5% Interest Savings Account: Where Can I Get 5% on My Money?

What is a 5% interest savings account?

It’s a high-yield savings account that offers a 5% interest rate — which is more than 10 times the average interest rate on savings deposit accounts in the United States as of late 2023, according to the FDIC.

Traditional savings accounts at local banks and credit unions, for example, typically provide interest earnings of less than 1% — often it’s a fraction of a percent.

Depending on the policies of the particular financial institution, you may need to open the account with a minimum deposit, keep a minimum average balance or have a certain number of direct deposits hit the savings account to earn the high interest rate. Interest-earning accounts may earn based on simple or compound interest, and in the latter case, interest may be compounded daily or on another schedule. These details can slightly impact how much you earn over time, though the difference is typically negligible unless you carry a very high savings account balance.

To understand how much you can save with a 5% high-yield savings account, check out the hypothetical example below. This example demonstrates the type of earnings you might see if you put $3,000 in a savings account with interest that is compounded daily. It also assumes that you add another $300 per month to your account over the entire time that you save.

5% Interest Savings Account with $3K Initial Deposit & Additional Deposit of $300 per Month

The total amount you can earn with this type of savings account depends on:

• Your starting balance.
• How much money you continue to contribute.
• The length of time you leave the money in the account.

To learn more about how much you could earn, try using our savings calculator.

How to choose a 5% interest savings account

Not all 5% interest savings accounts are the same, so it’s important to consider factors other than the interest rate before you open a savings account.

Some common factors differentiating high-yield savings accounts include:

• Minimum balance requirements. Some high-yield savings accounts require you to keep a minimum average balance, such as $5,000, to accrue the higher interest. Otherwise, your account may accrue a much lower interest amount for a given period, such as a month, during which your balance didn’t meet minimum requirements. However, you can find high-yield accounts without balance requirements so you don’t have to worry about this detail.
• Minimum opening deposit requirements. Some banks only allow you to open a high-yield savings account if you do so with a certain starting deposit, such as $500 or $1,000 or more. Again, you can find high-yield savings options that don’t have this requirement, which can make it easier to start saving.
• Online banks vs. brick-and-mortar branches. You may need to choose between an online bank and a financial institution with local branches. Both are legitimate choices, and it comes down to a personal preference on how you like to manage your account and access customer service when needed.
• Options for a checking account. Not all online banks that offer high-yield savings provide other types of accounts. Consider whether you want your savings account with an institution that provides comprehensive services, including checking account options.
• Check-writing capability. Some savings accounts offer limited check-writing capabilities, making it easier to access or use your funds if needed.
• Monthly service fee. Depending on what type of balance you keep in your savings account, your interest earnings can be wiped out by maintenance fees. Consider looking for accounts that don’t charge monthly fees or waive them if you keep a certain balance or make one or more direct deposits to your checking account. Some accounts are virtually fee-free if you don’t conduct specific types of transactions, such as wire transfers.
• Type of interest accrued. Find out how interest is accrued and credited on any interest-bearing account you’re considering. Many banks credit interest as a single amount each month, but if you have an account with interest that compounds daily, you earn a little more than you might if interest is compounded monthly or quarterly.
• FDIC coverage. Choose accounts with institutions that are covered by FDIC insurance. This protects up to $250,000 in deposits per account per depositor in case the bank or credit union experiences a financial failure.
• Customer service options. Look at the ways a bank serves its customers, especially if you’re going with an online bank. More customer service options, including chat, email and phone, are better than fewer, as they provide flexibility should you need assistance.

How to apply for a 5% interest savings account

You have two options for applying for a 5% interest savings account once you find one that meets your needs.

In either of the above cases, you’ll need to complete some paperwork. At a local branch, someone typically asks you questions and enters the information for you. When opening an account online, you type in the information yourself.

You generally need:

• A photo ID, such as a driver’s license, to prove your identity
• Your Social Security or Tax ID number
• A valid residential address
• Contact information, such as your email address and phone number
• A method of funding the savings account — typically via a transfer from an external checking or savings account by using the bank routing and account numbers

Get to know some of the following high-yield savings accounts:

*Limit of 6 withdrawals per statement cycle

Where can I get 5% interest on my money?

A variety of banks offer high-yield savings accounts. However, you’re most likely to find a 5% interest savings account with an online bank, and some banks may even provide a higher 7% interest rate savings account.

These online banks don’t have the expenses associated with operating branch locations, and they often pass those savings along to account holders via higher interest earnings.

Banks that have savings accounts with APYs of 5% or higher as of April 2024 include:

• Bask Bank, which offers a savings account with an APY of 5.10%.
• CIT Bank, which offers a Platinum savings account with an APY of 5.05%, though you need a minimum opening deposit of $100 and a balance of $5,000 to earn that rate.
• Ivy Bank, which offers a high-yield savings account with an APY of 5.30% and requires a minimum opening deposit of $2,500 and a minimum balance of $2,500 to earn the high APY.
• Texas Capital Bank, which offers a Star high-yield savings account with an APY of 5.10%, though this is only available for Texas residents.
• First Foundation Bank, an online bank that offers a 5% APY savings account and doesn’t restrict by state.
• DCU Bank, which offers primary savings accounts with APYs as high as 6.17% with super low deposit requirements and no minimum balances or fees, though you may only earn the higher APY on balances up to $1,000
• Bread Savings, an online bank that offers 5.15% APY savings accounts with a $100 opening deposit and no hidden fees

Banks that have savings account with APY of 4% as of April 2024

• Synchrony Bank, which offers a savings account with an APY of 4.75%.
• Citibank, which offers a high-yield savings account with an APY of 4.45%.
• Capital One, which offers a 4.25% APY savings account.
• Ally, an online bank that offers a savings account with an APY of 4.25%.
• American Express, which offers a high-yield savings account with an APY of 4.30%.
• Discover, which offers an online savings account with an APY of 4.25%.
• Barclays, which also offers an online savings account, has an APY of 4.35%.
• Marcus, an online savings account offered by Goldman Sachs, has an APY of 4.50%.

Savings account interest rates vary based on the market and other factors, so always do your own research before you choose an account. These are just some examples of the types of banks and accounts you can find.

Pros and cons of 5% interest savings accounts

It is important to understand the pros and cons of high-yield savings accounts to help you decide if a 5% interest savings account is right for you.

High-interest savings accounts offer a variety of perks, such as:

• Higher earnings -  The biggest benefit of a 5% interest savings account is the ability to earn more interest over traditional accounts, which can enhance your ability to save money over time.
• Flexibility - You don’t have to worry about maturity dates and can access your funds at any time while still getting an interest rate that’s equivalent to many certificates of deposit.
• Security - Savings accounts with reputable banks are FDIC-insured, providing you with more peace of mind than you might get with other investments, such as real estate or the stock market.
• Digital banking - When you choose an online bank, you have the added benefit of on-the-go savings management via mobile devices.

On the other hand, even a high-yield savings account may not provide the type of interest earnings you can get with less secure investment options. A savings account provides security rather than an opportunity to create fast wealth. If you choose to bank online, you may also give up access to branch locations and even ATMs, which means you’ll need to plan a few days in advance if you need access to the funds in your savings account.

Is a 5% interest savings account worth it?

Whether any savings account is worth it for you is a personal preference. However, if you’re building an emergency fund or saving for a large purchase like a house down payment, an account with a higher savings rate can help you get more from your money without taking a chance with riskier investments or locking your money up in CDs that have to mature.

Individuals who are paying down high-interest debt, however, may not find these accounts worth it. Even at a 5% savings rate, you won’t save more than you’d end up spending in interest on a high-balance credit card with an APR of 20% or more.

Alternatives to 5% interest savings accounts

Individuals looking for higher-yield savings might also consider these options.

• Certificates of deposit (CDs). Many banks offer these savings vehicles at rates of 3% APY and higher, and there are plenty of options with 5% APY or higher. CDs are a good option for those who know they won’t need the money for the term of the CD, which can take months or even a couple of years to mature. Like savings accounts, CDs are FDIC-insured and a low-risk savings option.
• Money market accounts. You may find money market accounts with APYs of 2% or higher. These accounts can be a good option for those who want a higher savings yield than what’s available with checking accounts but want to keep some features associated with checking.
• Index funds. Those who want to explore slightly more aggressive investment options might start with index funds. The S&P 500 index has a long-term average annual return rate of around 10%. However, short-term investments of this type can also lead to losses, as index funds aren’t as secure and safe as the other options mentioned above.