Interest rates have moved higher in recent months, but they vary by bank and account type

The Federal Reserve sets a target range for the federal funds rate — the rate banks charge each other for overnight loans. That rate influences what banks offer you on savings accounts, money market accounts, and certificates of deposit (CDs). Right now, that federal rate sits in a range, and banks are passing some of that through to customers, though not all banks offer the same rate on the same product.

Your actual rate depends on three things: what the Fed's rate is, what your specific bank decides to offer, and what type of account you open. A high-yield savings account at one bank might pay 4.5 percent while another pays 3.8 percent. A CD that matures in one year pays differently than one that matures in five years. The bank down the street may offer less than the online bank across the country.

Interest rates change. The Fed can raise or lower its target range, and when it does, banks adjust what they offer within weeks or months. Some banks move faster than others. If you locked money into a CD, your rate stays the same until it matures. If you have a savings account, the rate can go up or down depending on what the bank decides.

Key Takeaways

  • The Federal Reserve's target rate influences what banks offer, but each bank sets its own rates independently, so comparing across institutions matters.
  • High-yield savings accounts and money market accounts have rates that can change, while CD rates lock in for a set term.
  • Online banks often offer higher rates than brick-and-mortar branches because they have lower overhead costs.
  • Your rate depends on the account type, the bank, and the term length — there is no single "current rate" that applies everywhere.

How the Federal Reserve's decisions affect what you earn

The Federal Reserve meets eight times a year to decide whether to raise, lower, or hold its target rate steady. When the Fed raises rates, banks have more incentive to offer higher rates on savings products because they can charge more to borrowers. When the Fed lowers rates, banks often lower what they offer savers.

The Fed's rate is not the same as your savings rate. It is the wholesale rate — what banks pay each other. Your bank takes that information, looks at what competitors are offering, and decides what to pay you. A bank might offer 4.75 percent on a one-year CD while the Fed's rate is at 5.25 to 5.50 percent. The gap exists because the bank needs to make money on the difference.

If you are shopping for a savings account or CD right now, the rate you see is what matters to you. Historical context helps — you can see whether rates are higher or lower than they were six months ago — but the only rate that affects your money is the one your bank is offering today.

Why savings rates differ between banks

Online banks typically offer higher rates than traditional banks with physical branches. An online bank has no tellers, no building leases, no branch staff. Those savings get passed to customers as higher interest rates. A traditional bank with fifty branches in your state has higher costs and often offers lower rates to compensate.

Bank size matters too. A large national bank might offer 3.5 percent on a savings account while a smaller regional bank or credit union offers 4.2 percent. The smaller institution may be trying to attract deposits, or it may have a different business model that allows for higher rates.

The type of account also changes the rate. A regular savings account might pay 0.01 percent at a traditional bank. A high-yield savings account at the same bank might pay 4.5 percent. A money market account might pay 4.3 percent. A CD might pay 5.1 percent. The bank is offering different rates for different products based on how long they can keep your money and how they plan to use it.

How CD rates compare to savings account rates

A certificate of deposit locks your money away for a set time — three months, six months, one year, three years, five years. In exchange for that commitment, the bank usually offers a higher rate than a savings account. Right now, a one-year CD might pay 4.8 percent while a high-yield savings account at the same bank pays 4.5 percent.

The longer the term, the higher the rate usually goes — but not always. Sometimes a one-year CD pays more than a five-year CD. This happens when banks expect rates to fall, so they offer less for longer commitments. You can see the current rates for different terms on any bank's website and compare them side by side.

The trade-off is flexibility. With a savings account, you can withdraw money anytime without penalty. With a CD, you pay a penalty if you withdraw before the maturity date. That penalty varies by bank and term length — it might be three months of interest or six months of interest. Before opening a CD, check what the early withdrawal penalty is.

Money market accounts and what they pay right now

A money market account is a hybrid between a savings account and a checking account. It usually pays interest like a savings account but lets you write checks or use a debit card like a checking account. The rate on a money market account is usually between what a regular savings account pays and what a high-yield savings account pays.

Right now, money market rates at online banks range widely — some pay 4.0 percent, others pay 4.6 percent. At traditional banks, the range is usually lower, from 0.5 percent to 2.5 percent. The rate depends on the bank and how much money you deposit. Some banks offer higher rates if you maintain a minimum balance.

Money market accounts come with limits on how many times you can withdraw per month. Federal rules used to cap this at six withdrawals, though that rule has loosened. Check your bank's specific rules before opening one. If you need frequent access to your money, a regular savings account or checking account might be better even if the rate is lower.

What happens to your rate when the Fed changes course

If the Federal Reserve raises its target rate, banks usually raise what they offer on savings products within a few weeks. If the Fed lowers its rate, banks usually lower what they offer within a few weeks as well. The lag exists because banks need time to update their systems and marketing materials.

For CD holders, a rate change does not affect your existing CD. If you locked in 5.0 percent for one year, you earn 5.0 percent for that full year regardless of what happens to the Fed's rate or what new CDs pay. This is the benefit of a CD — your rate is may provide. It is also the risk — if rates fall, you are glad you locked in. If rates rise, you are stuck with the lower rate.

For savings account holders, a rate change can go either way. If rates rise, your bank may raise what it pays you. If rates fall, your bank may lower what it pays you. Some banks move quickly, others move slowly. If you want to keep earning a competitive rate, you may need to shop around every few months and move your money if another bank is offering more.

How to find the best rate for your situation

Start by deciding what you need the money for. If you will not touch it for a year, a one-year CD might lock in a good rate. If you might need it in three months, a savings account gives you flexibility even if the rate is slightly lower. If you want to write checks on your savings, a money market account splits the difference.

Once you know the account type, compare rates across banks. Most banks publish their rates on their websites. You can also use rate comparison sites that aggregate current rates from multiple banks, though you should verify the rate on the bank's own site before opening an account because rates change daily.

Check whether the bank is FDIC-insured. This means your deposits are protected up to $250,000 if the bank fails. All major banks are FDIC-insured, but it is worth confirming. Also check whether there are monthly fees, minimum balance requirements, or other conditions that might reduce your actual earnings.

Frequently Asked Questions

What is today's interest rate?

There is no single "today's rate" — it depends on the bank, the account type, and the term. High-yield savings accounts at online banks currently range from about 4.0 to 4.8 percent. Traditional bank savings accounts typically pay under 1 percent. CDs vary by term. Check your bank's website or a rate comparison site to see what is available right now.

Will interest rates go up or down next?

The Federal Reserve decides this based on economic conditions, and predictions change frequently. You can read Fed announcements and economic news to stay informed, but no one knows for certain. If you are concerned about rates falling, a CD locks in your current rate. If you think rates might rise, a savings account lets you move your money to a higher-paying account later.

Should I move my money to get a higher rate?

If your current bank pays significantly less than competitors — for example, 0.5 percent when others pay 4.5 percent — moving makes sense. Calculate how much extra you would earn in a year, then decide if it is worth the effort to open a new account and transfer funds. For small amounts, the difference may not be worth the hassle.

Do I pay taxes on interest I earn?

Yes. Interest earned on savings accounts, CDs, and money market accounts is taxable income. Your bank will send you a 1099-INT form at the end of the year showing how much interest you earned. You report this on your tax return. The higher the rate, the more interest you earn, and the more you owe in taxes — though the interest is still yours to keep.

Can a bank lower my rate without warning?

For savings accounts and money market accounts, yes — banks can lower rates anytime. For CDs, no — your rate is locked in for the term. If you have a savings account and your bank lowers the rate, you can move your money to another bank offering a higher rate. There is no penalty for moving savings accounts.