Key Takeaways
- Fed moves aside, the biggest banks still pay nearly 0% on savings, while many smaller banks pay rates 10–13 times the national average.
- Even a $5,000 balance can earn dramatically more in a top high-yield savings account, and the gap grows as your savings increase.
- You don’t need to leave your primary bank to earn more: Linking a separate savings account is easy and can reduce spending temptation.
The Huge Gap Between Big-Bank Savings Rates and What Smaller Banks Pay
With Federal Reserve decisions and interest rate headlines back in the news, savings rates are once again in focus. But for most households, the real issue isn’t what the Fed does next—it’s how much their savings account is paying right now.
Many savers keep their money at Chase, Bank of America, or Wells Fargo simply because that’s where they already bank. But that familiarity often comes at a steep cost. All three institutions continue to pay a near-zero 0.01% APY on standard savings accounts.
At that rate, even a $10,000 balance earns just $1 in interest over an entire year.
Meanwhile, several smaller banks and credit unions are paying 4% or more on high-yield savings accounts, with the most competitive options offering 5.00% APY. Those rates may drift lower over time, but they still dwarf what the biggest banks are paying by a wide margin.
If you’re assuming a large bank is safer, you’re not alone—but that assumption doesn’t hold up. Federal Deposit Insurance Corporation (FDIC) insurance protects deposits up to $250,000 per depositor, per institution, regardless of the bank’s size. Credit unions insured by the National Credit Union Administration (NCUA) offer the same coverage. That means smaller institutions are just as safe, with the only real difference being what your savings can earn.
Why This Matters to You
If you’re keeping savings at a big bank, you may be missing out on hundreds of dollars in interest every year. Moving your money to a high-yield savings account is an easy way to earn more without changing how you bank day to day.
Here’s How Much a Near-Zero Bank Rate Is Costing You
So how much are you missing out on by keeping savings at one of the biggest banks? Even on a modest balance, the gap between a near-0% savings rate and a competitive high-yield account adds up quickly. On larger balances, the difference can be staggering.
The table below shows how much you would earn over one year at a 0.01% APY versus a 4% APY, depending on your savings balance. Even though you can earn as much as 5% with today’s top high-yield savings accounts, we used 4% as a more conservative comparison.
As the numbers show, someone with $25,000 in a big-bank savings account would earn just a few dollars in interest over a year. At a 4% rate, that same balance would generate about $1,000. That’s about $83 in extra earnings each month.
| Big Bank vs. High-Yield: The Earnings Gap After One Year | |||
|---|---|---|---|
| Balance | Earnings at 0.01% APY | Earnings at 4.00% APY | Difference After 1 Year |
| $5,000 | $0.50 | $200.00 | $199.50 |
| $10,000 | $1.00 | $400.00 | $399.00 |
| $15,000 | $1.50 | $600.00 | $598.50 |
| $25,000 | $2.50 | $1,000.00 | $997.50 |
| $50,000 | $5.00 | $2,000.00 | $1,995.00 |
Note that savings account rates are variable, so they’ll likely drift lower if the Fed makes future rate cuts. But even with a modest drop, they would still pay far more than the near-0% rates offered by the biggest banks.
Some Big Name Banks Pay a Bit More
Not every familiar-name bank pays near 0%. Citi, Ally, Capital One, and American Express currently offer savings rates in the mid-3% range—far better than Chase, Bank of America, or Wells Fargo. Even so, those rates still trail what many smaller banks and credit unions are offering today.
You Can Earn More Without Leaving Your Big Bank
If you’re happy with your big bank for everyday banking, there’s no reason you have to leave it to open a high-yield savings account. You can keep your checking account, credit cards, and bill payments exactly where they are while earning a higher rate on some of your funds elsewhere.
A high-yield savings account can simply serve as a separate place to keep money you don’t need to access every day. Linking it to your existing checking account usually takes just a few minutes, and most transfers settle within one to three business days.
For many people, keeping savings in a separate account can actually make it easier to save more. When money isn’t sitting right next to your checking balance, you’re less likely to dip into it for impulse purchases or routine expenses. That small bit of separation can make a real difference over time.
And moving your savings doesn’t change your protection: High-yield savings accounts are federally protected by FDIC or NCUA insurance, just like accounts at big banks.