The Federal Reserve has cut the Federal Funds Rate three times this year, meaning deposit rates are now falling. It’s more important than ever to make sure you’re earning the highest possible interest on your savings, and a high-yield savings account could be the answer.
These accounts pay more interest than the typical savings account – as much as 4% APY and higher. Not sure where to find the best savings interest rate today? Read on to find out which banks have the best offers.
Historically, interest rates on savings accounts have been high. That said, the rates on traditional savings accounts pale in comparison to those for high-yield savings accounts.
For example, the average interest rate on savings accounts is only 0.42%, while the best savings rates are generally around 4.0% to 4.5% APY.
As of December 25, 2024, the highest interest rate on savings accounts offered by our partners is 4.66% APY. This rate is offered by VIO Bank and no minimum opening deposit is required.
Here’s a look at some of the best savings rates available today from our verified partners:
Related: 10 best high-yield savings accounts in 2024>>
The interest on deposit accounts – including the savings rate – is tied to the federal funds rate. This is the target interest rate set by the Federal Reserve; when it raises its target rate, interest rates on deposit accounts usually go up. And conversely, if the Fed cuts rates, deposit rates fall.
After several rate hikes by the Fed in response to skyrocketing inflation, it ultimately cut the Fed Funds rate three times at the end of 2024. As a result, the deposit interest rate also falls.
The Fed is expected to cut its target rate two more times in 2025, so we can expect savings rates to continue to decline. However, high-yield savings accounts remain one of the best places to safely store cash and earn the best deposit interest available.
Read more: I Bond vs. High-Yield Savings Account: Which Is Better to Beat Inflation?
Choosing where to invest your money is an important decision, and there are a few factors to consider when evaluating your options. A high-yield savings account can make sense if you’re looking for a safe place to hold shorter-term savings while earning solid returns. Here are some important considerations:
-
Interest rates: One of the most important features of a savings account is the interest rate. It’s important to shop around and compare the best offers to ensure your money will grow over time. Since savings rates are likely to fall in the near future, opening a high-yield savings account now will allow you to take advantage of historically high interest rates.
-
Goals: Today’s high-yield savings accounts offer rates we haven’t seen in more than a decade. That said, savings rates still don’t match the average stock market return. If you’re saving for a long-term goal such as retirement, a savings account is probably not the best place to put your money because your balance won’t grow at a rate that will help you reach your goal. However, if you’re saving for a financial emergency, a down payment on a house or car, holiday gifts, or another short-term goal, a savings account is a great place to put that money.
-
Accessibility: Certain types of accounts and investments can provide higher returns than a savings account, but can make it difficult to access your money in an emergency. For example, if you put your savings in a certificate of deposit (CD) and need to access the money before the maturity date, you could be subject to an early withdrawal penalty. So if you want to be able to tap into your savings when necessary, a high-yield savings account is probably the better choice.
-
Security: In most cases, savings accounts are insured by the FDIC up to the federal limit. They also cannot lose money due to market fluctuations, making them a low-risk option.
Read more: Can you agree on a higher savings interest rate with your bank?