Today marks the conclusion of the May policy meeting held by the Federal Reserve, with widespread expectations that interest rates will remain stable. This decision presents a valuable opportunity for individuals to continue earning attractive returns on high-yield savings accounts before any potential future rate adjustments. High-yield savings accounts not only offer competitive interest rates, with some accounts currently yielding up to 4.40% APY, but also provide the flexibility to access funds as needed, all while being protected by FDIC insurance. Online banks, which operate with lower overhead costs compared to traditional brick-and-mortar institutions, consistently offer superior savings rates to customers.
For those seeking the best savings rates available today, FDIC-insured digital banks and online accounts are leading the way, offering APY rates of up to 4.40% with minimal requirements. Examples include Valley Bank Direct Savings offering 4.40% APY with a $1,000 minimum for new customers, Bread Financial High-Yield Saving with 4.35% APY and a $100 minimum deposit, and CIT Bank Platinum Savings providing 4.10% APY on balances of $5,000 or more. Other options like Barclays Bank Tiered Savings, SoFi Checking and Savings, and Discover Online Savings also offer competitive rates and benefits to customers.
While these digital banking brands may not be as well-known as traditional institutions, they provide the same level of FDIC insurance coverage for deposits up to $250,000. Additionally, the temporary transaction limitations on high-yield savings accounts have been permanently lifted, allowing account holders to freely move their money in and out of their accounts as needed.
For those interested in exploring and opening a high-yield savings account, the process can be broken down into five simple steps. It’s important to note that traditional low-interest deposit accounts, as tracked by the Federal Deposit Insurance Corporation, continue to offer minimal interest rates across various account types.
Unchanged at 1.34%, the 60-month (5 year) CD rate has remained stable. Looking at average rate updates over the past year, traditional savings accounts have seen minimal movement, while short- and long-term CDs have experienced more significant changes. The FDIC, an independent government agency, is responsible for ensuring stability and public trust in the U.S. financial system, as well as providing insurance on consumer deposit accounts.
Exploring further, here are 13 common bank fees to avoid, along with tips on how to steer clear of them.
A savings account is a deposit account intended for holding funds that are not earmarked for regular expenses such as bills or groceries. These accounts usually do not offer check-writing or debit card privileges, although some high-yield money market accounts may provide limited checking options. Savings accounts can earn interest on your balance, ranging from 1% to 4% APY, assisting in the growth of your savings through compounding.
Differentiating between simple and compound interest, simple interest is calculated solely on the principal amount. In contrast, compound interest considers both the principal and accumulated interest. The frequency of compounding—whether daily, monthly, or quarterly—impacts the total interest earned over time. High-yield savings accounts tend to offer better interest rates compared to traditional savings accounts, enhancing your earning potential.
Both high-yield and traditional savings accounts are types of deposit accounts that earn interest and are federally insured up to $250,000. High-yield accounts generally offer more competitive interest rates, particularly from digital banks and online platforms, which can yield over 10 times the national average compared to traditional accounts.
Banks and online accounts with no fees or minimum deposits, like SoFi Checking and Savings offering up to 3.80% APY, make it easy to manage your account in the long term. Choosing between high-yield and traditional savings accounts, digital banking offers competitive rates and fewer fees compared to brick-and-mortar banks. With user-friendly apps, monitoring your balance, transferring money, and depositing checks from your device is convenient.
Although it may be tempting to select an account solely based on its advertised APY, it’s important to consider that interest rates on savings accounts can change over time. Factors to weigh when selecting an account include promotional rates, low or no minimum requirements, ease of access, and federal insurance protections.
In addition to savings accounts, other options for growing your money include certificates of deposit (CDs) and money market accounts (MMAs), each offering their own benefits. CDs provide a fixed rate of return over a set term, while MMAs can offer competitive rates with flexibility in accessing your funds.
The Federal Reserve’s target interest rate influences savings rates and is a key factor in the financial landscape. As the Fed rate changes, it impacts the rates on deposit accounts, loans, and other financial products. Staying informed about savings rates and high-interest accounts can help you make informed decisions about managing your finances.
Market accounts are currently offering attractive rates, with the top high-yield savings accounts yielding over 4% APY. Following a series of interest rate hikes from March 2022 to July 2023 to combat rising inflation post-pandemic, the Federal Reserve made a significant half-point cut to its federal funds target rate on September 18. Subsequent quarter-point cuts were announced after the November and December policy meetings.
On March 19, 2025, the Fed decided to pause rate cuts for the second time, keeping the federal funds target rate steady at 4.25% to 4.50%. This pause marked the second time the Fed refrained from changing rates since the consecutive cuts in the previous months, aiming to stabilize inflation around 2%.
The Fed emphasized its commitment to achieving “maximum employment” and controlling inflation in its post-meeting statement. With economic uncertainties on the horizon, the Fed pledged to carefully assess data and risks before making further adjustments to interest rates.
Looking ahead to the next policy meeting on May 6–7, 2025, the Federal Reserve is expected to maintain the current rate range of 4.25% to 4.50%. Market indicators suggest a high likelihood that rates will remain unchanged. Analysts are closely monitoring inflation and labor market reports for insights into potential future rate cuts.
Recent employment data revealed positive job growth in April, while inflation rates have shown signs of moderation. Despite some relief from inflation pressures, concerns linger about potential impacts from trade policies and tariff developments. Federal Reserve Chair Jerome Powell acknowledged these economic dynamics during a speech in Chicago on April 16.
The challenging situation of President Trump’s extensive tariffs has led the Federal Reserve to take a cautious approach to future policy decisions: “At this point, we are waiting for more clarity before considering any changes to our policy stance.” The committee led by Powell will reveal their rate decision at the end of their meeting scheduled for Wednesday, May 7, 2025, at 2 p.m. Eastern Time.
For more insights: When is the next Federal Reserve meeting? What to anticipate and how it impacts your finances.
Important terms to understand:
– Annual Percentage Yield (APY): This represents the total interest earned on a deposit over a year, including compound interest, shown as a percentage.
– Member FDIC: Indicates that a bank or financial institution is protected by the Federal Deposit Insurance Corporation, ensuring up to $250,000 per depositor in case of insolvency.
– Maintenance or service fee: Some banks charge monthly fees for maintaining an account, but top high-yield savings accounts often waive these fees based on meeting certain criteria.
– Minimum deposit: Some banks require a specific minimum deposit when opening an account to profit from fees if balances aren’t met. The best high-yield savings accounts have no minimum balance requirements.
– Variable APY: Interest rates can be fixed or variable, affecting deposit accounts differently based on economic changes such as Federal Reserve rate adjustments.
The Federal Reserve, also known as the Fed, plays a vital role in the U.S. financial system, aiming to support employment, stabilize prices, and manage long-term interest rates. Its decisions impact rates for deposit accounts.
Further reading: Fixed vs. variable interest rates — how they affect borrowing and saving.
Explore common questions about savings accounts and discover the best fit for your budget and financial goals. Additionally, check out our collection of personal finance guides to help you manage your money effectively.
Wondering about the best option for flexible savings: a no-penalty CD or a high-yield account? Both offer secure ways to grow your money with interest, and the choice depends on your deposit amount, access needs, and financial objectives. Learn more in our comparison guide.
Have $10,000 saved up? Find out the optimal strategies to maximize this amount for a more secure financial future. Consider generating passive income, boosting your retirement fund, or paying off high-interest debts. Check out our guide to making the most of your $10,000.
Compound interest is a powerful concept where you earn interest not only on your initial deposit but also on the interest you’ve already earned. This can significantly boost your savings over time. The Annual Percentage Yield (APY) represents the total interest you’ll earn on your deposit over a year, including compound interest, expressed as a percentage. Many High-Yield Savings Accounts (HYSAs) compound interest daily or monthly. To learn how to make the most of compounding, check out our guide.
Regarding taxes on savings accounts, any interest you earn is considered taxable income by the IRS. If you earn more than $10 in interest in a calendar year, your financial institution will provide you with a Form 1099 to include in your tax return.
When it comes to choosing between fixed and variable interest rates, there is no “best” option. Fixed rates remain constant, while variable rates can fluctuate based on market conditions. Your choice will depend on the product and your financial goals.
Banks profit from savings accounts by charging higher interest rates on loans than what they pay on customer deposits, creating a spread. Online banks and digital accounts have lower overhead costs, allowing them to offer higher APYs compared to traditional brick-and-mortar banks.
Your money is safe with online neobanks or digital accounts. These fintech companies partner with FDIC-insured banks to provide deposit accounts protected up to $250,000 by the government. Look for terms such as “member FDIC” or “FDIC insured” when selecting a bank.
Saving involves keeping your money in secure accounts with minimal risk, while investing entails purchasing assets like stocks or bonds with potentially higher returns and greater risks. Check out our comprehensive guide to saving and investing to determine the best strategy for your financial goals.
