months—compared to about $11 with an average rate.
- Able to save more than that? We'll show you how much you can earn with today's record rates.
- Savings account rates are likely to stay elevated for now, but they will at some point fall when the Fed signals it's ready to start cutting rates.
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Savings Account Rates Surged in 2023—And Are Still at a Peak
Last year was a historically remarkable year for deposit interest rates. Due to decades-high inflation, the Federal Reserve raised its federal funds rate 11 times between March 2022 and July 2023. That aggressive rate-hike campaign in turn pushed banks and credit unions to dramatically raise their rates on savings, money market, and CD accounts.
The annual percentage yield (APY) on the best nationwide savings account skyrocketed to 5.50% in early December. It's estimated that this is the highest nationally available savings account rate in 20-plus years since the federal funds rate has not been this high since 2001.
Since July, the central bank has opted to hold its benchmark rate where it is. As a result, savings account returns stopped climbing. Fortunately for savers, the Fed's steady hand has resulted in savings account rates also stabilizing, with the current record rate of 5.50% APY still available.
How Much Can I Earn With a High-Yield Savings Account?
The amount of interest you can collect on your savings varies wildly, depending on how much you shop around and whether you're willing to open a high-yield savings account somewhere other than your primary bank.
The current national average rate for savings accounts is a paltry 0.46% APY, according to the latest data published by the FDIC. With a rate like that, you won't earn much. In fact, a $5,000 deposit held at that rate for six full months won't even earn $12 in interest.
As unimpressive as the national average rate of 0.46% sounds, many banks offer even less than that. And some of them—including big-name players like Chase and Bank of America—pay shockingly less. So always be sure you know the rate your bank is offering, and compare that to what's available if you move a portion of your savings elsewhere.
Fortunately, it's easy to earn 10 to 12 times more than the national average with one of today's top-paying high-yield savings accounts. Beyond the nation-leading rate of 5.50% APY, another 14 options in our daily ranking pay 5.20% APY or better. That gives you a broad selection from which to choose a bank and an account whose features and required minimums suit your needs.
So how much can you earn with a $5,000 deposit? Or maybe you can sock away even more? Here are the numbers.
| 6 Months of Earnings at Different Savings Account Rates and Balances | |||||||
|---|---|---|---|---|---|---|---|
| Balance | 0.46% (national average) | 3.00% APY | 3.50% APY | 4.00% APY | 4.50% APY | 5.00% APY | 5.50% APY |
| $5,000 | $11.51 | $74 | $87 | $99 | $111 | $124 | $136 |
| $7,500 | $17.27 | $112 | $130 | $149 | $167 | $185 | $204 |
| $10,000 | $23.02 | $149 | $174 | $198 | $223 | $247 | $272 |
| $15,000 | $34.53 | $223 | $261 | $297 | $334 | $371 | $407 |
| $25,000 | $57.56 | $372 | $434 | $495 | $556 | $618 | $679 |
It's important to note that what you earn on a savings account is not a guaranteed rate (see our discussion below about CDs for options that will lock in your rate). Banks and credit unions can lower a savings account rate at any time, and they don't have to warn you. But given the current rate environment, it's possible you'll be able to earn one of the high rates above—or close to it—for six months or more.
How Long Will Savings Account Rates Stay This High?
The Federal Reserve is currently in a holding pattern on its federal funds rate, watching to see if inflation comes down both sufficiently and sustainably. Until it feels confident in this, the Fed is likely to keep its benchmark rate where it is. And as long as it does that, savings account rates are also expected to remain roughly steady.
At some point, however, the Fed will decide to make a rate cut. Back in December, Fed members penciled in an expectation of lowering rates three times in 2024. But economic data that's been released since then show that inflation is proving stubborn—actually showing an acceleration in the latest report.
As a result, market predictions on when the Fed will start cutting rates have been pushed further out, with a majority of traders not projecting a first decrease until June. But whether that aligns or not with what the Fed ultimately does remains to be seen. In fact, doubts are creeping in on how many times—if any—the central bank will be able to cut rates in 2024.
Lock in One of Today's Record Rates by Adding a CD
Though the Fed's timeline is uncertain, it's a reasonable assumption that it will begin lowering interest rates sometime in 2024 or 2025. But this doesn't mean you're completely at the mercy of the Fed when it comes to how much you can earn on your cash savings.
One way to protect yourself against future rate decreases is to commit a portion of your savings to a certificate of deposit (CD). Though CDs require committing your funds for the duration of the CD term, the payoff is that your rate is locked and guaranteed for the full length of the CD—no matter what happens with the Federal Reserve and rates.
Today's top nationwide CD is paying 5.75% APY for 6 months, but there are almost 10 options in our daily ranking of the best CDs paying at least 5.50% APY on terms up to 13 months. And if you can commit your funds longer, you can lock in a rate of at least 5% for up to 3 years. Assuming the Fed lowers interest rates in 2024 and 2025, a multi-year CD you open now will be a financial gift to your future self.
Choose a CD length carefully based on your financial timeline, so you can avoid having to withdraw before the term ends and getting hit with an early withdrawal penalty. These vary widely—from mild to downright onerous—so research the penalty policy on any CD you’re considering before you sign on the dotted line.
Best CD Rates for May 2024: Up to 5.51%
Best High-Yield Savings Accounts for May 2024—Up to 5.55%
Best Money Market Account Rates for May 2024—Up to 5.35%
How We Find the Best Savings and CD Rates
Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.
Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.
Article Sources
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Federal Reserve Board. "Open Market Operations."
FDIC. "National Rates and Rate Caps."
Federal Reserve Board. "Summary of Economic Projections, December 13, 2023," Page 4.
