Best Bank Interest Rates

Finding banks offering top interest rates allows your money to grow faster whether saving for the future or just holding funds temporarily. While rates have fallen overall the past decade, big differences still exist between financial institutions. Comparing options for the highest yielding savings accounts, CDs, money market accounts and other bank products scored in 2023 makes a difference.

This guide examines today’s best bank interest rates, factors influencing rate variances between banks, how to locate the highest rates for your area and situation, and strategies to maximize yield by structuring accounts optimally. With some research, you can place cash in secure insured accounts earning interest substantially above national averages.

How Banks Determine Interest Rates Paid

Several factors influence the interest rates banks pay customers on deposit accounts:

• Federal Reserve – As the Fed adjusts short-term rates, borrowing costs for banks rise so they gradually raise consumer deposit rates. But deposit rates trail since banks want to preserve profit margins.
• Competition – As new online banks enter the market offering high yields to acquire customers, established banks have to increase rates to remain competitive.
• Loan demand – When demand grows for new loans, banks raise deposit rates to attract more consumer funds to lend out. Lower loan demand means lower rates.
• Cost of operations – Online and lean startup banks have lower overhead than brick-and-mortar banks, allowing them to pay out higher interest on deposits.
• Account restrictions – Banks pay higher rates on accounts with restrictions like limited withdrawals or debit transactions compared to fully liquid accounts.

Consumers benefit by having many choices between new digital banks and traditional institutions. Shopping around for the best returns is wise.

Highest Savings Account Rates

Savings accounts provide deposit safety, liquidity, and modest interest. Top rates from online banks in 2023 include:

UFB Direct Savings – 4.16% APY

CFG Bank Savings – 4.15% APY

Quontic Bank Savings – 4.07% APY

BrioDirect Savings – 4.05% APY

Crescent Bank Savings – 4.05% APY

Salem Five Savings – 4.04% APY

CIBC Agility Savings – 4.00% APY

Thanks to virtually zero operating expenses, the highest yields come from newer digital banks. But some established regional banks also compete. Avoid big banks paying only 0.01%.

Finding the Best CD Rates

Certificates of deposit (CDs) lock-in fixed interest for specific durations. Top rates include:

6 Month CD Rates

Popular Direct – 4.15% APY

CFG Bank – 4.10% APY

CIT Bank – 4.10% APY

1 Year CD Rates

Crescent Bank – 4.60% APY

Bread Savings – 4.50% APY

Quontic Bank – 4.50% APY

2 Year CD Rates

CFG Bank – 4.60% APY

CIT Bank – 4.50% APY

Crescent Bank – 4.50% APY

Competing on short-term CDs, online banks pay handsomely for tying up cash. But smaller banks also offer attractive medium-term CD yields.

Best Money Market Account Rates

Money market accounts provide benefits like debit access despite paying higher rates than basic savings. Top APYs include:

BrioDirect Money Market – 4.30%

Salem Five Money Market – 4.25%

Sallie Mae Money Market – 4.20%

CFG Bank Money Market – 4.15%

Crescent Bank Money Market – 4.15%

With elevated yields compared to paltry national averages, money market accounts offer suitable liquidity and growth for short-term savings goals or emergency funds.

Comparing Online Banks vs Brick-and-Mortar Banks

Higher rates are available through online banks, but traditional banks have advantages too:

Online Banks

• Top rates on savings, CDs, money markets
• Low overhead costs passed to customers
• Digital experience – mobile apps, remote deposit

Brick-and-Mortar Banks

• Physical branches allow face-to-face service
• Established reputation and financial strength
• Full suite of products like loans and credit cards
• Local connections and community focus

Online banks compete through efficiency and attractive rates. But traditional banks provide in-person expertise and a broader product portfolio.

Strategies to Earn More Interest

Beyond smart shopping, you can further maximize interest earned by:

• Laddering CDs to enjoy new higher rates as shorter CDs mature
• Trying online banks without the overhead of physical branches
• Using high-yield savings for emergency funds, avoiding checking accounts
• Comparing rates across banks regularly as offerings evolve
• Maintaining larger deposit balances when requirements exist for top tiers
• Using reward checking accounts for some liquid funds, meeting debit requirements
• Consolidating funds from multiple banks to maximize balances

With the right account structures and diligent rate monitoring, idle cash can earn multiples more in interest over time.

Avoiding Big Bank Pitfalls

Recognize big banks frequently pay the lowest interest rates:

• Large shareholders demand maintaining higher profit margins, limiting payouts to consumers
• High overhead costs of physical infrastructure reduce what they can pay on deposits
• Rely on name recognition and branch convenience over attractive yields
• Use high rates as promotion to attract new money rather than ongoing offerings
• Contribute a lower percentage of deposits directly to lending versus relying on capital markets
• Have greater access to near-zero cost Fed deposits to fund lending activities

While convenient for in-person services, the big banks simply are not competitive for interest yields.

Questions to Ask When Choosing the Best Bank

Before opening accounts, always inquire about:

• Minimum opening deposit amounts and ongoing balance requirements
• Monthly maintenance and transaction fees with ways to waive them
• Penalties for withdrawing funds like CD earnings before maturity
• Insurance coverage through FDIC or NCUA protecting deposits
• Required debit card transactions or direct deposit amounts needed to qualify for top rates
• Introductory bonus rates and when accounts transition to standard lower yields
• When and how interest compounds on various account types

Asking questions upfront prevents assumption gaps and supports the best rate maximization.

Beware of Excessively High Rates

Very high interest rates above competitive averages may actually signal risk rather than value. Be wary of:

• Obscure institutions with no reputation or history in an area
• Vague explanations why and how they can pay rates well above competitors
• Offers sounding too good to be true
• Accounts not backed by proper FDIC or NCUA insurance
• Companies pushing your money into high risk investments rather than true deposit accounts

Extremely high yields can stem from unsustainable business models, bait-and-switch teasers, or even fraud in worst cases. Vet institutions thoroughly before pursuing rates seeming unrealistic.

Future Interest Rate Outlook

Interest rates across accounts are expected to continue moving higher in 2023 based on several economic factors:

• The Federal Reserve is likely to keep raising its federal funds rate through 2023 to curb inflation, driving up general interest costs.
• Strong labor market, inflation and GDP growth support further measured rate increases in 2023 to cool economic overheating.
• As benchmark rates rise, competition for deposits typically heats up, forcing banks to increase consumer yields.
• Online lending and savings platforms will continue gaining market share and disrupt established players.

Account for future earning potential when locking in longer fixed CD rates versus shorter terms to take advantage of expected rate strength. But avoid drastic upswings leading to later crash.

Weighing Liquidity vs Rate of Return

Higher interest rates generally mean sacrificing liquidity and flexibility:

Liquid Deposit Accounts

• Savings, checking, money market
• Immediate or quick access to funds
• FDIC insured just like longer term accounts
• Very low interest rates

Term Deposit Accounts

• Certificates of deposit
• Early withdrawal penalties apply
• Funds locked up for set period of time
• Highest interest rates

Evaluate tradeoffs between liquidity and return based on timeline until needing the funds. But keep some cash readily accessible for emergencies despite lower yield.

Tips for Managing Savings and CD Investments

Follow these best practices when investing cash in high yield accounts:

• Maintain an emergency fund in an online savings account for quick access
• Open a rewards checking account for some liquidity earning modest interest
• Compare CD rates across multiple banks when investing term deposits
• Ladder CDs so amounts become available periodically as shorter CDs mature
• Reinvest CDs upon maturity again if needed longer term to keep earning interest
• Transfer maturing CDs to savings accounts if liquid cash is needed short term
• Know early withdrawal penalties before committing long term to CDs

The right savings approach makes idle cash work harder through disciplined account structuring tailored to evolving time horizons and liquidity needs.

Avoiding Common Bank Deposit Mistakes

Some frequent mistakes to avoid:

• Placing emergency fund money into a CD losing liquid access
• Depending on promotional teaser rates that later drop
• Failing to compare competitor bank offerings routinely before investing
• Not checking insurance and coverage limits on accounts across banks used
• Assuming big banks offer best rates due to size and familiarity
• Overlooking account maintenance fees eroding interest earned
• Keeping large deposits in checking rather than maximizing savings/CD yields
• Withdrawing CD earnings early incurring penalties

Shopping carefully, reading fine print, and avoiding assumptions leads to the most advantageous interest maximization.

Key Takeaways on Interest Rates

Key tips for earning the highest yields:

• Compare online and traditional banks when rate shopping
• Look for highest rates on savings, CDs and money markets
• Pursue new customer promotions when changing banks
• Ladder maturing CDs across near-term, mid-term and longer
• Maintain deposit balance minimums to qualify for top rates
• Review fees and deposit insurance for each account

Whether saving for a home, retirement, education or other goals, ensuring your money earns the most interest possible allows reaching key milestones faster. Avoid leaving savings idle in a low-yield checking account when attractive CD options exist. With some diligence finding the best offerings, you can earn multiples more in interest over time from the same deposit amounts.