How much extra interest is switching savings accounts actually worth?

It depends on the balance, the rate gap and the time you leave the money in place. Moving 15,000 from 0.05% to 4.75% for three years is worth about 2,218 in extra interest; the same rate gap on 40,000 over five years is worth about 7,960. Enter your own balance and rates above rather than relying on either example.

Is a 4% or 5% APY good for a savings account?

Relative to the roughly 0.01% to 0.1% many large traditional banks pay on standard savings accounts, 4% to 5% is a strong online-bank rate and has been common on top high-yield accounts through 2024 and 2025 as the Federal Reserve held its target rate elevated. Whether it stays that high depends on future Fed policy, so treat it as current rather than permanent.

Does compounding frequency change the comparison much?

Less than the headline rate does. Daily versus monthly versus annual compounding on the same quoted APY changes the ending balance by a small fraction of a percent, while a rate gap of several points changes it by thousands. Compare the advertised APY, which already accounts for compounding, rather than the nominal rate.

Is my money still insured if I move it to an online bank?

Yes, as long as the bank is FDIC-insured (or the credit union is NCUA-insured), coverage works the same way regardless of whether the institution has branches: up to 250,000 per depositor, per bank, per ownership category. Confirm FDIC or NCUA membership before opening the account, since not every fintech app is a bank itself.

Will I owe more tax if I earn more interest?

Yes. Interest is ordinary income in the year it is paid, so a higher APY simply means a larger taxable amount and a bigger 1099-INT at year end in the US. The extra interest is still a net gain after tax for almost every filer, but it will not be the full headline figure once tax is applied.

How often do high-yield savings rates change?

They are variable and can change within days or weeks of a Federal Reserve rate decision, and banks are free to adjust them at any time without notice. A projection run over several years assumes today's rate holds throughout, which is the weakest assumption in a long-horizon comparison.

Savings rate comparison

This tool grows the same balance forward at two different annual percentage yields and shows the gap at the end. A normal starting point for the 'current' rate is whatever a big-bank passbook savings account pays, often a few hundredths of a percent, while the 'alternative' rate is what a competitive online savings account or money market account is advertising. The gap between those two numbers, not either rate alone, is what tells you whether moving your money is worth the hassle.

What counts as a meaningful rate gap

A difference under half a percentage point rarely changes behaviour, because the extra interest on a modest balance is small next to the effort of opening a new account and redirecting deposits. A gap of three to four and a half points, which is common between legacy brick-and-mortar savings accounts and online high-yield accounts, is usually large enough to act on.

The size of the balance matters as much as the size of the gap. A four-point spread on 2,000 is a rounding error; the same spread on 40,000 is real money, which is why this calculator is more useful for emergency funds and short-term cash than for a checking buffer.

Treat the number this tool returns as the reward for switching, and weigh it against the one-time cost: paperwork, a possible brief gap in interest during the transfer, and the discipline of remembering a second login.

Three worked comparisons

Move 15,000 from an account paying 0.05% to one paying 4.75% and leave it for 3 years. The old account grows to about 15,023; the new one grows to about 17,241. That is roughly 2,218 in extra interest, or about 739 a year, for a rate gap of 4.7 points on a modest balance.

Move a larger emergency fund of 40,000 from 1.5% to 5.0% for 5 years. Staying put reaches about 43,091; switching reaches about 51,051. The difference is about 7,960 over five years, or roughly 1,592 a year — a bigger prize because both the balance and the time horizon are larger.

A smaller, shorter case: 8,000 sitting at 0.01% for 2 years compared with 4.5%. Staying put barely moves to about 8,002; switching reaches about 8,736, a gain of roughly 735. Even on a modest sum and a short horizon, a wide rate gap adds up to real money.

Why the projection understates or overstates reality

The calculation compounds once a year at a fixed rate for the whole period, which flatters both sides equally but does not reflect how either account actually behaves. Real savings and high-yield accounts compound daily or monthly and credit interest monthly, so the true balance is slightly higher than a pure annual-compounding formula suggests for the same quoted APY.

The bigger source of error is that advertised high-yield rates are not fixed. They track the Federal Reserve's target rate and can move within weeks of a policy change, while the account you are leaving may also change its rate, usually more slowly and by less. A projection run over five years assumes both rates hold, which is the least realistic part of the exercise the longer the horizon runs.

This tool also assumes no deposits or withdrawals during the period. Add in regular contributions, or draw the account down for an emergency, and the actual gap between the two accounts will differ from the lump-sum comparison shown here, usually growing larger if you keep contributing to the higher-rate account.

Introductory rates, caps and account limits

Many high-yield savings accounts advertise a rate that only applies for the first three to six months, after which it reverts to a lower ongoing rate. Check whether the alternative rate you are entering is the ongoing rate or a temporary teaser before you rely on a multi-year projection built from it.

Some accounts also cap the balance that earns the advertised rate, paying a much lower rate on anything above that ceiling. If your balance to move exceeds a stated cap, split it mentally between the capped and uncapped portions rather than applying the headline rate to the whole amount.

Money market accounts and some online savings accounts limit the number of withdrawals per statement cycle. That is not a cost this calculator captures, but it is worth checking before moving funds you might need to access on short notice.

Deposit insurance and tax timing

In the United States, FDIC insurance covers up to 250,000 per depositor, per insured bank, per ownership category, and NCUA insurance covers credit unions on the same terms. A balance comfortably under that limit at either institution carries no additional insurance risk from switching.

Interest earned in a standard US savings account is taxable in the year it is credited, regardless of whether you leave it in the account or withdraw it, and the bank reports it on a 1099-INT once it passes 10 for the year. A higher APY means a larger 1099-INT the following January, so build the extra tax into your expectation of the net gain.

UK savers should note that interest is set against the Personal Savings Allowance rather than reported on a US-style form, and that most easy-access rates are variable and reviewed by providers far more often than fixed-term bonds, so a rate comparison there ages faster than in a fixed-term product.

Frequently asked questions

How much extra interest is switching savings accounts actually worth?: It depends on the balance, the rate gap and the time you leave the money in place. Moving 15,000 from 0.05% to 4.75% for three years is worth about 2,218 in extra interest; the same rate gap on 40,000 over five years is worth about 7,960. Enter your own balance and rates above rather than relying on either example.
Is a 4% or 5% APY good for a savings account?: Relative to the roughly 0.01% to 0.1% many large traditional banks pay on standard savings accounts, 4% to 5% is a strong online-bank rate and has been common on top high-yield accounts through 2024 and 2025 as the Federal Reserve held its target rate elevated. Whether it stays that high depends on future Fed policy, so treat it as current rather than permanent.
Does compounding frequency change the comparison much?: Less than the headline rate does. Daily versus monthly versus annual compounding on the same quoted APY changes the ending balance by a small fraction of a percent, while a rate gap of several points changes it by thousands. Compare the advertised APY, which already accounts for compounding, rather than the nominal rate.
Is my money still insured if I move it to an online bank?: Yes, as long as the bank is FDIC-insured (or the credit union is NCUA-insured), coverage works the same way regardless of whether the institution has branches: up to 250,000 per depositor, per bank, per ownership category. Confirm FDIC or NCUA membership before opening the account, since not every fintech app is a bank itself.
Will I owe more tax if I earn more interest?: Yes. Interest is ordinary income in the year it is paid, so a higher APY simply means a larger taxable amount and a bigger 1099-INT at year end in the US. The extra interest is still a net gain after tax for almost every filer, but it will not be the full headline figure once tax is applied.
How often do high-yield savings rates change?: They are variable and can change within days or weeks of a Federal Reserve rate decision, and banks are free to adjust them at any time without notice. A projection run over several years assumes today's rate holds throughout, which is the weakest assumption in a long-horizon comparison.

Sources

FDIC — Deposit Insurance FAQs — Standard deposit insurance coverage is 250,000 per depositor, per insured bank, per ownership category (current 2025).
Federal Reserve — Open Market Operations / policy rate — The federal funds target rate, which online savings and money market APYs track closely, is set by the FOMC and was held at an elevated level through 2024 and 2025.
IRS — Topic no. 403, Interest received — Interest income is taxable in the year received and is reported to the taxpayer on Form 1099-INT once it exceeds 10 (guidance current 2025).