What is the interest rate on my savings account?
Those new to banking – or even those who have been in it for a while – may be surprised to learn that not all interest is bad. Unlike the interest charges you are charged for credit products, savings account interest works for you rather than against you.
What is savings account interest?
Interest on a savings account is the fee you earn for keeping your money in the bank. Why?
Banks use the collective money deposited by account holders to fund loans and other investments. Interest charges are paid to you by the bank as compensation for allowing them to use your deposits as capital for investments.
(Don’t worry, the bank never uses everything of its deposits; you can withdraw your money at any time.)
The amount of interest you earn on your money is determined by the interest rate on your savings account. As such, one of the first things we should all ask ourselves when evaluating a savings account is, “What is my interest rate on my savings account?”
The best savings accounts offer a high interest rate that can help you increase your savings. The amount of interest you’ll earn will vary a lot depending on the bank and account type, so it’s important to look for the best rates.
Related: The best savings accounts
Where to find your savings account interest rate
The easiest way to find out the current interest rate on your savings account is online:
- Log in to your online banking account through a web browser or the bank’s mobile app.
- Select the account on which you want more information.
- Next, look for a section that says “account details” or similar.
- Scroll until you find your interest rate
In addition to your interest rate, most banks will also show how much interest you’ve earned so far this year.
If you can’t find your rate online or in the app, you can also ask your bank directly. You can call customer service or visit a local branch. Your rate may also appear in any documents you received when you first opened your account.
How to find the interest rate on a new account
It’s a good idea to compare interest rates when shopping for a new savings account. In this case, the best place to find the interest rate is probably the bank’s website.
Some banks will have a page that compares all of their savings products. Other banks will have a dedicated page for each type of savings account.
Savings account interest rates can often vary depending on your location. Thus, you may need to provide your zip code to see the potential interest rate on a new account.
Related: How to open a bank account online
Interest rate vs. APY
The interest rate on your savings account may be listed as an APY, rather than an interest rate. APY stands for Annual Percentage Yield. The APY is the amount of interest you can expect to earn over a year. An APY is based on both the interest rate and how often the interest is compounded.
Learn more: What is APY?
Savings account interest can be paid daily, monthly, quarterly or annually. The amount of interest earned is calculated at the time of payout based on your total account balance. This includes both your initial deposit – the principal – and the interest you’ve earned so far.