National Banks Are the Most Popular With Consumers, But They Don’t Generally Offer the Best Rates — Find Out Where Your Money Could Grow the Most

Interest rates have risen at a meteoric pace. The Federal Reserve's target federal funds rate is 4.50% to 4.75%, the highest since 2007. For those paying attention, knowing how to take advantage of this high-rate environment is crucial — particularly when choosing a financial institution.

Researchers analyzed DepositAccounts data to estimate average APYs for small, medium, large and online banks and credit unions among select institutions. Additionally, we surveyed more than 2,000 U.S. consumers about their banking preferences and experiences.

Here's what we found.

Key findings

• Large national banks are the most popular among Americans, as almost a third (31%) of consumers primarily bank with one. But while convenient, they may not be the best place to grow your money. Large banks offer the lowest average APYs on checking accounts (0.02%) and high-yield savings accounts (0.04%) among the select institutions DepositAccounts examined.
• It might be more comfortable for some consumers to do their banking in person, but the best high-yield savings account APYs are generally found online. With an average APY of 1.78% across select banks, competitive rates are helping web-based banking grow in popularity. The majority of the 11% of consumers who say they primarily use an online bank have been doing so for less than five years, including 26% who say they joined two to three years ago.
• If you're looking for competitive rates with excellent customer service, credit unions could offer both. 77% of Americans who choose these nonprofits for their primary financial needs report being the most satisfied of any institution type with their service. If you plan to stash your cash long term, 12-month certificates of deposit (CDs) from select credit unions have the highest APYs — 4.08%, on average — compared to analyzed banks.
• While APYs can vary depending on the type of institution you choose, 63% of people don't know their current APY. This means 74% of Americans aren't primarily banking where the lowest checking account rates generally are found, leaving easy money on the table. The best APYs on checking accounts can typically be found at small banks — offering 0.46%, on average, across the institutions analyzed — but only 26% of consumers primarily bank with them. These rates are 23 times higher than those found at the large national banks studied.
• Although 71% of Americans report being satisfied with their banks, 34% could look to switch in the next year. Of the 13% definitely considering a switch, 22% say low fees will be the most important decision-maker, followed by online or mobile banking capabilities (17%) and competitive financial offers (15%).

Americans prefer large banks

Generally speaking, consumers prefer large financial institutions. While our survey didn't specify bank sizes by assets, just under a third (31%) of Americans surveyed say they primarily use a national institution. Following that, 26% primarily use a regional/local bank and 21% mostly use a credit union.

Although gaining in popularity, only 11% of people say they primarily use an online-only financial institution. These are particularly popular among millennials ages 27 to 42. Of this age group, 16% say they use an online-only bank for their primary personal accounts.

Meanwhile, 11% of people surveyed say they don't use a bank and/or use the same one consistently.

By demographic, some other notable findings include:

• Six-figure earners are significantly more likely to prefer national banks than other income groups. Just under half (47%) of the highest earners say they use a national bank. Comparatively, just 21% of those earning less than $35,000 say similarly.
• Baby boomers ages 59 to 77 are the most likely age group to prefer national financial institutions (41%) and regional/local institutions (32%).
• Gen Zers ages 18 to 26 are the most likely age group to prefer credit unions (24%) or say they don't have a primary financial institution or use the same one consistently (23%).

Despite their convenience (and popularity among high earners), a sample of data indicates national institutions may not be the best place to grow cash. In fact, large banks offer the lowest average APYs on checking accounts (0.02%) and high-yield savings accounts (0.04%) among the institutions examined. Meanwhile, they offer the second-lowest average APY for 12-month CD accounts (1.75%), ranking behind small banks.

Given the lackluster rates at large institutions, why are national banks generally more popular among consumers? According to DepositAccounts founder Ken Tumin, there are a few factors.

“Convenience and inertia are major factors that keep large national banks as the primary bank for almost a third of consumers,” he says. “Many consumers focus mostly on checking accounts at their banks, and large national banks can be convenient to use for checking accounts. Once a consumer has an established checking account, the inertia typically prevents them from changing. The low APY may not be a significant issue for many who don't maintain large cash and savings balances.”

With rates rising, however, Tumin cautions that these low rates are a growing issue — particularly as the rate spread widens between brick-and-mortar and online banks. More on that below.

Best high-yield savings account APYs are generally found online

Despite the popularity of brick-and-mortar banks, online institutions generally offer the best APYs for high-yield savings accounts. The average APY across analyzed online banks was 1.78% — making them competitive enough to spur their growing popularity.

The transition to online accounts is, for most consumers, a recent trend. Of the 11% who primarily bank online, the majority say they've done so for less than five years — and more than a quarter (26%) of them say they joined two to three years ago.

It's not just their high rates — online banks also have some of the best deals. Across all account types, online banks offer:

• 7 of the 20 best checking account rates
• 15 of the 20 best high-yield savings account rates
• 8 of the 20 best 12-month CD rates

Credit unions are another good choice, offering an average APY of 0.73% for high-yield savings accounts among select institutions — second-highest among those we examined. Credit unions also offer seven of the 20 best CD rates and five of the best offers for checking accounts.

Unlike those who prefer online accounts, though, those who primarily bank with credit unions have a long history of doing so. Of the 21% who primarily use a credit union, almost half (49%) opened their account more than seven years ago.

Consumers are most satisfied with credit unions — here's why

While each financial institution has pros and cons, Americans who choose to bank primarily with credit unions report being the most satisfied with their service of any institution type. Of this group, 77% say they're at least somewhat satisfied. Comparatively, 71% of all consumers say similarly.

“Credit unions often have fewer fees and better rates than banks, and that can help consumers be more satisfied,” Tumin says. “Also, credit unions are often managed locally, and that can help consumers remain satisfied.”

When it comes to why they bank at their current institution, those with credit union accounts are most likely to say online or mobile banking options (52%) are an important factor. That's followed by:

• Low fees (51%)
• Access to ATMs (39%)
• Customer service (36%)
• Access to physical branches (36%)

On the other hand, those who bank online are the least satisfied with their service, with just 66% reporting at least some satisfaction. Not surprisingly, online-only banking customers are the most likely of all institution types to say low fees are an important factor for their decision to bank there, at 52%. Meanwhile, these online customers were the least likely to report customer service (23%) as a driving factor.

Majority of consumers don't know their current APY

Although APYs vary by institution, it's worth noting that more than 3 in 5 (63%) don't know their current APY on their primary checking or savings account. Some demographics are less likely to know their APY than others. By generation, Gen Zers and Gen Xers ages 43 to 58 are the least likely to know their current APYs, at 70% for both. Women are also more likely to not know their current rates for their primary checking or savings account than men — 73% versus 54%.

Overall, Tumin attributes most consumers' lack of knowledge to historic attitudes toward APYs.

“Years of very low rates have conditioned consumers to not focus on deposit rates,” he says. “With the large increase in interest rates over the last year, the advantage of the rate leaders over those offering only average rates has grown. Consequently, those who are unaware of the interest rate of their accounts and who don't shop around for the best rates may be losing out on a lot of interest earnings.”

How are consumers missing out? When it comes to their checking accounts, those at small banks are generally getting the most bang for their buck. Across select institutions, small banks offer an 0.46% APY, on average — the best of any institution type and 23 times higher than those at the large national banks studied. Still, only 26% of consumers primarily bank here.

To put that into context, here's how much APYs have grown over the last year, according to FDIC data:

• The national average APY on savings accounts spiked from 0.06% in January 2022 to 0.33% in January 2023.
• Average APYs on 12-month CDs increased the most year over year, from 0.13% in January 2022 to 1.28% in January 2023.
• The average checking account APY doubled from 0.03% in January 2022 to 0.06% in January 2023.

Despite these increasingly high rates across most account types, the personal savings rate — the percentage of income left after taxes and spending — among Americans has fallen. The personal savings rate in December 2022 was 3.4%. That's a significant decrease from December 2021, when the personal savings rate was 7.5%.

How many consumers are satisfied with their bank, and how many plan to switch

Although most (71%) Americans say they're satisfied with their bank, 34% say they're considering switching institutions in the next year. Of the 13% who say they'll definitely find a new institution, 22% say low fees will be the most important decision-maker — the most of any category listed. That's followed by mobile banking capabilities (17%) and competitive financial offers (15%).

Whether they're switching institutions or not, though, most Americans have been loyal to their bank for some time. More than half (55%) say they've been banking at their primary institution for more than five years. Additionally, 48% have been loyal customers for more than seven years.

Baby boomers (78%) and those with adult children (67%) are the most likely groups to have been at their bank for more than seven years. Unsurprisingly, Gen Zers are the most likely to be new customers: 45% of Gen Zers opened their primary account in the past two years.

Why did consumers open their most recent accounts? For most, their reasons were simple:

• 26% say it was their first bank account
• 20% opened the account because of unhappiness with other institutions
• 19% say they moved and needed a bank that was more accessible in their area

Although promotions can be eye-catching, only 8% say they opened their accounts because of financial incentives like a cash sign-on bonus and/or interest rates.

The type of institution consumers choose could play a role in how long consumers have been there. As online banks have gained popularity (thanks to their competitive rates), 82% of those banking at online institutions have been at their bank for less than five years, with the majority (26%) having switched only two to three years ago.

Brick-and-mortar banks' inability to keep up may also be spurring their popularity. Of those who primarily bank online, 33% say they opened their primary account because they were unhappy with their previous institution — the most of any group. Online banking customers are 50% more likely than consumers overall to have opened the account because of a financial incentive like bonus offers.

Shopping for a new bank? Here's what to consider

With APYs as high as they've been, it may be worth shopping for a new financial institution. With so many options to choose from, though, how do you make a decision?

“For those wanting to earn more interest, the easiest step is to open an online savings account at an online bank,” Tumin says. “You can keep your existing checking account and just link the new online savings account. The link allows you to electronically transfer funds back and forth between your checking account and online savings account.”

Additionally, Tumin says to look for online banks that offer both an online savings account and an online checking account. You can start with just the online savings account and keep your existing checking account. Once you're comfortable with the online savings account, you can open the online checking and slowly transition it to be your primary checking account.

Methodology

Researchers analyzed DepositAccounts data to estimate average APYs for small, large and medium banks among select institutions at the time of analysis.

We defined banks as:

• Small (less than $1 billion in assets)
• Medium (between $1 billion and $25 billion in assets)
• Large (more than $25 billion in assets)

Rates for savings and checking accounts are based on $1,000 deposits, while rates for CDs are based on deposits up to $2,500. All APY data via DepositAccounts is as of Feb. 14, 2023.

National rates are from the Federal Deposit Insurance Corp. (FDIC) and cover Jan. 18, 2022, through Jan. 17, 2023.

Separately, DepositAccounts commissioned Qualtrics to conduct an online survey of 2,041 U.S. consumers ages 18 to 77 from Feb 7 to 10, 2023. The survey was administered using a nonprobability-based sample, and quotas were used to ensure the sample base represented the overall population. Researchers reviewed all responses for quality control.

We defined generations as the following ages in 2023:

• Generation Z: 18 to 26
• Millennial: 27 to 42
• Generation X: 43 to 58
• Baby boomer: 59 to 77