If you have savings you want to protect against market fluctuations but still earn a decent yield, consider a high-yield savings account. These accounts work just like traditional savings accounts, but they pay a much higher interest rate (around 5% annual interest or more).
That said, savings interest rates vary widely, so it's important to do your research and find a competitive rate. Not sure where to start? Here's more information on current savings interest rates and where to find the best offers.
Where are the highest savings rates available right now?
According to the FDIC, the average interest rate on a traditional savings account is just 0.45%, but the highest savings rates are in high-yield accounts, where annual interest rates can be as high as 4.5% to 5% or even more.
These top interest rates are generally offered by online banks, but you can also find competitive rates at some credit unions and community banks.
Below are some of the best discount rates currently available, offered by our certified partners.
Related: 10 Best High Yield Savings Accounts June 2024 >>
Past regular deposit interest rates
Over the past decade, interest rates on savings accounts have fluctuated widely. From around 2010 to 2015, interest rates were at their lowest, hovering around 0.06% to 0.10%. This was mainly due to the 2008 financial crisis and the Federal Reserve’s decision to cut its target interest rate to near zero in order to stimulate economic growth.
From 2015 to 2018, interest rates began to slowly rise, but remained at historically low levels. Then, in 2020, interest rates fell again sharply as the COVID-19 pandemic hit and the Federal Reserve cut interest rates again to stimulate the economy. This caused average savings rates to fall to new lows of around 0.05% to 0.06% by mid-2021.
Since then, savings account interest rates have rebounded significantly, largely due to the Fed raising interest rates in response to surging inflation.
Below is a look at how savings rates have changed over the past 10 years.
Is a high-yield savings account right for you?
Despite the significant increase in interest rates since 2021, the average interest rate on savings accounts still remains fairly low, especially when compared to market investments. If you're saving for long-term goals like your children's education or retirement, your savings account may not generate the returns you need to achieve your goals.
On the other hand, if you're saving for an emergency fund, a down payment on a home, a vacation, or other short-term goals, a high-yield savings account is ideal, especially if you want to have access to your funds when you need them. Other types of savings accounts, like money markets or CDs, may offer similar or even higher rates but limit how often you can withdraw money. The key is to shop around and find an account that offers a competitive interest rate with low or no fees.