You might be shocked at how much more online savings accounts yield – even after the Fed’s rate cuts

The Federal Reserve has cut interest rates twice in recent months. This has caused interest rates for savings accounts, CDs and money market accounts to decline.

However, you should keep a few things in mind. First, interest rates are still quite high. The Fed’s cuts lowered the federal funds rate by a total of three-quarters of a percentage point (0.75%), but the benchmark rate is still well above the peak of the previous rate hike cycle.

And second, you might be surprised at the interest rates that online savings accounts currently pay, especially if you’re used to banking with a brick-and-mortar financial institution.

Are you looking for a better interest rate on your savings? Click here for our list of the best high-yield savings accounts of the moment.

Online savings accounts versus the national average

According to data from the FDIC, the average interest rate on savings accounts in the United States is 0.45%. In money market accounts, the national average is 0.61%, and even if it is a one-year CD, the average is 1.81%.

Meanwhile, some high-yield savings accounts, offered by mainly online banks, offer returns of almost 10 times the national average. And despite what you might expect about online banking, many of these are offered by institutions you probably know and trust. For example, the Capital One 360 ​​Performance Savings account has an APY of 4.00%.

There are other great examples, and you may be able to find even higher returns, especially if you tend to maintain a relatively high savings balance. For example, the LendingClub LevelUp Savings Account offers a best-in-class 5.00% APY with $250+ in monthly deposits.

It’s not just now about the proceeds

To be clear, the huge difference in interest rates is the biggest reason to switch from a physical savings account to a savings account from a leading online bank. For example, almost every online savings account has no monthly account fees. Physical banks usually offer account holders a way to avoid fees (for example, by maintaining a certain balance), but with an online savings account you don’t have to worry about that.

In addition, some accounts have other benefits. Not all of these apply to all online savings accounts, but here are some things you might find:

• 24/7 customer support
• Easy to use banking apps
• Some (like Capital One) have physical locations in some areas
• Unlimited (and free) external transfers
• ATMs in tens of thousands of locations
• ATM reimbursement at out-of-network ATMs

The bottom line is that if you’re still using a brick-and-mortar bank for your savings, it may still be a good time to switch to online banking — even after the Fed’s rate cuts. And it’s important to keep in mind that even if the Fed continues to cut rates over the next two years, as is widely expected, online savings accounts will still likely pay several times the national average savings rate. This was the case even when the Fed kept interest rates near zero, and there is no reason to expect this to change.