When searching for a good interest rate on a savings account, you’ll typically find that the rates banks offer vary widely. You may see the terms “interest rate” and “APY” (annual percentage yield) used, but these two things are not the same and it’s important to understand the difference.
The interest rate on a savings account is the rate you earn from keeping your money in the account. Essentially, you’re earning interest for lending your money to the bank or financial institution.
Here’s how it works: Say you have a savings account that earns simple interest, paid annually. In this case, if you have $1,000 and earn 1.00% interest, you would have $1,010 at the end of the first year, $1,020 after the second year, and so on. However, savings accounts usually pay compound interest. With compound interest, you earn interest on the entire balance, including previous interest payments. Interest may compound daily, monthly, or annually, depending on the bank.
APY is how much you will earn on the money in your savings account over the course of a year, taking compound interest into account. APY is higher than the interest rate because it includes the effect of compounding
When you’re looking for the interest rate on a savings account, you’ll usually see the APY listed, which tells you how much you’ll earn on your money over the course of a year. For most traditional savings accounts, the APY is currently below 1.00%. To get the best possible rate, you may want to consider a high-yield bank account, which may offer 3.00% APY or higher.
National Average Savings Account Rate for 2024
The national savings account rate is 0.45% APY as of October 21, 2024 as of August 19, 2024, according to the Federal Deposit Insurance Corporation (FDIC).That’s more than the average checking account rate of 0.08%. By comparison, money market accounts have a rate of 0.68%.
If you’re wondering, “what is a good interest rate on a savings account,” keep in mind that the rate can change. For instance, rates were even lower in 2021 and 2022.
Now that you know what the typical rate is currently for a traditional savings account, when you’re choosing a savings account, you may want to look for one that pays as high of a rate as possible while delivering the features that are most important to you.
How the National Average Savings Rate Is Calculated
The national average savings account rate is the national average that includes all banks insured by the FDIC. The average is weighted by each bank’s share of domestic deposits. This matters because some of the country’s largest banks have savings account rates that are even lower than the current national average.
It’s also important to note that savings account interest rates usually rise and fall with rates set by the Federal Reserve. Generally, when the Fed slashes interest rates, APYs on savings accounts fall. When the Fed raises interest rates, savings accounts tend to have higher yields.
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APYs at Big Banks
Here are the APYs for traditional savings accounts at some big banks in the U.S. as of May 7, 2024.
| Bank* | APY |
|---|---|
| Capital One | 4.25% |
| TD Bank | 0.02% |
| Chase | 0.01% |
| Bank of America | 0.01% |
| Wells Fargo | 0.01% |
| U.S. Bank | 0.01% |
*May not reflect regional variances or balance tier options.
Recommended: Plug in the APY percentages above into the APY calculator below to see how they compare.
How to Get a Higher Interest Rate for a Savings Account
There are two main ways to earn a higher interest rate on a savings account: with a high-yield savings account or by linking your checking and savings accounts.
High-yield Savings Accounts
High-yield savings accounts offer interest rates that are considerably higher than the national average. These accounts are usually available at online banks as well as some traditional banks and credit unions. However, the online savings account typical interest rate is generally higher than the rates at bricks and mortar institutions.
The benefit of these types of high-yield accounts for savings is that you can generally earn more than 3.00% APY on your money, which is a good rate for a savings account in comparison to the national average rate.
Money held in a high-yield savings account is usually FDIC-insured, meaning your money is protected in the event of a bank failure up to $250,000 per depositor and per ownership category. This generally makes them a good place to set aside extra cash for an emergency fund or to meet short-term savings goals.
Recommended: Understanding How High Yield Savings Accounts Work
Linked Accounts
If you have a checking account at a bank, you might be able to increase your interest rate by opening a savings account at the same institution. Some banks will offer a higher interest rate if you have both a checking and a savings account with them and link the two.
Although savings rates on linked accounts are typically higher, everything is relative. Opening a linked account might allow you to increase your savings APY from 0.01% to 0.02% or 0.03%. Banks might also increase the rate a bit more with higher account balances.
Common Requirements to Receive a Higher Interest Rate
In order to open a high-yield savings account, there are typically certain criteria you are required to meet.
• Account minimums: You may need to make a high initial deposit in order to open a high-yield savings account. Additionally, you might be required to keep a certain balance in the account.
• Direct deposit: You may have to set up direct deposit for a high-yield savings account. In many cases, you can only deposit money by electronic bank transfer.
• Limited withdrawals: Some banks impose a monthly withdrawal limit on savings accounts. For instance, they might not allow you to make more than six withdrawals a month, otherwise they may charge you a penalty. Inquire at your bank to find out their specific policy.
How Will Savings Rates Change Throughout 2024?
It’s impossible to know exactly how the savings rate might change during the rest of 2024. That will depend in part on whether inflation rises and how the Federal Reserve responds to keep inflation in check. In general, if the Fed cuts interest rates, savings rates may be reduced as well. If the Fed raises rates, the savings rates might go up.
Currently, many high-yield savings accounts offer rates above 3.00% APY. By taking time to shop around and find the right fit, you may be able to find the right savings vehicle to help you save for the future — and earn money while doing so.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
What is the interest rate on a traditional savings account?
According to the FDIC, as of August 19, 2024, the current national average deposit rate for savings accounts is 0.45% APY as of October 21, 2024.
What is considered a high-interest savings account?
High-interest savings accounts typically offer interest rates many times the national average. For instance, currently, these accounts generally offer 3.00% APY or higher. While high-yield savings accounts may be offered at traditional banks and credit unions, the highest rates are often offered at online banks.
Is 5.00% a good savings rate?
Yes, 5.00% is a good savings rate. It’s much higher than the current national average deposit rate for savings accounts, which is 0.45% APY as of October 21, 2024.
How much interest does $10,000 earn a year?
How much interest $10,000 earns in a year will vary depending on several factors, such as the interest rate and how often interest is compounded. Assuming a 3.00% APY, $10,000 compounded annually earns $300 in interest in a year. Compounded daily, the same interest rate earns approximately $304 in a year.
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4.20% APY
SoFi members with direct deposit activity can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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