A savings account has always been a first step for anyone looking to save money safely. But in 2025, many savers wonder: What interest rate should you expect from a traditional savings account? The answer tells a story of big differences between old-school banks and modern online options.
Piggy banks might be cute, but the real returns come from knowing where to park your savings.
Photo by adrian vieriu
Traditional Bank Savings Account Rates: The Harsh Reality
If you walk into a major bank—think Bank of America, Chase, or Wells Fargo—you’ll likely find savings account rates stubbornly low. As of April 2025, traditional banks typically pay just 0.01% to 0.05% APY (annual percentage yield) on their standard savings accounts. At this rate, a $10,000 balance earns just $1 in interest over an entire year.
These rates haven’t budged much in years. Traditional banks set their rates based on the Federal Reserve’s target, competition, and their own operating costs. Because they have brick-and-mortar branches and higher expenses, they don’t compete aggressively on rates.
Why Are Traditional Rates So Low?
- High costs: Running physical branches is expensive.
- Customer habits: Many customers stick around out of familiarity instead of shopping rates.
- Limited motivation: Big banks don’t need to offer more since most customers don’t leave.
The result is a savings product that keeps money safe, but rarely grows it.
National Averages: What’s “Normal” in 2025?
When you hear “average interest rate,” the number might surprise you. Across all banks nationwide, the average APY sits at about 0.41% according to FDIC and Bankrate data. This figure includes both low-paying traditional accounts and higher-paying online options.
But don’t be fooled by the average. The vast majority of savings accounts at old-fashioned banks are stuck near zero.
High-Yield Savings: The Game Changer
The real outliers in today’s savings market are high-yield accounts, mostly offered by online banks and credit unions. These savings accounts routinely advertise rates from 4.00% up to 4.66% APY or more.
- Axos Bank: 4.66% APY
- BrioDirect: 4.45% APY
- Bread Savings: 4.40% APY
These rates can mean hundreds or thousands of dollars in extra earnings over time compared to traditional savings accounts.
What Makes High-Yield Accounts So Different?
- Online only: No branches, lower costs, higher rates passed to customers.
- Fewer fees: Many accounts have no monthly fees or minimums.
- FDIC/NCUA insurance: Same government-backed safety as big banks.
- Flexible access: Mobile apps, fast transfers, and sometimes even ATM cards.
If you’re not earning at least 4% on your savings, you’re leaving money on the table.
How Interest Rates Are Set
Savings account rates don’t move in a vacuum. Several factors shape what banks pay:
- Federal Reserve policy: When the Fed raises or lowers its benchmark rate, banks often adjust deposit rates in response. In March 2025, the Fed kept rates steady at 4.25-4.50%. But even so, traditional bank rates stayed near zero.
- Market competition: Online banks and fintechs sparked a “rate war,” driving up the best available offers.
- Operating costs: Legacy banks juggle the expense of branches and staff, while online banks save and can pay more.
- Inflation: Savings rates rarely keep up with inflation. In early 2025, inflation was about 2.4%—much higher than what you earn at a big bank.
Comparing the Numbers: Traditional vs. High-Yield Savings
Let’s break down how much you could make with $10,000 in savings over one year:
- Traditional bank (0.01% APY): $1
- National average (0.41% APY): $41
- High-yield account (4.50% APY): $450
The gap is staggering when you look at it on paper.
When Does a Traditional Account Make Sense?
- Safety net: For money you might need instantly, like the old rainy-day fund.
- Bank loyalty packages: Some people get small perks by linking accounts.
- Branch access: For those who prefer in-person banking.
But for most savers, the payoff just isn’t there anymore.
Features to Consider Beyond Just Rate
While APY is important, it’s not the only thing to look at:
- Access limits: Some savings accounts limit withdrawals to six per month.
- Minimum balance: Watch for accounts that require $500 or more to avoid fees.
- Deposit insurance: Ensure the account is FDIC or NCUA insured for safety.
- Ease of use: Online and mobile features can make saving—and transferring—money a breeze.
A higher rate doesn’t help much if jumping through hoops to access your money is a headache.
How to Choose the Right Account for You
Pick an account based on how you plan to use it. Ask yourself:
- Is this for emergency savings, short-term goals, or a nest egg?
- Do I need same-day access, or can I wait for transfers?
- Am I comfortable with online-only banking?
If you need every penny to grow and don’t require walking into a branch, go high-yield. If you want a set-it-and-forget-it backup at your main bank, stick with traditional—but know you’re trading off growth.
Conclusion: Don’t Settle For Less Than You Deserve
Traditional savings accounts in 2025 still pay almost nothing. The big banks’ rates hover between 0.01% and 0.05%, while the best online accounts now offer between 4.00% and 4.66%. That’s not just a small difference—it’s real money in your pocket.
It pays to check your current APY, compare options, and consider switching to a high-yield savings account. Your future self will thank you every time interest posts and your balance climbs a little higher.
Money should work for you, not just sit idle. Why settle for pennies when you can grow your savings faster—hands-free?