Interest rates are currently moderate to elevated compared to the last decade, but they vary sharply by product and lender

Whether rates are "high" or "low" depends entirely on what you're comparing them to and what product you're looking at. As of early 2024, savings account rates sit between 4% and 5.35% at top-paying online banks, while money market accounts and certificates of deposit (CDs) range from 4.5% to 5.5%. These are substantially higher than the near-zero rates that prevailed from 2020 through 2021. Mortgage rates, by contrast, have climbed to the 6% to 7% range for a 30-year fixed loan—well above the 2.5% to 3.5% rates available in 2021 and 2022, but lower than the 8%+ rates seen in late 2023.

The Federal Reserve sets the benchmark interest rate, which influences what banks charge for loans and pay on deposits. When the Fed raises its rate, savings products and borrowing costs both go up. When it cuts rates, both typically fall. The Fed has held its rate steady in the 5.25% to 5.50% range since mid-2023, meaning rates have stabilized rather than climbing further—but they remain elevated by historical standards of the past 15 years.

Key Takeaways

  • Savings accounts and CDs currently pay 4% to 5.5%, which is high compared to 2020–2022 but moderate compared to rates in the 1980s and 1990s.
  • Mortgage and auto loan rates have climbed to 6% to 7%, making borrowing more expensive than it was two years ago but cheaper than it was in late 2023.
  • The Federal Reserve's rate decisions drive the direction of all consumer interest rates, though individual banks and lenders set their own rates within that framework.
  • The best savings rates come from online banks and credit unions, not from traditional brick-and-mortar banks, which often pay under 0.5% on savings accounts.

How savings rates compare across account types right now

High-yield savings accounts at online banks currently offer the best rates for money you want to keep liquid. Institutions like Marcus, Ally, American Express Personal Savings, and Wealthfront Cash Account pay between 4.25% and 5.35%, depending on the bank and the exact date you check. These rates change frequently—sometimes weekly—so the highest rate today may not be the highest next week. Traditional banks like Chase, Bank of America, and Wells Fargo typically pay 0.01% to 0.5% on regular savings accounts, making them a poor choice if you're trying to earn interest.

Money market accounts sit in the middle. They offer check-writing or debit card access (unlike most savings accounts) and currently pay 4.5% to 5.25% at online institutions. CDs lock your money away for a set term—three months, six months, one year, five years—and pay slightly more than savings accounts in exchange for that commitment. A one-year CD might pay 5% to 5.35%, while a five-year CD might pay 4.75% to 5.15%. The longer you lock money away, the more you're betting that rates won't drop significantly before your CD matures.

What mortgage and auto loan rates tell you about the broader picture

Mortgage rates and auto loan rates move in the same direction as savings rates but don't move in lockstep. A 30-year fixed mortgage currently costs between 6% and 7.5%, depending on your credit score, down payment, and lender. A 15-year mortgage is typically 0.5% to 1% lower. These rates are roughly double what they were in 2021, when 30-year mortgages hovered around 2.5% to 3%. Auto loans range from 5% to 8% for new cars and 8% to 12% for used cars, again depending on credit and the lender.

The gap between what you earn on savings and what you pay on debt matters. If you're earning 5% on a CD but paying 7% on a mortgage, you're losing 2 percentage points. That's why some people prioritize paying down high-interest debt before maximizing savings. Conversely, if you can lock in a 5% CD rate and your mortgage is at 3%, you're ahead—though you can't move money from savings to pay down the mortgage without triggering tax consequences if the account is tax-advantaged.

Why rates are where they are: the Federal Reserve's role

The Federal Reserve raised its benchmark rate aggressively between March 2022 and July 2023, moving from near zero to 5.25%–5.50%, in response to inflation. That series of increases pushed up rates across the entire economy. Since mid-2023, the Fed has paused—it has neither raised nor cut rates, holding steady to see whether inflation continues to fall. This pause is why savings rates have stabilized rather than climbing higher.

The Fed does not set consumer interest rates directly. Instead, it sets the federal funds rate, which is the rate banks charge each other for overnight loans. Banks use this as a reference point and add their own margin on top. A bank might pay you 4.5% on a savings account while charging a customer 7% on a mortgage—the difference is the bank's profit. When the Fed cuts rates, banks eventually lower what they pay savers and charge borrowers, though they don't always move at the same speed or by the same amount.

How to find the best rates for your situation

The highest savings rates are almost never at your current bank. Online banks have lower overhead costs than branch networks, so they pass savings on to depositors. Websites like Bankrate, DepositAccounts, and DepositRates track rates across hundreds of institutions and update them daily. You can filter by account type, term length (for CDs), and minimum deposit. Credit unions often pay competitive rates too, and you may be a member through your employer or a professional association.

For CDs, compare not just the rate but the term. A six-month CD at 5.2% will mature faster than a one-year CD at 5.1%, giving you the option to reinvest sooner if rates rise. If you think rates will fall, locking in a longer term makes sense. If you think rates will rise, a shorter term lets you move your money to a higher-paying CD when it matures. For savings accounts and money market accounts, there's no penalty for moving your money, so you can chase the highest rate without commitment.

What happens if the Federal Reserve cuts rates

If the Fed cuts its benchmark rate—which it may do in 2024 or 2025 if inflation continues to fall—savings rates will decline. Banks will lower what they pay on deposits within weeks or months. A 5% savings account might drop to 4%, then 3.5%, then lower. Mortgage rates and auto loan rates will also fall, making borrowing cheaper. This is good news if you're planning to take out a loan but bad news if you're living off savings interest.

This is why some people lock in CD rates now, even if they don't need the money immediately. A five-year CD at 5% guarantees that rate for five years, regardless of what happens to the Fed's rate. The trade-off is that if rates rise further, you're stuck earning 5% when you could be earning 6% or more. There's no perfect answer—it depends on your confidence in where rates are headed and how much flexibility you need.

How inflation affects whether rates feel high or low

A 5% savings rate sounds good until you remember that inflation is running around 3% to 3.5% (as of early 2024). That means your real return—the amount your purchasing power actually grows—is only about 1.5% to 2%. If inflation rises back to 4% or 5%, your real return shrinks further. This is why some savers feel frustrated even when nominal rates are at their highest in years: the money isn't growing as fast as prices are rising.

Conversely, if you locked in a 3% mortgage in 2021 and inflation has since climbed to 3.5%, you're effectively paying less in real terms—the dollars you're repaying are worth less than the dollars you borrowed. This is why borrowers benefited from the low-rate environment of 2020–2022, and why savers are benefiting now. The relationship between rates and inflation determines whether you're actually getting ahead.

Frequently Asked Questions

Will interest rates go down soon?

The Federal Reserve may cut rates in 2024 or 2025 if inflation continues to fall, but no one knows for certain. The Fed meets eight times a year and makes decisions based on current economic data. If you need to make a savings decision now, don't wait for a rate cut that may not happen—lock in current rates if they meet your needs, knowing you can always move money to a higher-paying account later if rates rise.

Should I move my money from my bank to an online bank for better rates?

If your current bank pays under 1% on savings, moving to an online bank paying 4.5% to 5.35% will earn you significantly more interest. The trade-off is that online banks have no physical branches, so you can't deposit cash or speak to someone in person. Most people find this acceptable for savings accounts they don't access frequently. Make sure the online bank is FDIC-insured, which protects your deposits up to $250,000.

Is it better to put money in a CD or a savings account right now?

A CD pays slightly more but locks your money away. If you might need the cash within the next year, a savings account is safer. If you're confident you won't touch the money, a CD at 5% to 5.35% for one year locks in that rate and removes the temptation to spend. For money you won't need for five years or more, a longer-term CD can pay slightly less but still beats inflation and offers certainty.

Why does my bank pay so much less than online banks?

Traditional banks have higher costs: they maintain physical branches, employ tellers, and run advertising campaigns. Online banks have no branches and lower overhead, so they can afford to pay depositors more. The trade-off is convenience—you can't walk into a branch—but for savings accounts you rarely access, the higher rate usually makes up for it.

If rates are high, should I pay off my mortgage faster?

Not necessarily. If your mortgage is at 3% and you can earn 5% in a CD, you're better off keeping the mortgage and investing in the CD. You earn 2 percentage points more than you're paying. However, if your mortgage is at 7% and CDs pay 5%, paying down the mortgage saves you 2 percentage points, which is a may provide return. The math depends on your specific rates and your comfort with debt.