Online Banks Still Lead on Rates, But Is Switching Worth it Now?

As interest rates trend down, online banks keep an edge on yields, but service, access and flexibility still matter. Here’s how the trade-offs stack up. When you purchase through links on our site, we may earn an affiliate commission. Here’s how it works. If you’re looking for the best interest rate on a savings account, chances are you’ll find it at an online bank. Online banks, which are banks that operate without physical branches, offer convenient digital banking and competitive interest rates that can maximize your return on your savings.The national average interest rate for savings accounts as of December 15 was 0.39%, according to the Federal Deposit Insurance Corporation (FDIC).But right now, some online banks are offering savings account interest rates up to 5%. Since online banks have lower overhead costs, they’re able to pass on better interest rates to customers than you’ll typically find offered by traditional banks.Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special IssuesProfit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.Profit and prosper with the best of expert advice - straight to your e-mail.Interest rates on savings accounts have eased modestly over the past year as the broader rate environment has shifted. The national average savings account rate stood at 0.47% in mid-January 2024 before gradually slipping to 0.39% by December, according to FDIC data. Rates have continued to edge slightly lower throughout 2025 as the Federal Reserve begins to dial back policy rates.Even with that pullback, online banks continue to pay far more than the national average, keeping their savings yields well above what most traditional banks offer.The Federal Reserve sets its benchmark interest rate during policy meetings, and those decisions ripple through the financial system, influencing everything from mortgage rates to the interest banks pay on savings accounts.In 2025, Fed policymakers have been walking a careful line, balancing signs of a softening labor market with ongoing uncertainty tied to tariffs and broader economic conditions. At its December meeting, the Fed cut its policy rate by 0.25% and some economists expect at least two additional rate cuts in the year ahead.Against that backdrop, the yield advantage at online banks stands out. Even as rates trend lower, their higher payouts can make a meaningful difference for savers willing to trade branches for better returns.For savers weighing whether to make the switch, the benefits of online banking extend beyond higher interest rates. Here are a few pros to consider:While there are many benefits to online banking, you should also be aware of the drawbacks:With the national average savings rate sitting at 0.39%, the gap between traditional banks and online options remains wide. Here’s how a few online banks currently stack up.Use the tool below to quickly explore and compare more of today's top savings account offers:You may decide it makes sense to switch to digital banking if you have substantial savings and want to maximize the interest your money earns. By switching to a high-yield savings account through an online bank, you may qualify for a substantially higher interest rate than your current APY.But be careful about aggressively chasing rates, especially if online banks are offering promotional rates. If you’re looking for a long-term banking solution, it’s important to make sure that the services available and the overall convenience the bank offers truly match your needs. Consider the types of accounts you need and your banking priorities when deciding if an online bank is right for you.It’s common to be worried about the safety of online banking, especially since you won’t initially go to a physical branch to open your account and make your first deposit. Be sure to choose a bank that is FDIC insured. FDIC insurance applies whether the bank is online or brick-and-mortar, and in case of a bank failure, FDIC insurance protects your money up to at least $250,000.Digital banking offers many perks, including higher interest rates than traditional savings accounts provide. But those perks come with trade-offs, including the lack of in-person customer service, cash deposits that can be a hassle and potentially varying rates.If you’re considering switching to online banking, take some time to research each bank and its available products. Compare the current rates and check the fee schedule to make sure you understand the potential costs involved and any minimum balance requirements.You can also take advantage of digital banking interest rates with a hybrid approach. Consider opening a savings account with a digital bank, but leaving your other accounts in your current bank open, too. You can try this hybrid approach to see how well digital banking works for you.Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.Paige Cerulli is a freelance journalist and content writer with more than 15 years of experience. She specializes in personal finance, health, and commerce content. Paige majored in English and music performance at Westfield State University and has received numerous awards for her creative nonfiction. Her work has appeared in The U.S. News & World Report, USA Today, GOBankingRates, Top Ten Reviews, TIME Stamped Shopping and more. In her spare time, Paige enjoys horseback riding, photography and playing the flute. Connect with her on LinkedIn. How can a snowbird wannabe warm up without the expense? We asked professional wealth planners for advice. 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