High interest savings account: what a better rate is worth
The difference between an ordinary account and a high interest savings account is large: on $10,000, 1% earns $100 a year while 4% earns $400, so the better rate is worth $300 a year. On $50,000 the gap is $1,500.
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What different rates earn in a year
The table shows one year of interest on common balances at four rates. The last column is the extra you earn from 4% compared with 1%.
Interest earned in one year
| Balance | At 1% | At 3% | At 4% | At 5% | 4% vs 1% |
|---|---|---|---|---|---|
| $1,000 | $10 | $30 | $40 | $50 | $30 |
| $5,000 | $50 | $150 | $200 | $250 | $150 |
| $10,000 | $100 | $300 | $400 | $500 | $300 |
| $25,000 | $250 | $750 | $1,000 | $1,250 | $750 |
| $50,000 | $500 | $1,500 | $2,000 | $2,500 | $1,500 |
Before tax. Rates are examples, not offers.
How to find the highest interest savings account
- Compare easy-access, notice, fixed-rate and online accounts. Fixed rates are usually the highest but lock your money away.
- Look at the rate after any bonus period ends.
- Check how interest is paid and whether there are withdrawal limits.
- Check the protection: FDIC (or NCUA) insurance protects up to $250,000 per depositor, per insured institution, per ownership category.
- Review your rate every year and move when it drops.
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Tax on the interest
Savings interest is taxed as ordinary income. A higher rate means more income to report, but it is almost always better to earn it.
How long to double your savings
At 4% your money doubles in about 18 years, at 5% in about 14 years and at 1% in about 72 years. The rate is the biggest lever you control.
Sources and further reading
Questions people ask
How much interest will I earn on $10,000 at 4%?
$400 in a year if you leave the interest in the account, or about $2,167 over five years.
Is a high interest savings account safe?
Deposits at FDIC-insured banks and NCUA-insured credit unions are protected up to the official limit. Check that the institution is insured.
Results are estimates for information only, not financial advice. Read the full disclaimer.
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