The Federal Reserve is convening for its third policy meeting of the year today, with expectations of announcing a pause on interest rates tomorrow. The federal funds target is anticipated to remain at 4.25% to 4.50% as the Fed adopts a cautious approach towards inflation, employment, and the economy.
For savvy savers, this pause presents an opportunity to take advantage of the best Annual Percentage Yields (APYs) on high-yield savings accounts before potential rate decreases later in the year. Transitioning from a standard savings account to these high-yield options is a prudent step for safeguarding your funds against diminishing rates.
Digital banks and online accounts, backed by the FDIC, are offering APYs of up to 4.40%, significantly surpassing the national savings average. These institutions operate without the costs associated with physical branches, enabling them to offer higher interest rates. By capitalizing on these accounts, you can grow your savings efficiently without fees or restrictive conditions.
With the likelihood of rate cuts looming, it’s advisable to explore the current top savings account options and highest interest rates available for quick and hassle-free signup. As of today, May 6, 2025, leading FDIC-insured digital banks and online providers such as Valley Bank, Bread Financial, CIT Bank, and others are offering competitive APYs with minimal requirements.
Valley Bank Direct Savings — 4.40% APY with a $1,000 minimum for new customers
Bread Financial High-Yield Savings — 4.35% APY with a $100 minimum deposit
Barclays Bank Tiered Savings — Starting at 4.10% APY with no minimum balance
CIT Bank Platinum Savings — 4.10% APY on balances of $5,000 or more
SoFi Checking and Savings — Up to 3.80% APY plus a cash bonus of up to $300 with direct deposit
Discover Online Savings — 3.60% APY with no minimum balance
These lesser-known brands offer FDIC-insured accounts, ensuring protection for your deposits. Additionally, the Federal Reserve has suspended the transaction limits on high-yield savings accounts, granting you greater flexibility in managing your funds during these uncertain times.
To simplify your search for a high-yield savings account, follow these five steps to find and open an account. For a comparison, the FDIC provides data on average interest rates for traditional low-yield deposit accounts, offering insights into the returns you might expect from standard bank offerings.
Date National Deposit Rate Change as of April 21, 2025
| Account Type | March 17, 2025 | April 21, 2025 | Change |
|———————–|—————–|—————-|—————-|
| Savings | 0.41% | 0.41% | No change |
| Interest Checking | 0.07% | 0.07% | No change |
| Money Market | 0.62% | 0.63% | Down 1 basis point |
| 1-month CD | 0.24% | 0.25% | Down 1 basis point |
| 3-month CD | 1.42% | 1.43% | Down 1 basis point |
| 6-month CD | 1.60% | 1.61% | Down 1 basis point |
| 12-month CD | 1.77% | 1.78% | Down 1 basis point |
| 24-month CD | 1.49% | 1.49% | No change |
| 36-month CD | 1.35% | 1.35% | No change |
| 48-month CD | 1.27% | 1.27% | No change |
| 60-month CD | 1.34% | 1.34% | No change |
Over the past year, traditional savings accounts have shown minimal movement, with more significant changes observed in short- and long-term CDs. The Federal Deposit Insurance Corporation (FDIC) is an independent government agency responsible for maintaining stability and public confidence in the U.S. financial system, providing insurance on consumer deposit accounts.
A savings account is targeted for storing funds not intended for regular expenses, offering interest rates that vary depending on the account type. Compound interest, as opposed to simple interest, allows for the reinvestment of earned interest, resulting in accelerated growth of savings.
High-yield and traditional savings accounts both offer incremental interest on balances, with funds federally insured up to $250,000 per person, per account by the FDIC or the NCUA. Understanding the compounding and crediting terms of your account can help maximize your savings potential.
Comparing High-Yield Savings Accounts and Traditional Savings Accounts
When it comes to choosing between a high-yield savings account (HYSA) and a traditional savings account, your earning potential is the key difference. A high-yield savings account has the potential to earn you significantly more interest than a traditional savings account. Digital banks and online accounts typically offer the best rates, capitalizing on cost savings to provide high yields that can be more than 10 times the national average compared to traditional accounts.
Top digital banks and online accounts, such as SoFi Checking and Savings, often come with no fees and no minimum deposits, making it easier for you to maintain your account over the long term. SoFi Checking and Savings, for example, offers up to 3.80% APY, ensuring that your money can grow effectively.
While high advertised APYs can be tempting, it’s important to remember that interest rates on savings accounts are variable. Rates can fluctuate after you open an account and may change over time, especially if the Federal Reserve adjusts its benchmark interest rate. Therefore, it’s crucial to choose an account that aligns with your banking preferences.
Factors to consider when comparing savings accounts include promotional rates, minimum deposit requirements, ease of access, and deposit insurance protections. Promotional rates can offer attractive returns, but it’s essential to be aware of any rate adjustments that may follow. Look for accounts with low or no minimum balance requirements to maximize your earnings without facing fees. Access to your funds should be convenient, whether through ATMs, mobile apps, or branch locations. Additionally, ensure that your savings are protected by FDIC or NCUA insurance, safeguarding your funds up to $250,000 per account.
Beyond savings accounts, consider alternative options for saving and growing your money. Certificate of deposits (CDs) guarantee fixed returns at the end of a specified term, though early withdrawals may incur penalties. Money market accounts (MMAs) offer competitive rates and liquidity similar to savings accounts. High-yield checking accounts provide high APYs along with checking features, offering a balance of interest earnings and transactional convenience. Each of these options presents unique benefits to suit your financial goals and preferences.
Money Market Account: Finding the Best High-APY Option for Your Cash
Recent news has highlighted the strong correlation between savings rates and the target interest rate set by the Federal Reserve. As the country’s central bank, the Federal Reserve’s benchmark rate impacts interest rates for various financial products, including deposit accounts, loans, mortgages, and credit cards. When the Fed rate increases, the Annual Percentage Yields (APYs) on savings accounts, CDs, and money market accounts also rise. Currently, the top high-yield savings accounts are offering APYs exceeding 4%.
In response to the highest inflation in four decades following the pandemic, the Federal Reserve raised the target interest rate 11 times between March 2022 and July 2023. However, in a significant move, the Fed announced a half-point reduction in its federal funds target interest rate on September 18, followed by two additional quarter-point cuts in November and December. The Fed paused its rate cuts for the second time on March 19, 2025, maintaining the federal funds target interest rate at a range of 4.25% to 4.50%. This decision reflects the Fed’s commitment to achieving “maximum employment” and stabilizing inflation at 2%.
Looking ahead to the Fed’s next policy meeting on May 6–7, 2025, experts anticipate that the Fed will maintain the current interest rate range. Market expectations support this prediction, with over a 95% likelihood of the Fed keeping rates unchanged. Economists are closely monitoring inflation and labor reports to assess the timing of future adjustments to the Fed rate. Recent data has shown a gradual easing of inflation rates, with consumer prices stabilizing and unemployment levels remaining steady.
As the economic outlook evolves, the Federal Reserve will continue to assess incoming data and risks to make informed decisions about future interest rate adjustments. Stay informed about the latest developments in the financial markets to make strategic decisions for your savings and investments.
In March, the Producer Price Index (PPI) dropped by 0.4%, marking the most significant monthly decline since October 2023, mainly due to gasoline prices plummeting by 11.1%. The annual increase in the PPI slowed to 2.7%, indicating a moderation in inflation. Economists view this as a positive development, but many caution that President Trump’s trade policies and the temporary pause on “reciprocal” tariffs could result in accelerated price growth.
During a speech in Chicago on April 16, Federal Reserve Chair Jerome Powell acknowledged the challenges posed by President Trump’s tariffs on the Fed’s future policy decisions, stating, “For now, we are in a good position to wait for more clarity before making any adjustments to our policy stance.”
The Federal Reserve, under Powell’s leadership, will announce a rate decision at the end of its meeting on Wednesday, May 7, 2025, at 2 p.m. ET.
For more information about the Federal Reserve meetings and how they impact your finances, familiarize yourself with key terms like Annual Percentage Yield (APY), Member FDIC, maintenance/service fees, minimum deposit requirements, and variable APYs.
The Federal Reserve, also known as the Fed, is the central bank of the United States responsible for maintaining economic stability. Its actions, including setting interest rates, influence various financial products such as deposit accounts. Understanding the differences between fixed and variable interest rates is crucial for making informed financial decisions.
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Complete guide to no-penalty CDs and savings accounts:
Having saved up $10,000, you may be wondering where the best place to put it is. Achieving this financial milestone opens up numerous opportunities that can enhance your financial future. You can explore passive income streams, bolster your retirement fund, or reduce high-interest debt. Refer to our guide on the five smartest moves to make with your $10,000.
Understanding compound interest:
Compound interest is the concept of earning interest on both your initial deposit and any interest accumulated over time. It is a powerful tool that can significantly grow your savings. The Annual Percentage Yield (APY) of an account represents the total interest earned on your deposit over a year, considering compound interest. Many High-Yield Savings Accounts (HYSAs) compound interest daily or monthly. Learn more about compounding and how it can help you maximize your savings in our guide.
Tax implications of savings accounts:
Interest earned on your savings account is considered taxable income by the IRS. If you earn more than $10 in interest within a year, your bank or financial institution will provide you with a Form 1099 to include in your annual tax return.
Fixed rates vs. variable rates:
The choice between fixed and variable rates depends on individual preferences, as fixed rates remain constant while variable rates can fluctuate based on market conditions. Understanding the distinctions between these rate types is crucial for making informed decisions about borrowing and saving money. Learn more about fixed and variable rates in our comprehensive guide.
Earning revenue from savings accounts:
Banks generate profits by charging higher interest rates on loans to borrowers than the interest paid to customers on their deposit accounts. This difference, known as a spread, is the primary source of income for banks. Online banks and digital accounts, without the overhead costs of physical branches, can offer higher APYs to customers.
Security of online-only neobanks and digital accounts:
Deposits in neobanks are protected by the government through partnerships with FDIC-insured banks, ensuring that your funds are safe and secure up to $250,000. Look for terms like “member FDIC,” “FDIC insured,” or “NCUA insured” to verify the safety of your deposits.
Differentiating between saving and investing:
Saving involves keeping your money in secure accounts with minimal risk, while investing entails purchasing assets like stocks, bonds, or mutual funds with the potential for higher returns. Understanding the disparities between saving and investing is crucial in determining the optimal approach for growing your wealth. Read our guide on saving and investing for personalized insights.
Editor’s note: The Annual Percentage Yields mentioned were accurate as of Tuesday, May 6, 2025, at 7 a.m. ET. Rates may vary by region and are subject to change.
Sources:
– National Rates and Rate Caps, FDIC. Accessed April 22, 2025.
– Consumer Price Index Summary, U.S. Bureau
Summary of Consumer Price Index News Release from the U.S. Bureau of Labor Statistics, accessed on April 14, 2025. Summary of Employment Situation from the U.S. Bureau of Labor Statistics, accessed on May 5, 2025. CME FedWatch Tool information from CME Group, accessed on May 6, 2025.
