The National Average Savings Interest Rate is Near Zero. Here’s How You Can Earn Much More

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It’s a great idea to save money in an accessible account — for emergencies, short-term goals, and other near-future plans. But while a savings account is secure and accessible, it’s not going to give you sky-high returns.

In fact, the current national average savings interest rate is just 0.08%, according to the FDIC.

As the Federal Reserve raises federal interest rates, the average is increasing; it was 0.06% just a few months ago. Still, that average is much closer to what you’ll earn with a traditional savings account from a brick-and-mortar bank, which may be as low as 0.01%. If you’re looking to get the highest return on your savings, but still maintain security and flexibility, a high yield savings account can be a much more lucrative option. 

Here’s how you can find an above-average savings account rate today, and what to look for when you’re deciding which bank or financial institution to use:

Average Interest Rates on Savings Accounts

Though the national average savings account interest rate is growing — from 0.06% earlier this year to a current 0.08% — it’s still much lower than high yield savings accounts offer.

Some of the best high yield savings accounts have grown from pandemic-era lows of around 0.5% APY earlier this year to rates above 1% APY today. That’s more than 12 times the national average.  

“Interest is the first factor. So, if I can get 0.75% versus 0.02% … that’s a considerable amount of extra interest that the bank is paying you,” says Ayesha Selden, certified financial planner and franchise owner of Ameriprise Financial Services, Inc. in Philadelphia. 

Here’s how different interest rates can play out over a year of saving:

If you opened a savings account earning 0.08% APY with an initial deposit $5,000 and made monthly deposits of $200 for a full year, you would net a total of just $4.88 in interest over 12 months. Though, with your contributions, your total balance would grow to $7,404.88 over that time period.

Now say you started with the same deposit and made the same contributions for 12 months, but in an account earning 1% APY. You’d earn $60.98 in interest for a total balance of $7,460.98 at the end of the year.

Ultimately, you’re not going to get rich off the return on a savings account. But choosing an account with a great interest rate can add up to more dollars in the bank over time.

Which Bank Offers the Highest Savings Account Interest Rates?

To get the highest yield on your savings, the best places to look are online banks. 

Some of the best savings account rates available today are offered by institutions like Ally, Bask Bank, CIT Bank, and Lending Club, among others. Online divisions of some banks you might be more familiar with, such as Discover or Capital One, offer competitive high yield savings accounts, too.

You may also want to see what local banks in your area, or credit unions you qualify for, offer. Many local financial institutions offer high yield savings accounts with competitive rates on par with online banks. 

Here’s a more in-depth look at banks offering the best savings account rates available right now:

Pro Tip

Watch out for potential fees on savings accounts, such as monthly maintenance fees and paper statement fees. If your bank does charge fees, check your account or the bank’s site to see if there are actions you can take to eliminate them.

Do Interest Rates Change for Savings Accounts?

Interest rates on savings accounts are variable, meaning they can and do change over time. 

Savings account rates are based on the federal funds rate set by the Federal Reserve, though they’re not directly correlated. When the Fed raises rates, interest rates on savings accounts can go up, too. But it’s ultimately up to the banks (which have other factors to consider, like competition and their own reserves) to determine when and by how much they’ll raise rates.

The Fed recently made the largest rate hike in 28 years, raising rates to a target 1.5% – 1.75%. Plus, the Fed has signaled for more rate hikes to come in its effort to combat inflation, so experts predict that savings rate will continue to rise in turn. In fact, some experts say high-yield savings accounts could be returning to 2% or more by the end of 2022.

Advantages of Online Banks and Credit Union Savings Accounts

The type of banks that offer the best yields right now tend to be online banks and similar financial institutions that conduct most of their business on the web. That’s because fully online banks have a much lower overhead cost than banks with brick and mortar branches, says Ben Arbov, the founder & CEO of Greatest Gift, a savings app geared toward children.

“They don’t need to pay for real estate, furniture, electric bills, or bank staff,” says Arbov. “Instead, they offer their services online and give a part of their operational savings to their customers in the form of a higher return on deposits.”

Not only are yields higher from online banks and credit unions, but they often come with low or no minimum deposit requirements and no monthly fees. Plus, opening an account with these institutions is usually a breeze: you’ll just need to submit an online application with information like your name, email address, Social Security number, and more.

You’ll also typically need to submit routing and account information from another bank account to transfer funds to your new online account.

Online banks may create more of a barrier of access for some people. You may not have ATM access or a branch to go to for withdrawals, and instead rely on online transfers between accounts. But Selden views that as a benefit, saying it can help you stay disciplined in your savings goals.

How to Find the Highest Return Savings Account

To find the best online savings accounts, Arbov suggests starting by confirming the bank has FDIC insurance.

“FDIC insurance means that the bank is insured by the federal government and that your money is safe with them,” he says. This is part of what makes a savings account such a safe option for your emergency fund. “If anything happens to the bank, the federal government will take care of you in amounts of up to $250,000 per account.”

You may be unfamiliar with an online-only bank, but if it’s FDIC-insured, your money is secure. 

Beyond insurance, compare the details of each account, starting with interest rate. NextAdvisor’s list of best savings account rates is a great way to guage the highest returns available today.

Look for the account with the highest yield that also comes with no minimum balance requirements, says Michael Ryan, financial advisor and coach, and founder of MichaelRyanMoney.com. 

Fees, too, are a big consideration — though many high yield online savings accounts don’t charge them. Some fees to watch out for include monthly maintenance fees, paper statement fees, inactivity fees, fees for accessing money through an ATM, and more. 

Finally, make sure you know about any requirements you must meet to earn the advertised yield on your account. Some banks may offer higher yields only if you maintain a certain minimum balance, for example, or if you also open a checking account with the bank.