If you’ve checked your savings account lately and wondered, “Is this rate actually good?”, you’re not alone.

At any given time, the answer depends on three things:

• How your rate compares to the national average
• How it compares to inflation
• Whether you have a traditional savings account or high-yield savings account

So, Is My Rate “Good”?

The national average interest rate for traditional savings accounts is typically under 0.50% APY. That’s likely what you’re earning if you’re holding a standard savings account at a large bank like Chase, Wells Fargo, or Bank of America.

High-yield savings accounts (HYSAs) are often in the 3.75% - 4.75% APY range, depending on market conditions. Promotional offers sometimes bring that to 5%+, but usually with balance caps or time limits.

As a quick rule of thumb:

• If you’re earning under 1%, you’re likely in a traditional savings account.
• If you’re earning 3.5% or more, you’re likely in a competitive, modern high-yield account.
• If you’re earning 4%+, you’re historically in very strong territory — assuming inflation isn’t outpacing your growth

That said, rates move with Federal Reserve policy. What’s considered “good” today could look average a year from now.

Why Is There Such a Difference?

There are two very different types of savings accounts — and their interest rates don’t move the same way.

1. Traditional Savings Accounts

These are typically offered by large, brick-and-mortar banks.

• Often pay 0.01%-0.50% APY
• Rates tend to stay low, even when the Federal Reserve raises rates
• Designed primarily for convenience and branch access

Historically, traditional savings accounts have rarely offered competitive returns, especially over the past 15 years.

After the 2008 financial crisis, most paid close to zero. Rates rose in the booming 2010s, but during the 2020-2021 pandemic rate cuts, many dropped to 0.01% and stayed there. And even as federal rates have risen sharply, many large banks have been slow to increase what they pay depositors.

In other words: traditional savings accounts are stable — but not optimized for growth.

2. High-Yield Savings Accounts (HYSAs)

High-yield savings accounts are typically offered by online banks and some credit unions.

• Rates move more closely with Federal Reserve policy
• Frequently pay 3%-5%+ APY in higher-rate environments
• Have become much more common over the past decade

Here’s how they’ve changed over time:

In the 2010s, HYSAs often paid 1.5%-2.5%. That seems low now, but at the time it represented a marked innovation in what more agile banking could offer to customers. Where new banks couldn’t typically compete in terms of scale or physical presence, the rise of online banking meant they could offer a safe, customer-friendly experience and reduce overhead –– enabling much more attractive interest rates on their accounts.

Rates spiked above 4% during the inflationary cycles of 2023 and 2024, before tapering off slightly throughout 2025. Today, they’re still extremely competitive and levels above a traditional savings account if growth is your goal.

Why Do High-Yield Accounts Pay More?

This is where many savers hesitate. If traditional banks are paying 0.40% and an online bank is offering 4.25%, it’s reasonable to ask:

What’s the catch? There usually isn’t one — but there are structural differences.

Online banks:

• Don’t maintain expensive branch networks
• Have lower overhead
• Compete nationally for deposits
• Adjust rates quickly and more aggressively

They can pass more of their earnings back to customers in the form of interest.

Your deposits are typically protected by the Federal Deposit Insurance Corporation (FDIC) — up to $250,000 per depositor, per insured bank, per ownership category. Credit unions are insured by the National Credit Union Administration (NCUA) with similar limits.

That means a reputable high-yield savings account offers the same federal deposit insurance, the same basic safety and service, and significantly higher interest. The main trade-offs tend to be a lack of in-person branches, longer transfer times (though this isn’t always the case), and variable rates that can jump up and down in response to policy shifts. But even at their lowest, high-yield accounts will virtually always beat (or at least match) traditional savings.

Alternatives for Cash Savings

If you’re holding cash for specific goals, you might also consider:

Certificates of Deposit (CDs)

• Fixed rates for set terms (3–12 months or longer)
• Often slightly higher yields than savings accounts
• Early withdrawal penalties apply

Money Market Accounts

• Similar yields to HYSAs
• May offer check-writing or debit access

Treasury Bills (T-Bills)

• Backed by the U.S. government
• Short terms (4 to 52 weeks)
• Competitive yields during higher-rate environments

I Bonds

• Designed to protect against inflation
• Must be held at least one year
• Purchase limits apply

Each option trades liquidity and availability for growth in slightly different ways, with slightly different trade-offs.

Whatever You Do, Don’t Settle for Less

In today’s market, a good savings account should be earning at least 3-4% APY or more. If yours doesn’t, it may be time to move your money – especially if you’re still using a traditional bank.

But remember, no savings strategy is one-size-fits-all. Keep enough liquid cash for emergencies, and consider mixing savings accounts with other options to balance safety, access, and growth.

Want help comparing savings strategies? We’ve got guides on emergency funds, budget building, and using home equity to reach your goals faster.