At present, there are very few banks offering 7% APY on savings accounts. If you’re looking for maximum returns from a bank, the best high-yield savings accounts typically offer around 3% to 4% APY — which is still fairly high by historical standards.
Why aren’t 7% interest bank accounts typically available anymore? Mainly because of the Federal Reserve’s adjustments to the federal funds rate.
Starting in 2022, the Fed began a series of unusually aggressive rate hikes, with the aim of taming post-pandemic inflation and preventing a recession. For people with money in savings accounts, a positive side effect of the rate hikes was that deposit account rates rose in tandem.
Now, with inflation under control, the Fed is expected to continue its recent series of rate cuts. And with each cut, banks will reduce their deposit rates.
For financial accounts that have variable interest rates, including checking accounts, savings accounts, and credit cards, interest rates have dropped alongside the federal funds rate, and are likely to fall further. For new accounts with fixed rates, including CDs and most loans, rates have shifted downwards, too.
Read more: Fixed rate vs. variable rate: What’s the difference, and why it matters
To find the highest rate on a savings account, you’ll have to shop around. Interest rates vary drastically from one account to another, with the national average at just 0.4%, so earning more starts with some comparison shopping.
When you find a bank or credit union that advertises a high interest rate, be sure to read the fine print. In some cases, the highest rate on an account only applies to a limited portion of your deposit, and you have to meet certain requirements to earn that rate. Any or all of these actions may be required:
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Enroll in eStatements
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Complete a minimum number of debit transactions per month
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Receive a minimum dollar amount in direct deposits per month
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Log into your account at least once a month
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Open both a checking and savings account with the financial institution
Read more: How to maximize your savings following the Fed’s rate cut
Bank accounts that offer 7% APY are extremely rare. That said, you can find a handful of credit unions that pay 7% or more on checking or savings accounts. The catch: These rates only apply to a portion of your balance.
Before opening an account, take a close look at the terms and conditions to determine whether you can earn the advertised rate. For example, with BCU, you need $3,000 in qualifying deposits each month to earn the 8% rate, and the APY significantly drops after three months.
Earning 7% APY on a bank savings account is a thing of the past, but that doesn’t mean you should abandon your savings efforts. Keeping some money in FDIC- or NCUA-insured accounts remains essential for good financial management, even when interest rates are falling.
Here’s where you can deposit your money to maximize your interest:
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Day-to-day spending cash: Look for a high-yield checking account with low or no fees, where you can make unlimited withdrawals without any penalty.
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Emergency savings: Try a high-yield savings account or money market account where you qualify for a high APY based on the balance amount you can consistently keep on deposit.
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Short- and mid-term savings: Open a CD or Treasury bill that allows you to lock in an above-market APY before the Fed makes more interest rate cuts.
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Long-term savings: Invest in a retirement account (ideally with an employer match) where you’ll earn compound returns over the long term. Stock purchases and other investments can bring high returns, too, but they should be part of a balanced portfolio, especially given the current uncertainty in the stock market.
Read more: How to maximize your interest earnings following a Fed rate cut
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