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Savings account rates today: Unchanged Fed rate good news for savers looking to earn high APYs — May 2, 2024

Kelly Suzan Waggoner
Today's best savings rates: May 2, 2024 (PM Images via Getty Images)

With the Federal Reserve holding benchmark interest rates at 23-year highs, now is the best time for you to move your savings into a long-term account that offers easy access to your money and a safe place to more quickly grow your funds for everyday transactions, to meet a savings goal or to weather a rainy day.

You can find a wide range of savings accounts at your neighborhood banks, credit unions or online financial institutions — with digital accounts offering the strongest rates today. These high-yield accounts earn you interest at up to 10 times the national 0.46% average you’ll find with a traditional savings account, with few limitations and fees. Even legacy brands like American Express and Discover offer high-yield accounts offering 4.25% APY.

No matter which type of savings account you choose, today’s modern accounts support robust online banking and apps that make it easy to link to other banks, wherever they are, to efficiently move and manage your money.

Today’s best savings rates are at FDIC-insured digital banks and online accounts offering yields of up to 5.55% APY with a minimum $500 opening deposit at My Banking Direct and Western Alliance and more than 5.00% APY with no minimums at Jenius Bank and Forbright Bank, among others, as of Thursday, May 2, 2024.

While not everyday names, these digital banks and financial technology companies — or fintechs — partner with FDIC-insured banks to offer deposit accounts that are federally insured, like accounts at your neighborhood bank. Your money saved in these accounts is insured for up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), if deposited with a credit union.

And though the Federal Reserve once limited transactions and withdrawals from these accounts to six monthly, that limitation is suspended in the wake of the pandemic, with many banks no longer restricting how often you can move money in and out of your account.

The Federal Deposit Insurance Corporation tracks monthly average interest rates paid on savings and other deposit accounts, like certificates of deposit. This independent government agency is charged with maintaining stability and public confidence in the U.S. financial system and providing insurance on consumer deposit accounts.

Here's how national deposit rates on a $10,000 minimum deposit compare between April and March 2024, as reported by the FDIC, showing modest rate changes across traditional deposit accounts.

A wider view on rate changes over the past year shows little movement on most traditional accounts from May 2023 to April 2024.

A savings account is a type of deposit account designed for everyday storage of money you don’t expect to use for regular expenses, like paying bills or buying groceries. Most savings accounts allow you to earn interest on your account balance — anywhere from a modest 1% APY with a traditional account to a lucrative 5% APY and higher for high-yield accounts, depending on the bank, the account and how much you plan to save.

There’s no official definition for these accounts. Each is a type of deposit account that can earn you interest on your balance, helping you to grow your savings. And the money you save in these accounts is federally insured up to $250,000 by the FDIC or the NCUA for up to $250,000 per person, per account, protecting your nest egg against risk.

The main difference between an HYSA and a traditional savings account is your earning potential. A high-yield savings account can earn you significantly more interest than a traditional savings account, with digital banks and online accounts offering the strongest rates, able to pass along overhead savings in the form of high yields — up to 10 times the national average when compared to a traditional account. The best of these digital banks and online accounts come with no fees and no minimum deposits, removing any challenges to maintaining your account over the long term.

Digital banking opens up more competitive rates and fewer fees than your neighborhood branch, and it offers robust apps that make it easy to manage money among everyday accounts, including digital check deposits — all from your smartphone or tablet.

Yet while it's tempting to choose an account based only on its highest advertised APY, interest rates on savings accounts are variable, meaning rates can fluctuate after you open one and change over time. You could be earning a lower rate if the Fed cuts its benchmark interest rate later this year.

Instead, look for an account that fits the way you like to bank while weighing factors that include:

  • Promotional rates. Today's high-yield accounts earn 5% APY and higher. Yet some accounts offer promotional or limited-time rates to entice you to sign up before adjusting to a lower rate based on market conditions.

  • Low or no minimums. The best savings accounts require no minimum deposit or balance to earn interest, though you might be required to open with a minimum deposit or maintain a specific monthly balance to avoid maintenance or service.

  • Ease of accessing your money. Look for flexibility that includes ATMs and mobile apps that accept checks for deposit — or branch access, if you prefer in-person banking.

  • FDIC or NCUA protections. Savings accounts are federally insured for up to $250,000 per account, per person — which means your money is safe up to the limit.

Dig deeper: Can you lose money in a high-yield savings account? What to know about the $250K insurance limit, fees and other risks

A savings account can offer flexible access to your money, but it isn’t the only place to store and earn interest on your savings. Look to these alternatives that offer safe, steady returns at rates that can outpace traditional accounts.

  • Certificate of deposit. A CD guarantees a high fixed rate of return on a principal deposit at the end of an agreed-on term. CDs differ from savings accounts in that you risk a withdrawal penalty if you need to access your money before the CD matures — though a short-term CD ladder can help you leverage high-rates with rolling returns while interest rates are strong.

  • Money market account. Also called a money market savings account, the rate on an MMA can beat those of traditional savings accounts, with the same access to your money.

  • High-yield checking account. A high-yield checking account is like a money market account in that it combines high APYs with checking benefits, but with unlimited debit and check-writing privileges you won't find with an HYSA or MMA.

Dig deeper: High-yield savings account vs. money market account: Which high-APY account is best for your nest egg?

Savings rates strongly correlate with the target interest rate set by the Federal Reserve, the country’s central bank. This Fed rate is the benchmark that affects interest rates set for deposit accounts, loans, mortgages and other financial products. As the Fed rate rises, so do APYs on savings accounts, CDs and money market accounts — with today’s rates on high-yield savings accounts surging past 5% APY.

The Federal Reserve increased the target interest rate 11 times from March 2022 to July 2023 in an effort to combat the highest inflation in four decades coming out of the pandemic.

At the conclusion of its third rate-setting policy meeting of 2024 on May 1, 2024, the Federal Reserve left the federal funds target interest rate at a 23-year high of 5.25% to 5.50%, marking the sixth consecutive time the Fed's held the benchmark rate unchanged since July 2023.

In its post-meeting statement, the Federal Reserve maintained "there has been a lack of further progress toward the 2 percent inflation objective." The Federal Reserve is focused on a 2% percent inflation goal that's ideal for keeping employment high and prices low. Despite speculation in March of three rate cuts by the end of the year, the Fed cautioned in its May statement that its rate-setting committee "does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."

Complicating future cuts to the Fed rate is March's Consumer Price Index data released on April 10 that showed a rise in consumer prices — a widely used indicator for inflation — to 3.5% in March, up from 3.2% in February.

The same week brought with it the latest Producer Price Index, an economic indicator measuring changes over time in the prices producers receive for goods and services — or wholesale inflation. The April 11 data showed a lower rate of growth in March than economists expected, providing modest relief from continued inflation worries.

It's too early to predict what the Fed will decide at its next policy meeting on June 11 and June 12, 2024, though the Fed's given no signals as to when it might lower the key interest rate.

The pace of inflation has fallen from a peak of 9.1% in June 2022 to rates that have ranged from 3% and 4% since May 2023. April's Producer Price Index data is due for release on May 14, 2024, followed by April's Consumer Price Index data on May 15, 2024. Each report could indicate an improvement in the inflation rate, influencing the Fed's decision on a future rate cut.

Yet April's inflation data has prompted a growing group of economists and strategists to doubt whether the Fed can cut interest rates at all this year.

Responding to continued inflation concerns, Federal Reserve Chair Jerome Powell warned on April 16, "If higher inflation does persist, we can maintain the current level of [interest rates] for as long as needed.”

The Powell-led rate-setting panel will announce a rate decision at the conclusion of its meeting on June 12, at 2 p.m. ET.

Dig deeper: When’s the next Federal Reserve meeting? The FOMC — and how it affects your finances

  • Annual percentage yield. Called the APY, this is the total amount of interest you'll earn on your deposit over one year, including compound interest, expressed as a percentage.

  • Member FDIC. When a bank or financial institution is advertised as a member of the FDIC, it means that your money is protected by the Federal Deposit Insurance Corporation. Funds held by member FDIC institutions are insured and federally protected for up to $250,000 per depositor, offering a layer of protection if the bank were to go out of business.

  • Monthly fee. Some banks charge fees each month for simply holding your money, but many of the best high-yield savings accounts charge no monthly maintenance fees if you can meet account requirements.

  • Minimum deposit. As with monthly fees, some banks require you to deposit a minimum amount of money when opening your account as a way for them to profit from fees if required balances aren't met. The best high-yield savings accounts require no minimum balances to earn high rates of interest.

  • Variable APY. APYs can be fixed or variable, depending on the type of deposit account. Fixed rates don't fluctuate when, say, the Fed rate changes, while variable APYs do. Confirm the type of rate for the account you're interested in to understand whether the rate is fixed or variable.

  • Federal Reserve. The Federal Reserve — or Fed — is the central bank of the United States and the anchor of the financial system. Its Board of Governors is appointed by the president and confirmed by the Senate with the goals of maximizing employment, stabilizing prices and moderating long-term interest rates.

Learn more about how savings accounts work when narrowing down the best for your budget, lifestyle and financial goals.

High-yield savings accounts provide significantly higher earning potential when compared to traditional savings accounts that average 0.46% nationally, allowing your money to grow more substantially over time. They offer the convenience of online accessibility and minimal fees, giving you a secure and efficient way to manage your money.

Compound interest is often described as earning interest on your interest. It’s a powerful way to boost your savings over time by earning interest on both your initial deposit and any interest you earn along the way. An account's APY is the total amount of interest you'll earn on your deposit over one year, including compound interest, expressed as a percentage, with many HYSAs compounding daily or monthly.

Yes. Interest you earn on your savings account is considered taxable income by the IRS. If you earn more than $10 in interest in a calendar year, your bank or financial institution will send you a Form 1099 to file with your annual tax return.

Banks charge higher interest rates on money they lend out to borrowers than the interest they pay on customer deposit accounts. The difference is called a spread, and it’s what banks rely on to make money.

Online banks and digital accounts don't require the overhead of brick-and-mortar branches, allowing them to pass along savings to you in the form of even higher APYs than you might find in your neighborhood.

Yes. Financial technology companies — or fintechs — partner with FDIC-insured banks to offer deposit accounts that are protected by the government for up to $250,000. The FDIC insures the safety of your money, even if the fintech were to fail or go out of business. Look for terms like "member FDIC," "FDIC insured" or "NCUA insured" when comparing your options.

Yes. Look for high-yield savings accounts that are FDIC-insured up to the maximum limit, providing a level of security for deposited funds. For accounts at credit unions, the National Credit Union Administration insures balances up to a specific amount per share owner.

Editor's note: Annual percentage yields shown are as of Thursday, May 2, 2024, at 8 a.m. ET. APYs and promotional rates for some products can vary by region and are subject to change.

Sources

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