The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for .
Building up your savings account is one of the most effective ways to battle high inflation and brace for a recession. Money in the bank can serve as a safety net if you’re suddenly hit with a large expense, whether it’s a car repair, a medical bill or a loss of income.
One way to increase your savings with virtually no effort is to keep your money in a high-yield savings account that doesn’t charge monthly fees. However, only about 1 in 5 savers (Americans with short-term savings) currently has a savings account that earns a competitive rate of 3 percent or higher, Bankrate’s recent Online Savings Survey found.
It’s not difficult to find savings accounts with online banks that earn competitive annual percentage yields (APYs) of 3 percent or higher. Such rates are exponentially higher than the rate of 0.01 percent commonly offered by some of the nation’s largest banks.
However, only 22 percent of Americans with savings have accounts earning APYs of 3 percent or higher, Bankrate found. Nearly a quarter (24 percent) earn less than 1 percent, while 1 in 6 (16 percent) reported earning no interest whatsoever.
Higher returns on federally insured savings and money market accounts represent the only free lunch in finance. You get additional return and don’t have to take any investment risk to get it.— Greg McBride, CFA, Bankrate chief financial analyst
Key statistics on high-yield savings
- Among Americans with short-term savings, just 7 percent of savers are earning an APY of 4 percent or more in a savings account, and only an additional 14 percent are earning an APY between 3 percent and 3.99 percent.
- Roughly one quarter (24 percent) of savers are earning an APY between 1 percent and 2.99 percent, while the same amount (24 percent) are earning an APY that’s less than 1 percent. One in six savers (16 percent) isn’t earning any interest on their savings, while 14 percent don’t know what, if any, interest they’re earning.
- The average APY of savings accounts offered online by banks is 3.33 percent, Bankrate’s survey of 63 accounts found. The APY most commonly offered is 3.75 percent, while APYs of 4 percent or higher are earned by 40 percent of accounts.
- Of the 63 savings and money market deposit accounts covered in the survey, 25 are available nationwide, charge no monthly fees and have no requirements when it comes to earning the APY or opening the account.
Best savings accounts offer high APYs, no monthly fees
Bankrate’s 2023 Online Savings Survey included 48 federally insured banks and credit unions, and it looked at 63 savings and money market deposit accounts available online from these institutions.
“Bankrate.com found 25 ‘no excuses’ savings or money market accounts in its survey,” McBride says. “These accounts are available nationwide, have no monthly fee and no balance requirements to open the account or earn the APY — meaning these accounts are literally available to everyone.”
Of the nationally available accounts with no monthly fees, a total of 14 pay 4 percent or higher and require no more than $100 to open. Three-quarters of these online savings accounts earn 3 percent or higher, while the national average rate for savings accounts is just 0.23 percent.
Most savers could earn much higher savings account rates
Only around 1 in 5 Americans (22 percent) with short-term savings say they’re currently earning a yield that’s 3 percent or higher. Nearly a quarter (24 percent) earn mediocre APYs of 1 to 2.99 percent. The same percentage (24 percent) report earning a rock-bottom APY of less than 1 percent. A significant number of savers (16 percent) reported not earning any interest, while 14 percent said they don’t know how much interest they’re earning.
In all, adult savers report earning the following rates of return on their savings:
- APY of 4 percent or higher: 7 percent of savers
- APY of 3 percent to 3.99 percent: 14 percent of savers
- APY of 1 percent to 2.99 percent: 24 percent of savers
- APY of less than 1 percent: 24 percent of savers
- Not earning any interest: 16 percent of savers
- Not sure how much interest is earned: 14 percent of savers
Separately, one-third of Americans (33 percent) report they don’t have any short-term savings.
Why Americans don’t open high-yield online savings accounts
Among Americans who do not have an account with an online bank, a variety of reasons were cited in Bankrate’s survey:
- Preference for access to a local branch (46 percent)
- Comfort with current financial institution (41 percent)
- Worries about the security of their money (30 percent)
- Not having enough savings to make it worthwhile (16 percent)
- Uncertainty about ease and speed of money transfer (13 percent)
- Haven’t gotten around to it (10 percent)
- Did not know such accounts existed (8 percent)
- Thinking it takes too much time and effort to open an account (7 percent)
- Don’t know (6 percent)
- Something else (3 percent)
* Respondents could select more than one reason.
Why a savings account with an online bank makes sense
Those who are comfortable with their current bank or who don’t want to lose access to a local branch could still get an online account without giving those up.
“You can link an online savings account to the account at your primary institution and change nothing in your day-to-day financial routine,” Bankrate’s McBride says. “You’re just moving your savings to a place where it will be welcomed with open arms and higher returns.”
Nearly one-third of those who have not opened an online account said they haven’t done so because they’re worried about the security of their money.
“As long as you’re dealing with a federally insured bank, they are regulated the same as the bank or credit union down the street,” McBride says.
One in 10 respondents said they simply haven’t gotten around to opening an online account.
“If you saw a $20 bill on the ground, would you pick it up?” McBride asks. “With just $500 in savings, a 4 percent APY will generate $20 in annual interest earnings — $20 you don’t have now.”
A high-yield savings account typically earns many times the yield of the average savings account. Bankrate’s savings account interest calculator can help you determine how much your savings can earn by plugging in dollar amounts, rates of return and timeframes.
Savings account rates earned by generation and income
Millennials most likely to have high-earning savings accounts and accounts with online banks
The likelihood of earning 3 percent or more on a savings account varies based on generation:
- Generation Z (ages 18-26): 23 percent
- Millennials (ages 27-42): 26 percent
- Generation X (ages 43-58): 23 percent
- Baby boomers (ages 59-77): 17 percent
Millennial savers are also the most likely, by generation, to have a savings account with an online bank, while the generation least likely to do so is baby boomers.
The likelihood of having a savings account or money market deposit account with an online-only bank varies by generation:
- Generation Z: 50 percent
- Millennials: 56 percent
- Generation X: 35 percent
- Baby boomers: 23 percent
Gen X and baby boomers tend to cite access to a local branch (48% and 53%, respectively) and comfort with their current financial institution (41% and 48%, respectively) as reasons for not having a savings or money market account with an online bank. Baby boomers also had more worries about the security of their money (36 percent) than any other generation.
Of those not having a savings account with an online bank, Gen Z members were more likely than other generations to list reasons of not having enough savings to make it worthwhile (21 percent), haven’t gotten around to it (14 percent) and not knowing such accounts existed (17 percent).
A quarter of low-income households earn no interest
Of all income groups, savers in the lowest-income households are least likely to earn a competitive rate of 3 percent or higher on a savings account.
Households that earn 3 percent or more on a savings account, broken down by income, are as follows:
- Under $50,000: 17 percent
- $50,000-$79,999: 22 percent
- $80,000-$99,999: 19 percent
- $100,000 or more: 31 percent
In fact, of all income groups, lowest-income households are the least likely to earn any interest on their savings.
The percentage of households, broken down by income, that don’t earn any interest on savings are as follows:
- Under $50,000: 24 percent
- $50,000-$79,999: 15 percent
- $80,000-$99,999: 12 percent
- $100,000 or more: 9 percent
Those with an online savings account are three times as likely to be earning at least 3% on their savings than those who don’t have an online account (36% vs. 12%). They are also more than twice as likely to be earning 4% or more (11% vs. 5%).
Bankrate.com commissioned YouGov Plc to conduct the survey. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 3,674 U.S. adults, among whom 2,485 have short-term savings. Fieldwork was undertaken Feb. 28-March 3, 2023. The survey was carried out online. The figures have been weighted and are representative of all U.S. adults (aged 18+).